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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
COMMISSION FILE NUMBER: 000-16509

CITIZENS, INC.
(Exact name of registrant as specified in its charter)

Colorado | 84-0755371
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)

11815 Alterra Pkwy, Floor 15, Austin, TX 78758
(Current Address)
Registrant's telephone number, including area code: (512) 837-7100

Securities registered pursuant to Section 12(b) of the Act
Class A Common Stock | CIA | NYSE
(Title of each class) | (Trading symbol(s)) | (Name of each exchange on which registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:

| Large accelerated filer | ☐ |  | Accelerated filer | ☒ |  | Non-accelerated filer | ☐ |  | Smaller reporting company | ☒ |  | Emerging growth company | ☐ |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
As of November 1, 2024, the Registrant had 49,906,575 shares of Class A common stock outstanding.

THIS PAGE INTENTIONALLY LEFT BLANK

TABLE OF CONTENTS

|  |  | Page Number
Part I. FINANCIAL INFORMATION |
| Item 1. | Financial Statements | 2
|  | Consolidated Balance Sheets, September 30, 2024 (Unaudited) and December 31, 2023 | 2
|  | Consolidated Statements of Operations and Comprehensive Income (Loss), Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 4
|  | Consolidated Statements of Stockholders' Equity, Three and Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 5
|  | Consolidated Statements of Cash Flows, Nine Months Ended September 30, 2024 and 2023 (Unaudited) | 7
|  | Notes to Consolidated Financial Statements (Unaudited) | 9
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 37
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 58
| Item 4. | Controls and Procedures | 58
Part II. OTHER INFORMATION |
| Item 1. | Legal Proceedings | 59
| Item 1A. | Risk Factors | 59
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 59
| Item 3. | Defaults Upon Senior Securities | 59
| Item 4. | Mine Safety Disclosures | 59
| Item 5. | Other Information | 59
| Item 6. | Exhibits | 60

September 30, 2024 | 10-Q 1

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets

(In thousands) | September 30, 2024 |  | December 31, 2023
| (Unaudited) |  |
Assets: |  |  |
Investments: |  |  |
Fixed maturity securities available-for-sale, at fair value (amortized cost: $1,391,580 and $1,389,038 in 2024 and 2023, respectively) | $ | 1,273,497 |  |  | 1,238,981 |
Equity securities, at fair value | 5,716 |  |  | 5,282 |
Policy loans | 72,463 |  |  | 75,359 |
Other long-term investments (portion measured at fair value $93,167 and $82,460 in 2024 and 2023, respectively) | 93,433 |  |  | 82,725 |
Total investments | 1,445,109 |  |  | 1,402,347 |
Cash and cash equivalents | 32,382 |  |  | 26,997 |
Accrued investment income | 17,082 |  |  | 17,360 |
Reinsurance recoverable | 7,278 |  |  | 3,991 |
Deferred policy acquisition costs | 192,268 |  |  | 175,768 |
Cost of insurance acquired | 9,566 |  |  | 10,043 |
Current federal income tax receivable | 505 |  |  | 1,546 |
Property and equipment, net | 10,975 |  |  | 11,809 |
Due premiums | 10,090 |  |  | 11,264 |
Other assets (less allowance for losses of $574 and $408 in 2024 and 2023, respectively) | 10,554 |  |  | 7,803 |
Total assets | $ | 1,735,809 |  |  | 1,668,928 |

See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 2

Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, Continued

(In thousands, except share amounts) | September 30, 2024 |  | December 31, 2023
| (Unaudited) |  |
Liabilities and Stockholders' Equity: |  |  |
Liabilities: |  |  |
Policy liabilities: |  |  |
Future policy benefit reserves: |  |  |
Life insurance | $ | 1,236,873 |  |  | 1,229,253 |
Accident and health insurance | 998 |  |  | 889 |
Total future policy benefit reserves | 1,237,871 |  |  | 1,230,142 |
Policyholders' funds: |  |  |
Annuities | 145,838 |  |  | 133,216 |
Dividend accumulations | 47,052 |  |  | 44,960 |
Premiums paid in advance | 32,420 |  |  | 32,446 |
Policy claims payable | 9,236 |  |  | 6,637 |
Other policyholders' funds | 7,076 |  |  | 7,363 |
Total policyholders' funds | 241,622 |  |  | 224,622 |
Total policy liabilities | 1,479,493 |  |  | 1,454,764 |
Commissions payable | 3,843 |  |  | 3,445 |
Deferred federal income tax liability | 2,367 |  |  | 1,102 |
Other liabilities | 42,533 |  |  | 37,488 |
Total liabilities | 1,528,236 |  |  | 1,496,799 |
Commitments and contingencies (Notes 7 and 8) |  |  |
Stockholders' Equity: |  |  |
Common stock: |  |  |
Class A, no par value, 100,000,000 shares authorized, 54,222,644 and 53,882,661 shares issued and outstanding in 2024 and 2023, respectively, including shares in treasury of 4,327,810 in 2024 and 2023 | 269,356 |  |  | 268,675 |
Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2024 and 2023, including shares in treasury of 1,001,714 in 2024 and 2023 | 3,184 |  |  | 3,184 |
Retained earnings | 53,441 |  |  | 42,150 |
Accumulated other comprehensive income (loss) | (94,683) |  |  | (118,155) |
Treasury stock, at cost | (23,725) |  |  | (23,725) |
Total stockholders' equity | 207,573 |  |  | 172,129 |
Total liabilities and stockholders' equity | $ | 1,735,809 |  |  | 1,668,928 |

See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 3

Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands, except per share amounts) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |
Premiums: |  |  |  |  |  |  |
Life insurance | $ | 42,461 |  |  | 41,794 |  |  | 122,823 |  |  | 118,020 |
Accident and health insurance | 452 |  |  | 296 |  |  | 1,324 |  |  | 1,201 |
Property insurance | (16) |  |  | (64) |  |  | (18) |  |  | 780 |
Net investment income | 17,377 |  |  | 17,372 |  |  | 52,404 |  |  | 51,687 |
Investment related gains (losses), net | 827 |  |  | (892) |  |  | 1,537 |  |  | (477) |
Other income | 630 |  |  | 884 |  |  | 3,457 |  |  | 2,620 |
Total revenues | 61,731 |  |  | 59,390 |  |  | 181,527 |  |  | 173,831 |
Benefits and Expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 36,478 |  |  | 37,723 |  |  | 104,121 |  |  | 100,798 |
Increase (decrease) in future policy benefit reserves | 471 |  |  | (3,880) |  |  | (130) |  |  | (5,802) |
Policyholder liability remeasurement (gain) loss | 1,157 |  |  | 1,024 |  |  | 2,836 |  |  | 2,860 |
Policyholders' dividends | 1,320 |  |  | 1,414 |  |  | 3,748 |  |  | 3,783 |
Total insurance benefits paid or provided | 39,426 |  |  | 36,281 |  |  | 110,575 |  |  | 101,639 |
Commissions | 12,957 |  |  | 9,444 |  |  | 35,639 |  |  | 27,340 |
Other general expenses | 12,095 |  |  | 11,949 |  |  | 40,072 |  |  | 35,477 |
Capitalization of deferred policy acquisition costs | (10,430) |  |  | (7,132) |  |  | (29,304) |  |  | (20,034) |
Amortization of deferred policy acquisition costs | 4,493 |  |  | 4,056 |  |  | 12,804 |  |  | 11,544 |
Amortization of cost of insurance acquired | 153 |  |  | 151 |  |  | 477 |  |  | 465 |
Total benefits and expenses | 58,694 |  |  | 54,749 |  |  | 170,263 |  |  | 156,431 |
Income before federal income tax | 3,037 |  |  | 4,641 |  |  | 11,264 |  |  | 17,400 |
Federal income tax expense (benefit) | 247 |  |  | 1,943 |  |  | (27) |  |  | 3,704 |
Net income | 2,790 |  |  | 2,698 |  |  | 11,291 |  |  | 13,696 |
Per Share Amounts: |  |  |  |  |  |  |
Basic earnings per share of Class A common stock | 0.06 |  |  | 0.06 |  |  | 0.23 |  |  | 0.28 |
Diluted earnings per share of Class A common stock | 0.05 |  |  | 0.05 |  |  | 0.22 |  |  | 0.27 |
Other Comprehensive Income (Loss): |  |  |  |  |  |  |
Unrealized gains (losses) on fixed maturity securities: |  |  |  |  |  |  |
Unrealized holding gains (losses) arising during period | 59,101 |  |  | (59,817) |  |  | 31,427 |  |  | (36,811) |
Reclassification adjustment for losses (gains) included in net income | (100) |  |  | 419 |  |  | 547 |  |  | 481 |
Unrealized gains (losses) on fixed maturity securities, net | 59,001 |  |  | (59,398) |  |  | 31,974 |  |  | (36,330) |
Change in current discount rate for liability for future policy benefits | (45,404) |  |  | 60,054 |  |  | (5,887) |  |  | 45,825 |
Income tax expense (benefit) on other comprehensive income items | 356 |  |  | (1,040) |  |  | 2,615 |  |  | (882) |
Other comprehensive income (loss) | 13,241 |  |  | 1,696 |  |  | 23,472 |  |  | 10,377 |
Total comprehensive income (loss) | $ | 16,031 |  |  | 4,394 |  |  | 34,763 |  |  | 24,073 |

See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 4

Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)

| Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders' Equity
(In thousands) | Class A | Class B

Balance at December 31, 2023 | $ | 268,675 |  |  | 3,184 |  |  | 42,150 |  |  | (118,155) |  |  | (23,725) |  |  | 172,129 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 4,542 |  |  | — |  |  | — |  |  | 4,542 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 18,385 |  |  | — |  |  | 18,385 |
Total comprehensive income (loss) | — |  |  | — |  |  | 4,542 |  |  | 18,385 |  |  | — |  |  | 22,927 |
Stock-based compensation | 127 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 127 |
Balance at March 31, 2024 | 268,802 |  |  | 3,184 |  |  | 46,692 |  |  | (99,770) |  |  | (23,725) |  |  | 195,183 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 3,959 |  |  | — |  |  | — |  |  | 3,959 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | (8,154) |  |  | — |  |  | (8,154) |
Total comprehensive income (loss) | — |  |  | — |  |  | 3,959 |  |  | (8,154) |  |  | — |  |  | (4,195) |
Stock-based compensation | 481 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 481 |
Balance at June 30, 2024 | 269,283 |  |  | 3,184 |  |  | 50,651 |  |  | (107,924) |  |  | (23,725) |  |  | 191,469 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 2,790 |  |  | — |  |  | — |  |  | 2,790 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 13,241 |  |  | — |  |  | 13,241 |
Total comprehensive income (loss) | — |  |  | — |  |  | 2,790 |  |  | 13,241 |  |  | — |  |  | 16,031 |
Stock-based compensation | 73 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 73 |
Balance at September 30, 2024 | $ | 269,356 |  |  | 3,184 |  |  | 53,441 |  |  | (94,683) |  |  | (23,725) |  |  | 207,573 |

See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 5

Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity, Continued
(Unaudited)

| Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Treasury Stock | Total Stockholders' Equity
(In thousands) | Class A | Class B

Balance at December 31, 2022 | $ | 268,147 |  |  | 3,184 |  |  | 16,309 |  |  | (137,044) |  |  | (22,806) |  |  | 127,790 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 4,872 |  |  | — |  |  | — |  |  | 4,872 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 21,579 |  |  | — |  |  | 21,579 |
Total comprehensive income (loss) | — |  |  | — |  |  | 4,872 |  |  | 21,579 |  |  | — |  |  | 26,451 |
Stock-based compensation | 50 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 50 |
Balance at March 31, 2023 | 268,197 |  |  | 3,184 |  |  | 21,181 |  |  | (115,465) |  |  | (22,806) |  |  | 154,291 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 6,126 |  |  | — |  |  | — |  |  | 6,126 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | (12,898) |  |  | — |  |  | (12,898) |
Total comprehensive income (loss) | — |  |  | — |  |  | 6,126 |  |  | (12,898) |  |  | — |  |  | (6,772) |
Acquisition of treasury stock | — |  |  | — |  |  | — |  |  | — |  |  | (719) |  |  | (719) |
Stock-based compensation | 46 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 46 |
Balance at June 30, 2023 | 268,243 |  |  | 3,184 |  |  | 27,307 |  |  | (128,363) |  |  | (23,525) |  |  | 146,846 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Net income | — |  |  | — |  |  | 2,698 |  |  | — |  |  | — |  |  | 2,698 |
Other comprehensive income (loss) | — |  |  | — |  |  | — |  |  | 1,696 |  |  | — |  |  | 1,696 |
Total comprehensive income (loss) | — |  |  | — |  |  | 2,698 |  |  | 1,696 |  |  | — |  |  | 4,394 |
Stock-based compensation | 180 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 180 |
Other 1 | — |  |  | — |  |  | 1,327 |  |  | — |  |  | — |  |  | 1,327 |
Balance at September 30, 2023 | $ | 268,423 |  |  | 3,184 |  |  | 31,332 |  |  | (126,667) |  |  | (23,525) |  |  | 152,747 |

1 See Note 11 - Income Taxes for details.
See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 6

Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended September 30, (In thousands) | 2024 |  | 2023
Cash flows from operating activities: |  |  |
Net income | $ | 11,291 |  |  | 13,696 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
Investment related (gains) losses on sale of investments and other assets, net | (1,537) |  |  | 477 |
Net deferred policy acquisition costs | (16,500) |  |  | (8,490) |
Amortization of cost of insurance acquired | 477 |  |  | 465 |
Depreciation | 443 |  |  | 380 |
Amortization of premiums and discounts on investments | 3,738 |  |  | 3,761 |
Stock-based compensation | 1,052 |  |  | 333 |
Deferred federal income tax expense (benefit) | (1,350) |  |  | 652 |
Change in: |  |  |
Accrued investment income | 278 |  |  | 8 |
Reinsurance recoverable | (3,287) |  |  | 778 |
Due premiums | 1,174 |  |  | 2,168 |
Future policy benefit reserves | 1,842 |  |  | (5,111) |
Other policyholders' liabilities | 19,002 |  |  | 8,156 |
Federal income tax payable | 1,041 |  |  | 1,253 |
Commissions payable and other liabilities | 6,397 |  |  | (3,116) |
Other, net | (2,969) |  |  | 34 |
Net cash provided by operating activities | 21,092 |  |  | 15,444 |
Cash flows from investing activities: |  |  |
Purchases of fixed maturity securities, available-for-sale | (49,345) |  |  | (50,077) |
Sales of fixed maturity securities, available-for-sale | 4,659 |  |  | 13,690 |
Maturities and calls of fixed maturity securities, available-for-sale | 37,907 |  |  | 23,128 |
Sales of equity securities | — |  |  | 770 |
Principal payments on mortgage loans | 7 |  |  | 6 |
(Increase) decrease in policy loans, net | 2,896 |  |  | 3,023 |
Sales of other long-term investments | 2,226 |  |  | 3,793 |
Purchases of other long-term investments | (11,123) |  |  | (13,262) |
Purchases of property and equipment | (561) |  |  | (292) |
Maturities of short-term investments | — |  |  | 750 |
Net cash used in investing activities | (13,334) |  |  | (18,471) |
See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 7

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CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Unaudited)
Nine Months Ended September 30, (In thousands) | 2024 |  | 2023
Cash flows from financing activities: |  |  |
Annuity deposits | $ | 5,181 |  |  | 5,443 |
Annuity withdrawals | (7,183) |  |  | (7,828) |
Acquisition of treasury stock | — |  |  | (719) |
Other | (371) |  |  | (57) |
Net cash used in financing activities | (2,373) |  |  | (3,161) |
Net increase (decrease) in cash and cash equivalents | 5,385 |  |  | (6,188) |
Cash and cash equivalents at beginning of year | 26,997 |  |  | 22,973 |
Cash and cash equivalents at end of period | $ | 32,382 |  |  | 16,785 |

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended September 30, 2024 and 2023, various fixed maturity issuers exchanged securities with book values of $3.7 million and $5.4 million, respectively, for securities of equal value.
The Company had $0.3 million of net unsettled security trades at September 30, 2023 and none at September 30, 2024.
The Company recognized $36 thousand right-of-use assets in exchange for new operating lease liabilities during the nine months ended September 30, 2023 and none during the nine months ended September 30, 2024.
See accompanying Notes to Consolidated Financial Statements.
September 30, 2024 | 10-Q 8

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

(1) FINANCIAL STATEMENTS
BASIS OF PRESENTATION AND CONSOLIDATION
The consolidated financial statements include the accounts and operations of Citizens, Inc. ("Citizens" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA Domestic"), CICA Life Ltd. ("CICA Bermuda"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc. ("CTI"), Nexo Global Services LLC, a Puerto Rico holding company ("Nexo") and its wholly-owned subsidiaries, CICA Life A.I., a Puerto Rico company ("CICA International") and Nexo Enrollment Services LLC, a Puerto Rico service company ("NES"). All significant inter-company accounts and transactions have been eliminated. Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company," "it," "we," "us" or "our".
The consolidated balance sheet as of September 30, 2024, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2024 and September 30, 2023 and the consolidated statements of cash flows for the nine months ended September 30, 2024 and September 30, 2023 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at September 30, 2024 and for comparative periods have been made. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission ("SEC"). Accordingly, the consolidated financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 ("Form 10-K"). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Our Life Insurance segment operates through CICA Domestic and CICA International.
CICA Domestic. Prior to July 1, 2023, our domestic life insurance business operated through CICA Domestic and Citizens National Life Insurance Company ("CNLIC"). CNLIC merged into CICA Domestic on July 1, 2023. CICA Domestic issues primarily ordinary whole life, final expense and life products with living benefits throughout the U.S.
CICA International. Until December 31, 2022, our international life insurance business operated through CICA Bermuda. Beginning January 1, 2023, all new international policies are issued by CICA International and on August 31, 2023, CICA Bermuda transferred all of its insurance in force business to CICA International. CICA International offers U.S. dollar-denominated products to non-U.S. residents/citizens internationally, including endowment products, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance. These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional increasing or decreasing coverage and annuity benefits to enhance accumulations.
NES provides services to policyholders of CICA International.
Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC, and focuses on the life insurance needs of the middle- and lower-income markets in Louisiana, Mississippi and Arkansas. Our products in this segment consist primarily of small face amount ordinary whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs. SPLIC also issues critical illness policies. Prior to June 30, 2023, SPFIC issued dwelling and contents property insurance policies. As of June 30, 2023, we ceased all operations for SPFIC.
September 30, 2024 | 10-Q 9

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

CTI provides data processing systems and services to the Company.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates.
Significant estimates include those used in the evaluation of credit losses on fixed maturity securities, valuation allowances on deferred tax assets, actuarially determined assets and liabilities and assumptions and contingencies related to litigation and regulatory matters. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the consolidated financial statements.
SIGNIFICANT ACCOUNTING POLICIES
For a description of all significant accounting policies, see Part IV, Item 15, Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K, which should be read in conjunction with these accompanying consolidated financial statements.
(2) ACCOUNTING PRONOUNCEMENTS
ACCOUNTING STANDARDS NOT YET ADOPTED
On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment expands a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is available. As the ASU only requires additional disclosures about the Company's operating segments, the impact to the consolidated financial statements will be minimal.
On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the state and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024 and early adoption and retrospective application are permitted. The Company is currently evaluating the impact of adopting this pronouncement on the consolidated financial statements.
No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.
September 30, 2024 | 10-Q 10

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

(3) INVESTMENTS
The Company invests primarily in fixed maturity securities, which totaled 86.2% of total cash and invested assets at September 30, 2024, as shown below.

Carrying Value (In thousands, except for %) | September 30, 2024 |  | December 31, 2023
Amount |  | % |  | Amount |  | %
Cash and invested assets: |  |  |  |  |  |  |
Fixed maturity securities | $ | 1,273,497 |  |  | 86.2 | % |  | 1,238,981 |  |  | 86.7 | %
Equity securities | 5,716 |  |  | 0.4 |  |  | 5,282 |  |  | 0.4 |
Policy loans | 72,463 |  |  | 4.9 |  |  | 75,359 |  |  | 5.3 |
Other long-term investments | 93,433 |  |  | 6.3 |  |  | 82,725 |  |  | 5.8 |
Cash and cash equivalents | 32,382 |  |  | 2.2 |  |  | 26,997 |  |  | 1.8 |
Total cash and invested assets | $ | 1,477,491 |  |  | 100.0 | % |  | 1,429,344 |  |  | 100.0 | %

The following tables represent the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated.

| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
September 30, 2024 |  |  |
(In thousands) |  |  |
Fixed maturity securities: |  |  |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |
U.S. Treasury securities | $ | 5,950 |  |  | 165 |  |  | 29 |  |  | 6,086 |
U.S. Government-sponsored enterprises | 3,380 |  |  | 287 |  |  | — |  |  | 3,667 |
States and political subdivisions | 299,622 |  |  | 2,531 |  |  | 23,940 |  |  | 278,213 |
Corporate: |  |  |  |  |  |  |
Financial | 276,156 |  |  | 4,152 |  |  | 24,177 |  |  | 256,131 |
Consumer | 253,133 |  |  | 2,358 |  |  | 32,726 |  |  | 222,765 |
Utilities | 127,449 |  |  | 1,032 |  |  | 17,247 |  |  | 111,234 |
Energy | 83,130 |  |  | 452 |  |  | 6,535 |  |  | 77,047 |
Communications | 71,071 |  |  | 293 |  |  | 7,500 |  |  | 63,864 |
All other | 111,435 |  |  | 823 |  |  | 10,675 |  |  | 101,583 |
Commercial mortgage-backed | 268 |  |  | 1 |  |  | 2 |  |  | 267 |
Residential mortgage-backed | 106,816 |  |  | 14 |  |  | 7,633 |  |  | 99,197 |
Asset-backed | 53,170 |  |  | 926 |  |  | 653 |  |  | 53,443 |
Total fixed maturity securities | $ | 1,391,580 |  |  | 13,034 |  |  | 131,117 |  |  | 1,273,497 |

September 30, 2024 | 10-Q 11

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

| Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
December 31, 2023 |  |  |
(In thousands) |  |  |
Fixed maturity securities: |  |  |  |  |  |  |
Available-for-sale: |  |  |  |  |  |  |
U.S. Treasury securities | $ | 5,983 |  |  | 127 |  |  | 48 |  |  | 6,062 |
U.S. Government-sponsored enterprises | 3,404 |  |  | 250 |  |  | 1 |  |  | 3,653 |
States and political subdivisions | 314,203 |  |  | 2,160 |  |  | 29,132 |  |  | 287,231 |
Corporate: |  |  |  |  |  |  |
Financial | 266,485 |  |  | 2,066 |  |  | 31,255 |  |  | 237,296 |
Consumer | 250,672 |  |  | 2,145 |  |  | 37,094 |  |  | 215,723 |
Utilities | 123,625 |  |  | 615 |  |  | 20,253 |  |  | 103,987 |
Energy | 73,808 |  |  | 64 |  |  | 8,049 |  |  | 65,823 |
Communications | 74,029 |  |  | 309 |  |  | 8,892 |  |  | 65,446 |
All other | 111,124 |  |  | 647 |  |  | 12,439 |  |  | 99,332 |
Commercial mortgage-backed | 171 |  |  | — |  |  | — |  |  | 171 |
Residential mortgage-backed | 107,174 |  |  | 9 |  |  | 10,060 |  |  | 97,123 |
Asset-backed | 58,360 |  |  | 290 |  |  | 1,516 |  |  | 57,134 |
Total fixed maturity securities | $ | 1,389,038 |  |  | 8,682 |  |  | 158,739 |  |  | 1,238,981 |

The Company's investments in equity securities are shown below.

Fair Value (In thousands) | September 30, 2024 |  | December 31, 2023
Equity securities: |  |  |
Bond mutual funds | $ | 766 |  |  | 740 |
Common stocks | 774 |  |  | 665 |
Non-redeemable preferred stock | 8 |  |  | 7 |
Non-redeemable preferred stock fund | 4,168 |  |  | 3,870 |
Total equity securities | $ | 5,716 |  |  | 5,282 |

VALUATION OF INVESTMENTS
Available-for-sale ("AFS") fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income. The Company recognized net investment related gains of $0.4 million for both the three and nine months ended September 30, 2024, respectively, on equity securities held. The Company recognized net investment related losses of $0.4 million and $0.3 million for the three and nine months ended September 30, 2023, respectively.
The Company considers several factors in its review and evaluation of individual investments, using the process described in Part IV, Item 15, Note 2. Investments in the notes to the consolidated financial statements of our Form 10-K to determine whether a credit valuation loss exists. For the three and nine months ended September 30, 2024 and 2023, the Company recorded no credit valuation losses on fixed maturity securities.
September 30, 2024 | 10-Q 12

Table of Contents

CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

For fixed maturity security investments that have unrealized losses as of September 30, 2024 and December 31, 2023, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows.

September 30, 2024 | Less than 12 months | Greater than 12 months | Total
(In thousands, except for # of securities) | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities
Fixed maturity securities: |  |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |  |
U.S. Treasury securities | $ | 569 |  | 16 |  | 2 |  | 315 |  | 13 |  | 4 |  | 884 |  | 29 |  | 6 |
States and political subdivisions | 12,007 |  | 126 |  | 21 |  | 160,393 |  | 23,814 |  | 180 |  | 172,400 |  | 23,940 |  | 201 |
Corporate: |  |  |  |  |  |  |  |  |
Financial | 11,511 |  | 27 |  | 8 |  | 165,303 |  | 24,150 |  | 194 |  | 176,814 |  | 24,177 |  | 202 |
Consumer | 8,889 |  | 122 |  | 14 |  | 173,308 |  | 32,604 |  | 216 |  | 182,197 |  | 32,726 |  | 230 |
Utilities | 2,805 |  | 132 |  | 8 |  | 86,941 |  | 17,115 |  | 146 |  | 89,746 |  | 17,247 |  | 154 |
Energy | 3,199 |  | 4 |  | 4 |  | 55,625 |  | 6,531 |  | 65 |  | 58,824 |  | 6,535 |  | 69 |
Communications | 2,749 |  | 34 |  | 4 |  | 50,790 |  | 7,466 |  | 60 |  | 53,539 |  | 7,500 |  | 64 |
All Other | 10,989 |  | 97 |  | 18 |  | 71,434 |  | 10,578 |  | 84 |  | 82,423 |  | 10,675 |  | 102 |
Commercial mortgage-backed | — |  | — |  | — |  | 96 |  | 2 |  | 1 |  | 96 |  | 2 |  | 1 |
Residential mortgage-backed | 46 |  | — |  | 3 |  | 98,714 |  | 7,633 |  | 84 |  | 98,760 |  | 7,633 |  | 87 |
Asset-backed | 3,973 |  | 71 |  | 4 |  | 16,507 |  | 582 |  | 18 |  | 20,480 |  | 653 |  | 22 |
Total fixed maturity securities | $ | 56,737 |  | 629 |  | 86 |  | 879,426 |  | 130,488 |  | 1,052 |  | 936,163 |  | 131,117 |  | 1,138 |

December 31, 2023 | Less than 12 months | Greater than 12 months | Total
(In thousands, except for # of securities) | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities | Fair Value | Unrealized Losses | # of Securities
Fixed maturity securities: |  |  |  |  |  |  |  |
Available-for-sale securities: |  |  |  |  |  |  |  |
U.S. Treasury securities | $ | 1,203 |  | 40 |  | 5 |  | 65 |  | 8 |  | 2 |  | 1,268 |  | 48 |  | 7 |
U.S. Government-sponsored enterprises | 221 |  | 1 |  | 1 |  | — |  | — |  | — |  | 221 |  | 1 |  | 1 |
States and political subdivisions | 19,540 |  | 357 |  | 35 |  | 164,264 |  | 28,775 |  | 192 |  | 183,804 |  | 29,132 |  | 227 |
Corporate: |  |  |  |  |  |  |  |  |
Financial | 12,584 |  | 383 |  | 19 |  | 176,521 |  | 30,872 |  | 217 |  | 189,105 |  | 31,255 |  | 236 |
Consumer | 10,175 |  | 265 |  | 16 |  | 176,725 |  | 36,829 |  | 223 |  | 186,900 |  | 37,094 |  | 239 |
Utilities | 3,596 |  | 66 |  | 20 |  | 85,169 |  | 20,187 |  | 137 |  | 88,765 |  | 20,253 |  | 157 |
Energy | 3,291 |  | 57 |  | 1 |  | 59,392 |  | 7,992 |  | 76 |  | 62,683 |  | 8,049 |  | 77 |
Communications | 5,784 |  | 153 |  | 5 |  | 56,108 |  | 8,739 |  | 69 |  | 61,892 |  | 8,892 |  | 74 |
All Other | 2,080 |  | 32 |  | 5 |  | 85,757 |  | 12,407 |  | 100 |  | 87,837 |  | 12,439 |  | 105 |
Residential mortgage-backed | 849 |  | 38 |  | 5 |  | 95,806 |  | 10,022 |  | 86 |  | 96,655 |  | 10,060 |  | 91 |
Asset-backed | 4,757 |  | 111 |  | 8 |  | 32,764 |  | 1,405 |  | 40 |  | 37,521 |  | 1,516 |  | 48 |
Total fixed maturity securities | $ | 64,080 |  | 1,503 |  | 120 |  | 932,571 |  | 157,236 |  | 1,142 |  | 996,651 |  | 158,739 |  | 1,262 |

September 30, 2024 | 10-Q 13

Table of Contents

CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

In each category of our fixed maturity securities described above, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. As of September 30, 2024 and December 31, 2023, 99.2% and 99.4% of the fair value of our fixed maturity securities portfolio, respectively, were rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded.
These unrealized losses on fixed maturity securities are due to noncredit-related factors, including change in credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline.
The amortized cost and fair value of fixed maturity securities at September 30, 2024 by contractual maturity are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date have been reflected based upon final stated maturity.

September 30, 2024 | Amortized Cost |  | Fair Value
(In thousands) |
Fixed maturity securities: |  |  |
Due in one year or less | $ | 13,425 |  |  | 13,375 |
Due after one year through five years | 136,629 |  |  | 137,256 |
Due after five years through ten years | 276,325 |  |  | 277,228 |
Due after ten years | 965,201 |  |  | 845,638 |
Total fixed maturity securities | $ | 1,391,580 |  |  | 1,273,497 |

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.

| Three Months Ended |  | Nine Months Ended |  |  |  |
| September 30, |  | September 30, |  |  |  |
(In thousands) | 2024 | 2023 |  | 2024 | 2023 |  |  |  |  |  |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |  |  |  |
Proceeds | $ | — |  | 9,446 |  |  | 4,659 |  | 13,690 |  |  |  |  |  |  |
Gross realized gains | $ | — |  | 38 |  |  | 91 |  | 43 |  |  |  |  |  |  |
Gross realized losses | $ | — |  | 436 |  |  | 196 |  | 453 |  |  |  |  |  |  |

(4) FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations and comprehensive income (loss).
Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of
September 30, 2024 | 10-Q 14

Table of Contents

CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories.
•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or whose significant value drivers are observable.
•Level 3 - Instruments whose significant value drivers are unobservable.
Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments.
Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes. These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments. All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities.
Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. We have no investments in this category.
The following tables set forth our assets measured at fair value on a recurring basis as of the dates indicated.

September 30, 2024 | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
(In thousands) |  |  |
Financial assets: |  |  |  |  |  |  |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |
U.S. Treasury and U.S. Government-sponsored enterprises | $ | 6,086 |  |  | 3,667 |  |  | — |  |  | 9,753 |
States and political subdivisions | — |  |  | 278,213 |  |  | — |  |  | 278,213 |
Corporate | 47 |  |  | 832,577 |  |  | — |  |  | 832,624 |
Commercial mortgage-backed | — |  |  | 267 |  |  | — |  |  | 267 |
Residential mortgage-backed | — |  |  | 99,197 |  |  | — |  |  | 99,197 |
Asset-backed | — |  |  | 53,443 |  |  | — |  |  | 53,443 |
Total fixed maturity securities, available-for-sale | 6,133 |  |  | 1,267,364 |  |  | — |  |  | 1,273,497 |
Equity securities: |  |  |  |  |  |  |
Bond mutual funds | 766 |  |  | — |  |  | — |  |  | 766 |
Common stocks | 774 |  |  | — |  |  | — |  |  | 774 |
Non-redeemable preferred stock | 8 |  |  | — |  |  | — |  |  | 8 |
Non-redeemable preferred stock fund | 4,168 |  |  | — |  |  | — |  |  | 4,168 |
Total equity securities | 5,716 |  |  | — |  |  | — |  |  | 5,716 |
Other long-term investments (1) | — |  |  | — |  |  | — |  |  | 93,167 |
Total financial assets | $ | 11,849 |  |  | 1,267,364 |  |  | — |  |  | 1,372,380 |

(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
September 30, 2024 | 10-Q 15

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December 31, 2023 | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value
(In thousands) |  |  |
Financial assets: |  |  |  |  |  |  |
Fixed maturity securities, available-for-sale: |  |  |  |  |  |  |
U.S. Treasury and U.S. Government-sponsored enterprises | $ | 6,062 |  |  | 3,653 |  |  | — |  |  | 9,715 |
States and political subdivisions | — |  |  | 287,231 |  |  | — |  |  | 287,231 |
Corporate | 43 |  |  | 787,564 |  |  | — |  |  | 787,607 |
Commercial mortgage-backed | — |  |  | 171 |  |  | — |  |  | 171 |
Residential mortgage-backed | — |  |  | 97,123 |  |  | — |  |  | 97,123 |
Asset-backed | — |  |  | 57,134 |  |  | — |  |  | 57,134 |
Total fixed maturity securities, available-for-sale | 6,105 |  |  | 1,232,876 |  |  | — |  |  | 1,238,981 |
Equity securities: |  |  |  |  |  |  |
Bond mutual funds | 740 |  |  | — |  |  | — |  |  | 740 |
Common stocks | 665 |  |  | — |  |  | — |  |  | 665 |
Non-redeemable preferred stock | 7 |  |  | — |  |  | — |  |  | 7 |
Non-redeemable preferred stock fund | 3,870 |  |  | — |  |  | — |  |  | 3,870 |
Total equity securities | 5,282 |  |  | — |  |  | — |  |  | 5,282 |
Other long-term investments (1) | — |  |  | — |  |  | — |  |  | 82,460 |
Total financial assets | $ | 11,387 |  |  | 1,232,876 |  |  | — |  |  | 1,326,723 |
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

FINANCIAL INSTRUMENTS VALUATION
FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
Fixed maturity securities, available-for-sale. At September 30, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $1.3 billion for Level 2 assets and comprised 92.3% of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets at September 30, 2024. As of September 30, 2024, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.
Equity securities. Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices.
Limited partnerships. The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. The Company recognized net investment related gains of $0.5 million and $1.8 million for the three and nine months ended September 30, 2024, respectively, and losses of $0.1 million and gains of $0.2 million on limited partnerships
September 30, 2024 | 10-Q 16

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held for the three and nine months ended September 30, 2023, respectively. These investments are included in other long-term investments on the consolidated balance sheets.

|  | September 30, 2024 |  | December 31, 2023
(In thousands, except for years) |  | Fair Value Using NAV Per Share | Unfunded Commit- ments | Range (In years) |  | Fair Value Using NAV Per Share | Unfunded Commit- ments | Range (In years)
Description |
Limited partnerships: |  |  |  |  |  |  |
Middle market | Investments in privately-originated, performing senior secured debt primarily in North America-based companies | $ | 34,832 |  | 1,669 |  | 3 |  | $ | 34,858 |  | 3,452 |  | 4
Global equity fund | Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth | 11,908 |  | — |  | 0 |  | 10,345 |  | — |  | 0
Late-stage growth | Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale | 25,431 |  | 10,102 |  | 4 to 6 |  | 20,524 |  | 14,271 |  | 4 to 6
Infrastructure | Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution | 20,996 |  | 6,345 |  | 9 to 11 |  | 16,733 |  | 9,576 |  | 10
Total limited partnerships | $ | 93,167 |  | 18,116 |  |  |  | $ | 82,460 |  | 27,299 |  |

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments. The global equity fund is redeemable monthly.
FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE
Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments. The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.
The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows:

| September 30, 2024 |  | December 31, 2023
(In thousands) | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Financial assets: |  |  |  |  |  |  |
Policy loans | $ | 72,463 |  |  | 72,463 |  |  | 75,359 |  |  | 75,359 |
Residential mortgage loan | 35 |  |  | 36 |  |  | 42 |  |  | 42 |
Cash and cash equivalents | 32,382 |  |  | 32,382 |  |  | 26,997 |  |  | 26,997 |
Financial liabilities: |  |  |  |  |  |  |
Annuity - investment contracts | 68,077 |  |  | 63,468 |  |  | 67,690 |  |  | 63,283 |

Policy loans. Policy loans had a weighted average annual interest rate of 7.7% at both September 30, 2024 and December 31, 2023 and no specified maturity dates. The aggregate fair value of policy loans approximates the
September 30, 2024 | 10-Q 17

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carrying value reflected on the consolidated balance sheets. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy.
Residential mortgage loan. This mortgage loan is secured by a residential property. The interest rate for this loan was 7.0% at both September 30, 2024 and December 31, 2023. At September 30, 2024, the remaining loan matures in four years. Management estimated the fair value using an annual interest rate of 6.25% at both September 30, 2024 and December 31, 2023. Our mortgage loan is considered a Level 3 asset in the fair value hierarchy and is included in other long-term investments on the consolidated balance sheets.
Cash and cash equivalents. The fair value of cash and cash equivalents approximates carrying value and are characterized as Level 1 assets in the fair value hierarchy.
Annuity liabilities. The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at September 30, 2024 and December 31, 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.40% to 4.40% and 3.80% to 4.50%, respectively. The fair value of liabilities under all insurance contracts are taken into consideration in the overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.
Other long-term investments. Financial instruments included in other long-term investments are classified in various levels of the fair value hierarchy. The following table summarizes the carrying amounts of these investments.

Carrying Value (In thousands) | September 30, 2024 |  | December 31, 2023
Other long-term investments: |  |  |
Limited partnerships | $ | 93,167 |  |  | 82,460 |
FHLB common stock | 210 |  |  | 202 |
Mortgage loans | 35 |  |  | 42 |
All other investments | 21 |  |  | 21 |
Total other long-term investments | $ | 93,433 |  |  | 82,725 |

We are a member of the Federal Home Loan Bank ("FHLB") of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value.
(5) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED
DAC
The following tables roll forward the DAC and COIA balances for the nine months ended September 30, 2024 and 2023 by reporting cohort. Our reporting cohorts are Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies
September 30, 2024 | 10-Q 18

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|  | (Unaudited)

with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies.

Nine Months Ended September 30, 2024 (In thousands) | Permanent | Permanent Limited Pay |  | Other Business | Total
Life Insurance: |  |  |  |  |
Balance, beginning of year | $ | 105,552 |  | 14,075 |  |  | 1,213 |  | 120,840 |
Capitalizations | 21,792 |  | 2,220 |  |  | 250 |  | 24,262 |
Amortization expense | (9,763) |  | (740) |  |  | (278) |  | (10,781) |
Balance, end of period | 117,581 |  | 15,555 |  |  | 1,185 |  | 134,321 |
Home Service Insurance: |  |  |  |  |
Balance, beginning of year | 43,280 |  | 10,564 |  |  | 1,084 |  | 54,928 |
Capitalizations | 3,973 |  | 892 |  |  | 177 |  | 5,042 |
Amortization expense | (1,698) |  | (323) |  |  | (2) |  | (2,023) |
Balance, end of period | 45,555 |  | 11,133 |  |  | 1,259 |  | 57,947 |
Consolidated: |  |  |  |  |
Balance, beginning of year | 148,832 |  | 24,639 |  |  | 2,297 |  | 175,768 |
Capitalizations | 25,765 |  | 3,112 |  |  | 427 |  | 29,304 |
Amortization expense | (11,461) |  | (1,063) |  |  | (280) |  | (12,804) |
Balance, end of period | $ | 163,136 |  | 26,688 |  |  | 2,444 |  | 192,268 |

Nine Months Ended September 30, 2023 (In thousands) | Permanent | Permanent Limited Pay |  | Other Business | Total
Life Insurance: |  |  |  |  |
Balance, beginning of year | $ | 100,926 |  | 11,542 |  |  | 1,016 |  | 113,484 |
Capitalizations | 11,220 |  | 2,385 |  |  | 353 |  | 13,958 |
Amortization expense | (8,859) |  | (586) |  |  | (197) |  | (9,642) |
Balance, end of period | 103,287 |  | 13,341 |  |  | 1,172 |  | 117,800 |
Home Service Insurance: |  |  |  |  |
Balance, beginning of year | 38,793 |  | 9,729 |  |  | 921 |  | 49,443 |
Capitalizations | 5,026 |  | 865 |  |  | 185 |  | 6,076 |
Amortization expense | (1,542) |  | (295) |  |  | (65) |  | (1,902) |
Balance, end of period | 42,277 |  | 10,299 |  |  | 1,041 |  | 53,617 |
Consolidated: |  |  |  |  |
Balance, beginning of year | 139,719 |  | 21,271 |  |  | 1,937 |  | 162,927 |
Capitalizations | 16,246 |  | 3,250 |  |  | 538 |  | 20,034 |
Amortization expense | (10,401) |  | (881) |  |  | (262) |  | (11,544) |
Balance, end of period | $ | 145,564 |  | 23,640 |  |  | 2,213 |  | 171,417 |

DAC capitalization increased for the nine months ended September 30, 2024, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment.
September 30, 2024 | 10-Q 19

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COIA

Nine Months Ended September 30, 2024 (In thousands) | Permanent | Permanent Limited Pay |  | Other Business | Total
Life Insurance: |  |  |  |  |
Balance, beginning of year | $ | 249 |  | 695 |  |  | 406 |  | 1,350 |
Amortization expense | (12) |  | (36) |  |  | (33) |  | (81) |
Balance, end of period | 237 |  | 659 |  |  | 373 |  | 1,269 |
Home Service Insurance: |  |  |  |  |
Balance, beginning of year | 7,194 |  | 168 |  |  | 1,331 |  | 8,693 |
Amortization expense | (279) |  | (5) |  |  | (112) |  | (396) |
Balance, end of period | 6,915 |  | 163 |  |  | 1,219 |  | 8,297 |
Consolidated: |  |  |  |  |
Balance, beginning of year | 7,443 |  | 863 |  |  | 1,737 |  | 10,043 |
Amortization expense | (291) |  | (41) |  |  | (145) |  | (477) |
Balance, end of period | $ | 7,152 |  | 822 |  |  | 1,592 |  | 9,566 |

Nine Months Ended September 30, 2023 (In thousands) | Permanent | Permanent Limited Pay |  | Other Business | Total
Life Insurance: |  |  |  |  |
Balance, beginning of year | $ | 267 |  | 750 |  |  | 444 |  | 1,461 |
Amortization expense | (14) |  | (43) |  |  | (29) |  | (86) |
Balance, end of period | 253 |  | 707 |  |  | 415 |  | 1,375 |
Home Service Insurance: |  |  |  |  |
Balance, beginning of year | 7,583 |  | 176 |  |  | 1,427 |  | 9,186 |
Amortization expense | (293) |  | (6) |  |  | (80) |  | (379) |
Balance, end of period | 7,290 |  | 170 |  |  | 1,347 |  | 8,807 |
Consolidated: |  |  |  |  |
Balance, beginning of year | 7,850 |  | 926 |  |  | 1,871 |  | 10,647 |
Amortization expense | (307) |  | (49) |  |  | (109) |  | (465) |
Balance, end of period | $ | 7,543 |  | 877 |  |  | 1,762 |  | 10,182 |

(6) POLICYHOLDERS’ LIABILITIES
LIABILITY FOR FUTURE POLICY BENEFITS
The following tables summarize balances of and changes in the liability for future policy benefits for our reporting cohorts: Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy,
September 30, 2024 | 10-Q 20

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and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies.

September 30, 2024 (In thousands) | Life Insurance |  | Home Service Insurance
Permanent | Permanent Limited Pay |  | Total |  | Permanent | Permanent Limited Pay |  | Total
Present Value of Expected Net Premiums: |  |  |  |  |  |  |  |
Balance, beginning of year | $ | 244,917 |  | 13,260 |  |  | 258,177 |  |  | 98,831 |  | 14,926 |  |  | 113,757 |
Beginning balance at original discount rate | 252,426 |  | 13,533 |  |  | 265,959 |  |  | 102,045 |  | 15,512 |  |  | 117,557 |
Effect of changes in cash flow assumptions | 17,731 |  | 274 |  |  | 18,005 |  |  | (462) |  | 21 |  |  | (441) |
Effect of actual variances from expected experience | (12,203) |  | 973 |  |  | (11,230) |  |  | (5,784) |  | (3,526) |  |  | (9,310) |
Adjusted beginning of year balance | 257,954 |  | 14,780 |  |  | 272,734 |  |  | 95,799 |  | 12,007 |  |  | 107,806 |
Issuances | 74,426 |  | 2,249 |  |  | 76,675 |  |  | 11,412 |  | 1,853 |  |  | 13,265 |
Interest accrual | 8,342 |  | 380 |  |  | 8,722 |  |  | 3,193 |  | 394 |  |  | 3,587 |
Net premiums collected | (36,066) |  | (2,420) |  |  | (38,486) |  |  | (9,116) |  | 892 |  |  | (8,224) |
Derecognition and other | (5,530) |  | 92 |  |  | (5,438) |  |  | 317 |  | 57 |  |  | 374 |
Ending balance at original discount rate | 299,126 |  | 15,081 |  |  | 314,207 |  |  | 101,605 |  | 15,203 |  |  | 116,808 |
Effect of changes in discount rates | (1,303) |  | (43) |  |  | (1,346) |  |  | (2,042) |  | (325) |  |  | (2,367) |
Balance, end of period | $ | 297,823 |  | 15,038 |  |  | 312,861 |  |  | 99,563 |  | 14,878 |  |  | 114,441 |
Present Value of Expected Future Policy Benefits: |  |  |  |  |  |  |
Balance, beginning of year | $ | 973,350 |  | 195,122 |  |  | 1,168,472 |  |  | 211,946 |  | 122,784 |  |  | 334,730 |
Beginning balance at original discount rate | 995,962 |  | 202,755 |  |  | 1,198,717 |  |  | 217,524 |  | 123,941 |  |  | 341,465 |
Effect of changes in cash flow assumptions | 18,320 |  | 734 |  |  | 19,054 |  |  | (502) |  | (1,078) |  |  | (1,580) |
Effect of actual variances from expected experience | (9,656) |  | 2,916 |  |  | (6,740) |  |  | (5,880) |  | (1,692) |  |  | (7,572) |
Adjusted beginning of year balance | 1,004,626 |  | 206,405 |  |  | 1,211,031 |  |  | 211,142 |  | 121,171 |  |  | 332,313 |
Issuances | 75,132 |  | 2,352 |  |  | 77,484 |  |  | 11,407 |  | 1,858 |  |  | 13,265 |
Interest accrual | 33,624 |  | 6,185 |  |  | 39,809 |  |  | 7,233 |  | 4,305 |  |  | 11,538 |
Benefit payments | (67,441) |  | (13,281) |  |  | (80,722) |  |  | (11,399) |  | (4,286) |  |  | (15,685) |
Derecognition and other | (6,642) |  | 16 |  |  | (6,626) |  |  | 301 |  | 51 |  |  | 352 |
Ending balance at original discount rate | 1,039,299 |  | 201,677 |  |  | 1,240,976 |  |  | 218,684 |  | 123,099 |  |  | 341,783 |
Effect of changes in discount rates | (8,395) |  | (6,067) |  |  | (14,462) |  |  | (5,797) |  | (2,493) |  |  | (8,290) |
Balance, end of period | $ | 1,030,904 |  | 195,610 |  |  | 1,226,514 |  |  | 212,887 |  | 120,606 |  |  | 333,493 |
Net liability for future policy benefits | $ | 733,081 |  | 180,572 |  |  | 913,653 |  |  | 113,324 |  | 105,728 |  |  | 219,052 |
Less: Reinsurance recoverable | 1,308 |  | — |  |  | 1,308 |  |  | — |  | — |  |  | — |
Net liability for future policy benefits, after reinsurance recoverable | $ | 731,773 |  | 180,572 |  |  | 912,345 |  |  | 113,324 |  | 105,728 |  |  | 219,052 |

The Company performed its annual review of policy benefit reserves assumptions in the third quarter of 2024 and recorded the effects of changes in its cash flow assumptions, which resulted in a net increase in future policy benefit
September 30, 2024 | 10-Q 21

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reserves, primarily driven by mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.
For the nine months ended September 30, 2024, the Life Insurance segment increased reserves compared to the same period in 2023 due to the unfavorable impact of actual versus expected experience related to mortality and lapses. There was little impact to the Home Service Insurance segment resulting from actual to expected experience for the nine months ended September 30, 2024 and 2023.

September 30, 2023 (In thousands) | Life Insurance |  | Home Service Insurance
Permanent | Permanent Limited Pay |  | Total |  | Permanent | Permanent Limited Pay |  | Total
Present Value of Expected Net Premiums: |  |  |  |  |  |  |  |
Balance, beginning of year | $ | 235,228 |  | 10,209 |  |  | 245,437 |  |  | 93,508 |  | 13,255 |  |  | 106,763 |
Beginning balance at original discount rate | 247,601 |  | 10,682 |  |  | 258,283 |  |  | 100,225 |  | 14,394 |  |  | 114,619 |
Effect of changes in cash flow assumptions | (210) |  | 38 |  |  | (172) |  |  | (343) |  | 85 |  |  | (258) |
Effect of actual variances from expected experience | 4,156 |  | 1,059 |  |  | 5,215 |  |  | (5,631) |  | (4,477) |  |  | (10,108) |
Adjusted beginning of year balance | 251,547 |  | 11,779 |  |  | 263,326 |  |  | 94,251 |  | 10,002 |  |  | 104,253 |
Issuances | 20,918 |  | 2,608 |  |  | 23,526 |  |  | 13,854 |  | 3,107 |  |  | 16,961 |
Interest accrual | 6,897 |  | 248 |  |  | 7,145 |  |  | 3,019 |  | 348 |  |  | 3,367 |
Net premiums collected | (31,480) |  | (2,004) |  |  | (33,484) |  |  | (8,909) |  | 2,019 |  |  | (6,890) |
Derecognition and other | 567 |  | 240 |  |  | 807 |  |  | 475 |  | 113 |  |  | 588 |
Ending balance at original discount rate | 248,449 |  | 12,871 |  |  | 261,320 |  |  | 102,690 |  | 15,589 |  |  | 118,279 |
Effect of changes in discount rates | (16,380) |  | (501) |  |  | (16,881) |  |  | (9,438) |  | (1,397) |  |  | (10,835) |
Balance, end of period | $ | 232,069 |  | 12,370 |  |  | 244,439 |  |  | 93,252 |  | 14,192 |  |  | 107,444 |
Present Value of Expected Future Policy Benefits: |  |  |  |  |  |  |
Balance, beginning of year | $ | 947,415 |  | 195,612 |  |  | 1,143,027 |  |  | 200,351 |  | 116,356 |  |  | 316,707 |
Beginning balance at original discount rate | 996,169 |  | 208,051 |  |  | 1,204,220 |  |  | 214,188 |  | 121,908 |  |  | 336,096 |
Effect of changes in cash flow assumptions | (389) |  | (702) |  |  | (1,091) |  |  | (257) |  | 331 |  |  | 74 |
Effect of actual variances from expected experience | 6,338 |  | 3,489 |  |  | 9,827 |  |  | (5,472) |  | (1,337) |  |  | (6,809) |
Adjusted beginning of year balance | 1,002,118 |  | 210,838 |  |  | 1,212,956 |  |  | 208,459 |  | 120,902 |  |  | 329,361 |
Issuances | 21,360 |  | 2,798 |  |  | 24,158 |  |  | 13,854 |  | 3,115 |  |  | 16,969 |
Interest accrual | 32,470 |  | 6,288 |  |  | 38,758 |  |  | 6,987 |  | 4,242 |  |  | 11,229 |
Benefit payments | (63,211) |  | (16,732) |  |  | (79,943) |  |  | (12,246) |  | (4,707) |  |  | (16,953) |
Derecognition and other | 97 |  | 42 |  |  | 139 |  |  | 464 |  | 109 |  |  | 573 |
Ending balance at original discount rate | 992,834 |  | 203,234 |  |  | 1,196,068 |  |  | 217,518 |  | 123,661 |  |  | 341,179 |
Effect of changes in discount rates | (78,072) |  | (18,778) |  |  | (96,850) |  |  | (23,934) |  | (12,670) |  |  | (36,604) |
Balance, end of period | $ | 914,762 |  | 184,456 |  |  | 1,099,218 |  |  | 193,584 |  | 110,991 |  |  | 304,575 |
Net liability for future policy benefits | $ | 682,693 |  | 172,086 |  |  | 854,779 |  |  | 100,332 |  | 96,799 |  |  | 197,131 |

September 30, 2024 | 10-Q 22

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|  | (Unaudited)

The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits reported in the consolidated balance sheets.

| September 30, 2024 |  | September 30, 2023
(In thousands) | Life Insurance | Home Service Insurance | Consolidated |  | Life Insurance | Home Service Insurance | Consolidated
Life Insurance: |  |  |  |  |  |  |
Permanent | $ | 731,773 |  | 113,324 |  | 845,097 |  |  | 682,693 |  | 100,332 |  | 783,025 |
Permanent limited pay | 180,572 |  | 105,728 |  | 286,300 |  |  | 172,086 |  | 96,799 |  | 268,885 |
Deferred profit liability | 29,572 |  | 29,158 |  | 58,730 |  |  | 27,616 |  | 26,138 |  | 53,754 |
Other | 32,426 |  | 14,320 |  | 46,746 |  |  | 28,011 |  | 13,926 |  | 41,937 |
Total life insurance | 974,343 |  | 262,530 |  | 1,236,873 |  |  | 910,406 |  | 237,195 |  | 1,147,601 |
Accident & Health: |  |  |  |  |  |  |
Other | 586 |  | 412 |  | 998 |  |  | 596 |  | 281 |  | 877 |
Total future policy benefit reserves | $ | 974,929 |  | 262,942 |  | 1,237,871 |  |  | 911,002 |  | 237,476 |  | 1,148,478 |

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts.

| September 30, 2024 |  | September 30, 2023
(In thousands) | Life Insurance |  | Home Service Insurance |  | Life Insurance |  | Home Service Insurance
Undiscounted: |  |  |  |  |  |  |
Permanent: |  |  |  |  |  |  |
Expected future gross premiums | $ | 731,580 |  |  | 448,837 |  |  | 604,059 |  |  | 459,405 |
Expected future benefit payments | 1,586,017 |  |  | 487,851 |  |  | 1,483,068 |  |  | 484,239 |
Permanent Limited Pay: |  |  |  |  |  |  |
Expected future gross premiums | 46,270 |  |  | 76,032 |  |  | 47,868 |  |  | 77,544 |
Expected future benefit payments | 322,188 |  |  | 320,318 |  |  | 325,964 |  |  | 320,563 |
Discounted: |  |  |  |  |  |  |
Permanent: |  |  |  |  |  |  |
Expected future gross premiums | $ | 564,242 |  |  | 272,938 |  |  | 453,277 |  |  | 261,271 |
Expected future benefit payments | 1,030,904 |  |  | 212,887 |  |  | 914,762 |  |  | 193,584 |
Permanent Limited Pay: |  |  |  |  |  |  |
Expected future gross premiums | 41,999 |  |  | 51,752 |  |  | 42,133 |  |  | 51,091 |
Expected future benefit payments | 195,610 |  |  | 120,606 |  |  | 184,456 |  |  | 110,991 |

September 30, 2024 | 10-Q 23

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The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statement of operations and comprehensive income (loss):

| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
(In thousands) | Gross Premiums | Interest Expense |  | Gross Premiums | Interest Expense |  | Gross Premiums | Interest Expense |  | Gross Premiums | Interest Expense
Life Insurance Segment: |  |  |  |  |  |  |  |  |  |
Life Insurance: |  |  |  |  |  |  |  |  |  |  |
Permanent | $ | 27,930 |  | 8,391 |  |  | 23,654 |  | 8,471 |  |  | 76,047 |  | 25,282 |  |  | 68,619 |  | 25,573 |
Permanent Limited Pay | 3,395 |  | 2,269 |  |  | 3,555 |  | 2,308 |  |  | 11,067 |  | 6,739 |  |  | 11,333 |  | 6,811 |
Other | 2,508 |  | — |  |  | 4,279 |  | — |  |  | 7,550 |  | — |  |  | 7,094 |  | — |
Less: |  |  |  |  |  |  |  |  |  |  |
Reinsurance | 1,828 |  | — |  |  | 392 |  | — |  |  | 3,559 |  | — |  |  | 1,452 |  | — |
Total, net of reinsurance | 32,005 |  | 10,660 |  |  | 31,096 |  | 10,779 |  |  | 91,105 |  | 32,021 |  |  | 85,594 |  | 32,384 |
Accident & Health: |  |  |  |  |  |  |  |  |  |  |
Other | 197 |  | — |  |  | 53 |  | — |  |  | 565 |  | — |  |  | 537 |  | — |
Less: |  |  |  |  |  |  |  |  |  |  |
Reinsurance | 1 |  | — |  |  | 1 |  | — |  |  | 3 |  | — |  |  | 3 |  | — |
Total, net of reinsurance | 196 |  | — |  |  | 52 |  | — |  |  | 562 |  | — |  |  | 534 |  | — |
Total | $ | 32,201 |  | 10,660 |  |  | 31,148 |  | 10,779 |  |  | 91,667 |  | 32,021 |  |  | 86,128 |  | 32,384 |
Home Service Insurance Segment: |  |  |  |  |  |  |  |  |
Life Insurance: |  |  |  |  |  |  |  |  |  |  |
Permanent | $ | 8,257 |  | 1,349 |  |  | 8,372 |  | 1,322 |  |  | 24,723 |  | 4,040 |  |  | 25,012 |  | 3,968 |
Permanent Limited Pay | 1,837 |  | 1,636 |  |  | 2,154 |  | 1,599 |  |  | 5,905 |  | 4,894 |  |  | 6,425 |  | 4,777 |
Other | 367 |  | — |  |  | 178 |  | — |  |  | 1,114 |  | — |  |  | 1,012 |  | — |
Less: |  |  |  |  |  |  |  |  |  |  |
Reinsurance | 5 |  | — |  |  | 6 |  | — |  |  | 24 |  | — |  |  | 23 |  | — |
Total, net of reinsurance | 10,456 |  | 2,985 |  |  | 10,698 |  | 2,921 |  |  | 31,718 |  | 8,934 |  |  | 32,426 |  | 8,745 |
Accident & Health: |  |  |  |  |  |  |  |  |  |  |
Other | 256 |  | — |  |  | 244 |  | — |  |  | 762 |  | — |  |  | 667 |  | — |
Total | $ | 10,712 |  | 2,985 |  |  | 10,942 |  | 2,921 |  |  | 32,480 |  | 8,934 |  |  | 33,093 |  | 8,745 |

The following table provides the weighted-average durations of the liability for future policy benefits.

| September 30, 2024 |  | September 30, 2023
(In years) | Life Insurance | Home Service Insurance |  | Life Insurance | Home Service Insurance
Permanent: |  |  |  |  |
Duration at original discount rate | 8.6 | 16.0 |  | 7.8 | 15.7
Duration at current discount rate | 8.6 | 15.6 |  | 8.2 | 15.6
Permanent Limited Pay: |  |  |  |  |
Duration at original discount rate | 8.1 | 14.7 |  | 7.9 | 14.3
Duration at current discount rate | 7.8 | 14.7 |  | 7.6 | 14.4

September 30, 2024 | 10-Q 24

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The following table provides the weighted-average interest rates for the liability for future policy benefits.

| September 30, 2024 |  | September 30, 2023
| Life Insurance | Home Service Insurance |  | Life Insurance | Home Service Insurance
Permanent: |  |  |  |  |
Interest rate at original discount rate | 4.87 | % | 4.96 | % |  | 4.92 | % | 4.98 | %
Interest rate at current discount rate | 4.61 | % | 5.03 | % |  | 5.62 | % | 5.71 | %
Permanent Limited Pay: |  |  |  |  |
Interest rate at original discount rate | 4.28 | % | 5.03 | % |  | 4.29 | % | 5.05 | %
Interest rate at current discount rate | 4.63 | % | 5.02 | % |  | 5.60 | % | 5.71 | %

LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES
The following table presents the policyholders' account balances by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited and the respective guaranteed minimums.

| At Guaranteed Minimum | 1 Basis Point-50 Basis Points Above | 51 Basis Points-150 Basis Points Above | Greater Than 150 Basis Points Above | Total
September 30, 2024 (In thousands)
Range of Guaranteed Minimum Crediting Rates: |  |  |  |
0.00% - 1.49% | $ | 816 |  | — |  | 726 |  | 34,772 |  | 36,314 |
1.50% - 2.99% | 8,840 |  | 176 |  | 37 |  | 27,092 |  | 36,145 |
3.00% - 4.49% | 101,646 |  | 346 |  | 16,039 |  | — |  | 118,031 |
Greater or equal to 4.50% | 31,519 |  | — |  | — |  | — |  | 31,519 |
Total | $ | 142,821 |  | 522 |  | 16,802 |  | 61,864 |  | 222,009 |

| At Guaranteed Minimum | 1 Basis Point-50 Basis Points Above | 51 Basis Points-150 Basis Points Above | Greater Than 150 Basis Points Above | Total
September 30, 2023 (In thousands)
Range of Guaranteed Minimum Crediting Rates: |  |  |  |
0.00% - 1.49% | $ | 746 |  | — |  | 1,138 |  | 37,233 |  | 39,117 |
1.50% - 2.99% | 30,256 |  | 675 |  | 63 |  | — |  | 30,994 |
3.00% - 4.49% | 104,304 |  | 10 |  | — |  | — |  | 104,314 |
Greater or equal to 4.50% | 31,374 |  | — |  | — |  | — |  | 31,374 |
Total | $ | 166,680 |  | 685 |  | 1,201 |  | 37,233 |  | 205,799 |

September 30, 2024 | 10-Q 25

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The following tables summarize balances of and changes in policyholders' account balances.

September 30, 2024 (In thousands, except for %) | Supplemental Contracts Without Life Contingencies | Fixed Annuity | Dividend Accumulations | Premiums Paid in Advance
Balance, beginning of year | $ | 44,569 |  | 87,134 |  | 44,960 |  | 31,039 |
Issuances | 17,642 |  | 2,132 |  | 598 |  | 4,211 |
Premiums received | 126 |  | 3,015 |  | 4,173 |  | 500 |
Interest credited | 1,496 |  | 2,043 |  | 1,377 |  | 1,348 |
Less: |  |  |  |
Surrenders and withdrawals | — |  | 6,997 |  | 4,056 |  | 6,498 |
Benefit payments | 6,803 |  | — |  | — |  | — |
Balance, end of period | $ | 57,030 |  | 87,327 |  | 47,052 |  | 30,600 |
Weighted-average crediting rates | 4.00 | % | 3.67 | % | 3.53 | % | 2.99 | %
Cash surrender value | $ | 57,030 |  | 87,327 |  | 47,052 |  | 30,600 |

September 30, 2023 (In thousands, except for %) | Supplemental Contracts Without Life Contingencies | Fixed Annuity | Dividend Accumulations | Premiums Paid in Advance
Balance, beginning of year | $ | 32,995 |  | 86,807 |  | 41,663 |  | 34,603 |
Issuances | 16,086 |  | 2,160 |  | 474 |  | 3,200 |
Premiums received | 85 |  | 3,273 |  | 4,210 |  | 659 |
Interest credited | 1,103 |  | 1,988 |  | 993 |  | 948 |
Other | 1 |  | — |  | — |  | — |
Less: |  |  |  |
Surrenders and withdrawals | — |  | 7,647 |  | 3,238 |  | 6,098 |
Benefit payments | 8,466 |  | — |  | — |  | — |
Balance, end of period | $ | 41,804 |  | 86,581 |  | 44,102 |  | 33,312 |
Weighted-average crediting rates | 4.01 | % | 3.57 | % | 3.05 | % | 2.96 | %
Cash surrender value | $ | 41,804 |  | 86,581 |  | 44,102 |  | 33,312 |

September 30, 2024 | 10-Q 26

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The following table reconciles policyholders' account balances shown above to the policyholders' account balance liability in the consolidated balance sheets.

As of September 30, (In thousands) |  |  | 2024 |  |  |  | 2023
Annuities: |  |  |  |  |  |  |
Supplemental contracts without life contingencies |  |  | $ | 57,030 |  |  |  |  | 41,804 |
Fixed annuity |  |  | 87,327 |  |  |  |  | 86,581 |
Unearned revenue reserve |  |  | 1,481 |  |  |  |  | 1,524 |
Total annuities |  |  | $ | 145,838 |  |  |  |  | 129,909 |
Premiums paid in advance: |  |  |  |  |  |  |
Premiums paid in advance |  |  | $ | 30,600 |  |  |  |  | 33,312 |
Other |  |  | 1,820 |  |  |  |  | 2,141 |
Total premiums paid in advance |  |  | $ | 32,420 |  |  |  |  | 35,453 |

(7) REINSURANCE
In the normal course of business, the Company reinsures portions of certain policies that we underwrite to mitigate exposure to potential losses and/or to provide additional capacity for growth. In our international business, we generally retain $100,000 on any one individual life insurance policy and reinsure the death benefit amount above $100,000. We also reinsure 100% of our accidental death benefit rider coverage. In the second quarter of 2024, CICA Domestic entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business.
Prior to 2024, the Company maintained catastrophic reinsurance for its Louisiana property and casualty business operated through Security Plan Fire Insurance Company. This reinsurance had a net retention on any one loss of $30,000, which was the maximum policy limit on any single risk. The Company ceased this business in June 2023 and thus did not renew this reinsurance.
Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. We obtain reinsurance from multiple reinsurers. We monitor our reinsurance concentration as well as the financial strength ratings of our reinsurers. Their ratings by A.M. Best Company range from A- (Excellent) to A+ (Superior).
Assumed and ceded life reinsurance activity is summarized as follows:

(In thousands) | September 30, 2024 |  | December 31, 2023
Aggregate assumed life insurance in force | $ | 3,605 |  |  | 3,772 |
Aggregate ceded life insurance in force | $ | 712,565 |  |  | 619,597 |
Net life insurance in force | $ | 4,480,563 |  |  | 4,306,429 |

September 30, 2024 | 10-Q 27

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The Company's reinsurance recoverable on ceded reinsurance was $7.3 million and $4.0 million as of September 30, 2024 and December 31, 2023, respectively. Premiums, claims and surrenders assumed and ceded and expenses ceded for all lines of business for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

| Three Months Ended |  | Nine Months Ended |  |
| September 30, |  | September 30, |  |
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023 |  |
Premiums from short duration contracts: |  |  |  |  |  |  |  |  |
Direct | $ | 449 |  |  | 283 |  |  | 1,376 |  |  | 3,920 |  |  |
Ceded | (14) |  |  | (16) |  |  | (16) |  |  | (1,798) |  |  |
Net premiums earned | 435 |  |  | 267 |  |  | 1,360 |  |  | 2,122 |  |  |
Premiums from long duration contracts: |  |  |  |  |  |  |  |  |
Direct | 44,295 |  |  | 42,156 |  |  | 126,351 |  |  | 119,353 |  |  |
Assumed | 15 |  |  | 16 |  |  | 48 |  |  | 52 |  |  |
Ceded | (1,848) |  |  | (413) |  |  | (3,630) |  |  | (1,526) |  |  |
Net premiums earned | 42,462 |  |  | 41,759 |  |  | 122,769 |  |  | 117,879 |  |  |
Total premiums earned | $ | 42,897 |  |  | 42,026 |  |  | 124,129 |  |  | 120,001 |  |  |
Claims and surrenders assumed | $ | 22 |  |  | 23 |  |  | 97 |  |  | 90 |  |  |
Claims and surrenders ceded | $ | (1,395) |  |  | (133) |  |  | (2,876) |  |  | (657) |  |  |
Commissions assumed and ceded | $ | (2,016) |  |  | 9 |  |  | (2,957) |  |  | 26 |  |  |
Other general expenses ceded | $ | (341) |  |  | — |  |  | (497) |  |  | — |  |  |

(8) COMMITMENTS AND CONTINGENCIES
LITIGATION AND REGULATORY ACTIONS
From time to time, we are subject to legal and regulatory actions relating to our business. We may incur defense costs, including attorneys' fees, and other direct litigation costs associated with defending claims. If we suffer an adverse judgment as a result of litigation claims, it could have a material adverse effect on our business, results of operations and financial condition.
Trade Secret Lawsuit
In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”. The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd. (Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us. Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims.
In March 2024, the jury found that (i) Defendant Carlos Nalsen Landa (“Landa”), a former independent consultant, misappropriated the Citizens’ Companies' policyholder information, (ii) Citizens’ former chief underwriter, Michael P. Buchweitz (“Buchweitz”) and Randall Riley (“Riley”), a former Citizens executive and son of Citizens’ founder Harold E. Riley, failed to comply with their Citizens’ confidentiality agreements, and (iii) both Buchweitz and Riley intentionally interfered with former Chief Actuary Jonathan Pollio’s ("Pollio") Citizens’ confidentiality agreement. For Buchweitz, the jury also found that he did not have a good faith belief that he was acting in the bona fide exercise of his own rights when he interfered with Pollio’s Citizens’ confidentiality agreement. Despite these findings, the jury did not believe that the above-mentioned actions damaged the Citizens Companies economically and thus did not assess any monetary damages against any of the above parties. Additionally, the jury found that Citizens should
September 30, 2024 | 10-Q 28

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pay Alexis Delgado (“Delgado”, a former independent consultant) and Landa approximately $1.3 million for “money had and received”, an equitable theory that claimed that the Citizens Companies would be unjustly enriched if they didn’t pay past and future commissions to Delgado and Landa. We accrued this expense at December 31, 2023.
On April 30, 2024, Defendants Riley (through his estate), Buchweitz and Delgado filed a motion against the Citizens Companies seeking payment of legal fees and a hearing was held on these matters on May 21, 2024. On July 26, 2024, the trial court awarded Riley and Buchweitz approximately $3.5 million of their legal fees. We accrued this expense in the quarter ended June 30, 2024.
We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received. We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.
We have not paid any amounts to Delgado, Landa, Riley, Buchweitz or any of their attorneys and intend to appeal the judgment against us. We purchased and filed an appeal bond in September 2024 to supercede enforcement of the judgment during the appeal process. If we aren't successful in our appeal, we may have to pay approximately $5 million as a result of the trade secret lawsuit. The accrued amounts are reflected as "other liabilities" on our balance sheet. Additionally, $1.3 million that is reported in cash and cash equivalents on our balance sheet is restricted while the appeal bond remains in place.
CONTRACTUAL OBLIGATIONS
As of September 30, 2024, CICA International is committed to fund investments up to $18.1 million related to limited partnerships previously described.
CREDIT FACILITY
On May 3, 2024, the Company renewed its $20 million senior secured revolving credit facility (the “Credit Facility”) with Regions Bank ("Regions"). The Credit Facility has a three-year term, maturing on May 5, 2027, and allows the Company to borrow up to $20 million for working capital purposes, capital expenditures and other corporate purposes.
Revolving loans may be requested by the Company in aggregate minimum principal amounts of $0.5 million per loan. At the Company's election, the revolving loans may either bear a rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50%, (c) the index rate plus 1.00% or (d) 0.75%. The Company is required to pay Regions an annual commitment fee of 0.375% of the unused portion of the Credit Facility in quarterly installments, which the Company expenses as it is incurred.
Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests in its subsidiaries, real estate owned by the Company, and other limited exceptions. The Credit Facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to restrictions on indebtedness, liens, investments, asset dispositions and restricted payments. As of September 30, 2024, the Company had not borrowed any funds against the Credit Facility and was not in violation of any covenants.
(9) STOCKHOLDERS' EQUITY AND RESTRICTIONS
STOCK
Our Restated and Amended Articles of Incorporation authorize the issuance of 127,000,000 shares, of which 100,000,000 shares shall be Class A common stock, 2,000,000 shares shall be Class B common stock, and 25,000,000 shall be preferred stock. Both authorized classes of common stock are equal in all respects, except (a)
September 30, 2024 | 10-Q 29

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each share of Class A common stock is entitled to receive twice the cash dividends paid on a per share basis to the Class B common stock, if any; and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the Board of Directors of Citizens. Citizens currently has no outstanding preferred stock or Class B common stock other than that held in treasury.
A summary of the change in the number of shares of Class A common stock and treasury stock issued is as follows:

Nine Months Ended September 30, | 2024 |  | 2023
(In thousands) | Common Stock Class A |  |  |  | Treasury Stock |  | Common Stock Class A |  |  |  | Treasury Stock
Balance at beginning of year | 53,883 |  |  |  |  | 5,330 |  |  | 53,758 |  |  |  |  | 4,937 |
Stock issued for compensation | 340 |  |  |  |  | — |  |  | 122 |  |  |  |  | — |
Acquisition of Class A shares | — |  |  |  |  | — |  |  | — |  |  |  |  | 325 |
Balance at end of period | 54,223 |  |  |  |  | 5,330 |  |  | 53,880 |  |  |  |  | 5,262 |

EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share.

Three Months Ended September 30, | 2024 |  | 2023
(In thousands, except per share amounts) |
Basic and diluted earnings per share: |  |  |
Numerator: |  |  |
Net income | $ | 2,790 |  |  | 2,698 |
Net income allocated to Class A common stock | $ | 2,790 |  |  | 2,698 |
Denominator: |  |  |
Weighted average shares of Class A outstanding - basic | 49,837 |  |  | 49,615 |
Weighted average shares of Class A outstanding - diluted | 50,669 |  |  | 50,522 |
Basic earnings per share of Class A common stock | $ | 0.06 |  |  | 0.06 |
Diluted earnings per share of Class A common stock | $ | 0.05 |  |  | 0.05 |

Nine Months Ended September 30, | 2024 |  | 2023
(In thousands, except per share amounts) |
Basic and diluted earnings per share: |  |  |
Numerator: |  |  |
Net income | $ | 11,291 |  |  | 13,696 |
Net income allocated to Class A common stock | $ | 11,291 |  |  | 13,696 |
Denominator: |  |  |
Weighted average shares of Class A outstanding - basic | 49,687 |  |  | 49,739 |
Weighted average shares of Class A outstanding - diluted | 50,519 |  |  | 50,647 |
Basic earnings per share of Class A common stock | $ | 0.23 |  |  | 0.28 |
Diluted earnings per share of Class A common stock | 0.22 |  |  | 0.27 |

September 30, 2024 | 10-Q 30

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STATUTORY CAPITAL AND SURPLUS
Each of our domestic regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements imposed by the U.S. National Association of Insurance Commissioners ("NAIC"). All domestic insurance subsidiaries exceeded the minimum capital requirements at September 30, 2024. On March 27, 2024, Citizens and the Colorado Division of Insurance entered into a capital maintenance agreement that specifies that Citizens will infuse capital as needed to ensure that CICA Domestic's RBC remains above 350%. As CICA Domestic's RBC exceeded 350% at September 30, 2024, no capital contribution was necessary.
CICA International is a Puerto Rico domiciled company. The Insurance Code of Puerto Rico does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the Office of the Commissioner of Insurance ("OIC") that includes proposed minimum capital and surplus. CICA International is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1. CICA International began issuing new business as of January 1, 2023 and received the transfer of all of CICA Bermuda's in force insurance business as of August 31, 2023. At September 30, 2024, CICA International exceeded the required minimum capital and related ratio.
(10) SEGMENT AND OTHER OPERATING INFORMATION
The Company has two reportable segments: Life Insurance and Home Service Insurance. Our Life Insurance segment issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection, and ordinary whole life insurance to non-U.S. residents through CICA International. These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations. CICA Domestic issues ordinary whole life, final expense and life products with living benefits throughout the U.S.
Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC, and focuses on the life insurance needs of the middle- and lower-income markets in Louisiana, Mississippi and Arkansas. SPLIC also issues critical illness policies. Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders. SPFIC sold property insurance policies in Louisiana and Arkansas until operations were ceased effective June 30, 2023.
The Life Insurance and Home Service Insurance portions of the Company constitute separate businesses. In addition to the Life Insurance and Home Service Insurance business, the Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions.
The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those described in the summary of significant accounting policies in our Form 10-K. The Company evaluates profit and loss performance based on U.S. GAAP net income before federal income taxes for its two reportable segments. The Company's Other Non-Insurance Enterprises represents the only reportable difference between segments and consolidated operations.
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

| Life Insurance |  | Home Service Insurance |  | Other Non-Insurance Enterprises |  | Consolidated
Three Months Ended September 30, 2024 |  |  |
(In thousands) |  |  |
Revenues: |  |  |  |  |  |  |
Premiums | $ | 32,201 |  |  | 10,696 |  |  | — |  |  | 42,897 |
Net investment income | 13,578 |  |  | 3,552 |  |  | 247 |  |  | 17,377 |
Investment related gains (losses), net | 936 |  |  | (111) |  |  | 2 |  |  | 827 |
Other income | 630 |  |  | — |  |  | — |  |  | 630 |
Total revenues | 47,345 |  |  | 14,137 |  |  | 249 |  |  | 61,731 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 30,083 |  |  | 6,395 |  |  | — |  |  | 36,478 |
Increase (decrease) in future policy benefit reserves | (1,497) |  |  | 1,968 |  |  | — |  |  | 471 |
Policyholder liability remeasurement (gain) loss | 1,681 |  |  | (524) |  |  | — |  |  | 1,157 |
Policyholders' dividends | 1,314 |  |  | 6 |  |  | — |  |  | 1,320 |
Total insurance benefits paid or provided | 31,581 |  |  | 7,845 |  |  | — |  |  | 39,426 |
Commissions | 9,549 |  |  | 3,408 |  |  | — |  |  | 12,957 |
Other general expenses | 6,791 |  |  | 3,756 |  |  | 1,548 |  |  | 12,095 |
Capitalization of deferred policy acquisition costs | (8,855) |  |  | (1,575) |  |  | — |  |  | (10,430) |
Amortization of deferred policy acquisition costs | 3,837 |  |  | 656 |  |  | — |  |  | 4,493 |
Amortization of cost of insurance acquired | 26 |  |  | 127 |  |  | — |  |  | 153 |
Total benefits and expenses | 42,929 |  |  | 14,217 |  |  | 1,548 |  |  | 58,694 |
Income (loss) before federal income tax | $ | 4,416 |  |  | (80) |  |  | (1,299) |  |  | 3,037 |

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

| Life Insurance |  | Home Service Insurance |  | Other Non-Insurance Enterprises |  | Consolidated
Nine Months Ended September 30, 2024 |  |  |
(In thousands) |  |  |
Revenues: |  |  |  |  |  |  |
Premiums | $ | 91,667 |  |  | 32,462 |  |  | — |  |  | 124,129 |
Net investment income | 41,076 |  |  | 10,618 |  |  | 710 |  |  | 52,404 |
Investment related gains (losses), net | 1,743 |  |  | (179) |  |  | (27) |  |  | 1,537 |
Other income | 3,354 |  |  | 20 |  |  | 83 |  |  | 3,457 |
Total revenues | 137,840 |  |  | 42,921 |  |  | 766 |  |  | 181,527 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 86,616 |  |  | 17,505 |  |  | — |  |  | 104,121 |
Increase (decrease) in future policy benefit reserves | (4,959) |  |  | 4,829 |  |  | — |  |  | (130) |
Policyholder liability remeasurement (gain) loss | 3,360 |  |  | (524) |  |  | — |  |  | 2,836 |
Policyholders' dividends | 3,731 |  |  | 17 |  |  | — |  |  | 3,748 |
Total insurance benefits paid or provided | 88,748 |  |  | 21,827 |  |  | — |  |  | 110,575 |
Commissions | 25,052 |  |  | 10,587 |  |  | — |  |  | 35,639 |
Other general expenses | 19,752 |  |  | 11,176 |  |  | 9,144 |  |  | 40,072 |
Capitalization of deferred policy acquisition costs | (24,262) |  |  | (5,042) |  |  | — |  |  | (29,304) |
Amortization of deferred policy acquisition costs | 10,781 |  |  | 2,023 |  |  | — |  |  | 12,804 |
Amortization of cost of insurance acquired | 81 |  |  | 396 |  |  | — |  |  | 477 |
Total benefits and expenses | 120,152 |  |  | 40,967 |  |  | 9,144 |  |  | 170,263 |
Income (loss) before federal income tax | $ | 17,688 |  |  | 1,954 |  |  | (8,378) |  |  | 11,264 |

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

| Life Insurance |  | Home Service Insurance |  | Other Non-Insurance Enterprises |  | Consolidated
Three Months Ended September 30, 2023 |  |  |
(In thousands) |  |  |
Revenues: |  |  |  |  |  |  |
Premiums | $ | 31,148 |  |  | 10,878 |  |  | — |  |  | 42,026 |
Net investment income | 13,661 |  |  | 3,459 |  |  | 252 |  |  | 17,372 |
Investment related gains (losses), net | (424) |  |  | (370) |  |  | (98) |  |  | (892) |
Other income | 884 |  |  | — |  |  | — |  |  | 884 |
Total revenues | 45,269 |  |  | 13,967 |  |  | 154 |  |  | 59,390 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 32,419 |  |  | 5,304 |  |  | — |  |  | 37,723 |
Increase (decrease) in future policy benefit reserves | (5,587) |  |  | 1,707 |  |  | — |  |  | (3,880) |
Policyholder liability remeasurement (gain) loss | 840 |  |  | 184 |  |  | — |  |  | 1,024 |
Policyholders' dividends | 1,405 |  |  | 9 |  |  | — |  |  | 1,414 |
Total insurance benefits paid or provided | 29,077 |  |  | 7,204 |  |  | — |  |  | 36,281 |
Commissions | 5,406 |  |  | 4,038 |  |  | — |  |  | 9,444 |
Other general expenses | 6,036 |  |  | 4,293 |  |  | 1,620 |  |  | 11,949 |
Capitalization of deferred policy acquisition costs | (5,141) |  |  | (1,991) |  |  | — |  |  | (7,132) |
Amortization of deferred policy acquisition costs | 3,313 |  |  | 743 |  |  | — |  |  | 4,056 |
Amortization of cost of insurance acquired | 28 |  |  | 123 |  |  | — |  |  | 151 |
Total benefits and expenses | 38,719 |  |  | 14,410 |  |  | 1,620 |  |  | 54,749 |
Income (loss) before federal income tax | $ | 6,550 |  |  | (443) |  |  | (1,466) |  |  | 4,641 |

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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|  | (Unaudited)

| Life Insurance |  | Home Service Insurance |  | Other Non-Insurance Enterprises |  | Consolidated
Nine Months Ended September 30, 2023 |  |  |
(In thousands) |  |  |
Revenues: |  |  |  |  |  |  |
Premiums | $ | 86,128 |  |  | 33,873 |  |  | — |  |  | 120,001 |
Net investment income | 40,470 |  |  | 10,379 |  |  | 838 |  |  | 51,687 |
Investment related gains (losses), net | (123) |  |  | (283) |  |  | (71) |  |  | (477) |
Other income | 2,619 |  |  | 1 |  |  | — |  |  | 2,620 |
Total revenues | 129,094 |  |  | 43,970 |  |  | 767 |  |  | 173,831 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 83,826 |  |  | 16,972 |  |  | — |  |  | 100,798 |
Increase (decrease) in future policy benefit reserves | (9,270) |  |  | 3,468 |  |  | — |  |  | (5,802) |
Policyholder liability remeasurement (gain) loss | 2,541 |  |  | 319 |  |  | — |  |  | 2,860 |
Policyholders' dividends | 3,761 |  |  | 22 |  |  | — |  |  | 3,783 |
Total insurance benefits paid or provided | 80,858 |  |  | 20,781 |  |  | — |  |  | 101,639 |
Commissions | 14,930 |  |  | 12,410 |  |  | — |  |  | 27,340 |
Other general expenses | 17,141 |  |  | 13,060 |  |  | 5,276 |  |  | 35,477 |
Capitalization of deferred policy acquisition costs | (13,958) |  |  | (6,076) |  |  | — |  |  | (20,034) |
Amortization of deferred policy acquisition costs | 9,642 |  |  | 1,902 |  |  | — |  |  | 11,544 |
Amortization of cost of insurance acquired | 86 |  |  | 379 |  |  | — |  |  | 465 |
Total benefits and expenses | 108,699 |  |  | 42,456 |  |  | 5,276 |  |  | 156,431 |
Income (loss) before federal income tax | $ | 20,395 |  |  | 1,514 |  |  | (4,509) |  |  | 17,400 |

(11) INCOME TAXES
The effective tax rate is the ratio of tax expense or tax benefit over pre-tax income. The effective tax rate was 8.1% and (0.2)% for the three and nine months ended September 30, 2024, compared to 41.9% and 21.3% for the same periods in 2023, respectively. CICA Bermuda and CICA International are considered controlled foreign corporations for federal income tax purposes. As a result, the insurance activity of CICA Bermuda and CICA International are subject to Subpart F of the Internal Revenue Code and are included in Citizens’ taxable income. Due to the 0% enacted tax rate in Bermuda for all periods prior to the transfer of CICA Bermuda's insurance in force business to CICA International, there are no deferred taxes recorded for CICA Bermuda's temporary differences. The Government of Puerto Rico approved a tax exemption decree for CICA International which freezes the income tax rate at 0% on taxable earnings up to $1.2 million and 4% on taxable earnings in excess of $1.2 million for a minimum of 15 years. The effective tax rate varies from the prevailing corporate federal income tax rate of 21.0% mainly due to the impact of Subpart F and uncertain tax positions.
As a result of the August 31, 2023 transfer of CICA Bermuda's in force business to CICA International, the Company's consolidated deferred federal income tax liability was reduced by $4.3 million due to the difference in the tax rates in the jurisdictions in which the companies operate. Since the transfer was between companies under common control, the $4.3 million reduction in the deferred federal income tax liability was recorded as a credit to equity, $1.3 million of which increased retained earnings and $3.0 million of which reduced accumulated other comprehensive income (loss), based on the nature of the tax components.
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|  | (Unaudited)

At September 30, 2024 and 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety. The Company recorded valuation allowances of $3.8 million and $6.2 million, respectively, through Other Comprehensive Income (Loss).
(12) OTHER COMPREHENSIVE INCOME (LOSS)
The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4% for Puerto Rican entities for the three and nine months ended September 30, 2024 and 2023, as indicated below.

Three Months Ended September 30, | 2024 |  | 2023
(In thousands) | Amount |  | Tax Effect |  | Total |  | Amount |  | Tax Effect |  | Total
Unrealized gains (losses): |  |  |  |  |  |  |  |  |  |  |
Unrealized holding gains (losses) arising during the period | $ | 59,101 |  |  | (4,360) |  |  | 54,741 |  |  | (59,817) |  |  | 8,717 |  |  | (51,100) |
Reclassification adjustment for losses (gains) included in net income (loss) | (100) |  |  | 21 |  |  | (79) |  |  | 419 |  |  | (88) |  |  | 331 |
Unrealized holding gains (losses), net | 59,001 |  |  | (4,339) |  |  | 54,662 |  |  | (59,398) |  |  | 8,629 |  |  | (50,769) |
Change in current discount rate for liability for future policy benefits | (45,404) |  |  | 3,983 |  |  | (41,421) |  |  | 60,054 |  |  | (7,589) |  |  | 52,465 |
Other comprehensive income (loss) | $ | 13,597 |  |  | (356) |  |  | 13,241 |  |  | 656 |  |  | 1,040 |  |  | 1,696 |
Nine Months Ended September 30, | 2024 |  | 2023
(In thousands) | Amount |  | Tax Effect |  | Total |  | Amount |  | Tax Effect |  | Total
Unrealized gains (losses): |  |  |  |  |  |  |  |  |  |  |
Unrealized holding gains (losses) arising during the period | $ | 31,427 |  |  | (2,169) |  |  | 29,258 |  |  | (36,811) |  |  | 7,548 |  |  | (29,263) |
Reclassification adjustment for losses (gains) included in net income | 547 |  |  | (115) |  |  | 432 |  |  | 481 |  |  | (101) |  |  | 380 |
Unrealized holding gains (losses), net | 31,974 |  |  | (2,284) |  |  | 29,690 |  |  | (36,330) |  |  | 7,447 |  |  | (28,883) |
Change in current discount rate for liability for future policy benefits | (5,887) |  |  | (331) |  |  | (6,218) |  |  | 45,825 |  |  | (6,565) |  |  | 39,260 |
Other comprehensive income (loss) | $ | 26,087 |  |  | (2,615) |  |  | 23,472 |  |  | 9,495 |  |  | 882 |  |  | 10,377 |

(13) RELATED PARTY TRANSACTIONS
The Company has various routine related party transactions in conjunction with our holding company structure, such as management service agreements related to costs incurred, a tax sharing agreement between entities, and inter-company dividends and capital contributions. There were no changes related to these relationships during the nine months ended September 30, 2024 except as described in Note 1. Financial Statements under Basis of Presentation and Consolidation. See our Form 10-K for a comprehensive discussion of related party transactions.
(14) SUBSEQUENT EVENTS
The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no other significant subsequent events need to be recognized or disclosed at this time.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions including those factors discussed in the "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated herein by reference.
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q,as well as in conjunction with MD&A and the consolidated financial statements and notes thereto that are included in our Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
The U.S. Securities and Exchange Commission ("SEC") maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. We also make available, free of charge, through our website (http://www.citizensinc.com), our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 Reports filed by officers and directors, news releases, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. We are not including any of the information contained on our website as part of, or incorporating it by reference into, this Form 10-Q.
Objective of our Management's Discussion and Analysis
We refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations as our “MD&A”. The objective of our MD&A is to provide investors with information in order to assess the material changes in our financial condition from December 31, 2023 to September 30, 2024 and the material changes in our results of operations for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.
OVERVIEW
For 55 years, we have been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. Citizens conducts insurance related operations through its insurance subsidiaries, which provide benefits to policyholders globally. We specialize in offering primarily ordinary whole life insurance, endowment products and final expense insurance in niche markets where we believe we can optimize our competitive position.
As an insurance provider, we collect premiums on an ongoing basis from our policyholders and invest the majority of the premiums to pay future benefits, including claims, surrenders and policyholder dividends. Accordingly, the Company derives its revenues principally from: (1) life insurance premiums earned for insurance coverages provided to insureds in our two operating segments – Life Insurance and Home Service Insurance; and (2) net investment income. In addition to paying and reserving for insurance benefits that we pay to our policyholders, our expenses consist primarily of the costs of selling our insurance products (e.g., commissions, underwriting, marketing expenses), operating expenses and income taxes.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

The Factors that Drive our Operating Results
We see the following as the primary factors that drive our operating results.
•Sales (i.e., premium revenues)
•Investments
•Claims and surrenders
•Operating expenses
•Actuarial assumptions
Premium revenues and investment income are our two primary sources of revenue and thus key to our profitability.
Premium Revenues. Premium revenues consist of all money deposited by customers into new and existing insurance policies. We view these premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and thereafter any premiums received are renewal premiums.
We believe premium statistics are meaningful to gaining an understanding of, among other things, the attractiveness of our new products, how expansion of our distribution channels affects our revenue, customer retention and the performance of our business from period-to-period. Throughout the MD&A, we describe the actions and initiatives we are taking to increase sales and improve retention, sales performance in each period and as compared to the prior periods, and how we view trends with respect to sales and retention.
Over the last couple of years, we began our "white label" program to expand our distribution by expanding CICA Domestic's state licenses, developing new final expense and living benefit products, and filing these new products in multiple states. As a result, in the past year, we have significantly expanded our domestic distribution in the Life Insurance segment and first year premiums have almost doubled in this segment quarter-over-quarter and year-to-date as compared to 2023. We incur significant upfront costs in acquiring new business such as this, including the payment of sales commissions and underwriting costs, and thus in order to provide more capacity for growth, in the second quarter of 2024, we entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business, which means that we cede 50% of premiums received and benefits paid in our domestic final expense business to RGA. We refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to RGA and our other reinsurers.
Because we ceased operations in our property insurance business effective June 30, 2023, the premiums charts below only reflect life insurance and accident and health insurance ("A&H") direct premium results.
First Year Premiums. In addition to increased first year premiums due to our domestic growth discussed above, first year premiums in our international business have increased in the nine months ended September 30, 2024, as compared to the same period in 2023 as we continue to work with our distribution partners to expand sales.
Renewal Premiums. Our renewal life and A&H premium revenues in the three and nine months ended September 30, 2024 slightly decreased primarily due to the impact of a higher level of surrenders and matured
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

endowments in our international business during the last few years, which has led to a lower number of policies paying renewal premiums.
Investment Income. Our net investment income increased for both the three and nine months ended September 30, 2024 compared to the same prior year periods, due primarily to investment income from our limited partnership investments and a growing diversified invested asset base.
Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus also key to our profitability. The three largest components of this expense are reflected in the graphs below. In the three and nine months ended September 30, 2024 compared to the prior year periods,
•death claim benefits increased due to the significant growth in our domestic life in force business as well as a higher volume of reported claims in our Home Services Insurance segment,
•surrenders decreased as we continue to focus on retention efforts, and
•matured endowments increased as expected due to many of our endowment policies reaching their contractual maturity dates.
While surrenders and matured endowments do not significantly affect current profitability since reserves are released in a corresponding amount of the surrendered policy or matured endowment benefit payment, they
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

negatively affect future renewal premium revenue and thus have a greater impact to future profitability versus current profitability.
Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Our general operating expenses for the three and nine months ended September 30, 2024 increased compared to the prior year periods. The primary reason for the increase in the nine months ended September 30, 2024 was the accrual of $3.5 million in legal fees awarded to certain defendants in the trade secret lawsuit. We have not paid any of these fees and intend to appeal the judgment against us. See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit for additional details. To a lesser extent, the increase was also due to our continued investment in the growth of our business and costs incurred as we transitioned to a new CEO.
Actuarial Assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, lapses and discount rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience.
As discussed above, our domestic growth in the Life Insurance segment has been significantly expanded. Our current profitability is affected by the amount of reserves we have to hold for this new business, and how closely actual experience matches our actuarial assumptions. The actuarial assumptions that underlie our reserves are
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

based upon our best estimates of mortality and lapses and are inherently more difficult to predict for a new product line. Actuarial assumptions are continually monitored and are expected to become less volatile as this business matures and we develop more experience.
FINANCIAL HIGHLIGHTS
Our net income before federal income taxes decreased to $3.0 million in the three months ended September 30, 2024 from $4.6 million in the three months ended September 30, 2023. While our revenues increased by $2.3 million due primarily to higher first year premiums and investment related gains, our net income decreased due primarily to (i) lower renewal premiums resulting from high surrenders and matured endowments in the past few years, and (ii) an increase in total benefits and expenses paid including (a) an increase in future policyholder benefit reserves primarily related to increases in our domestic life in force business and issuance of supplemental contracts; (b) policyholder remeasurement loss related to updating our actuarial assumptions in our CICA Domestic business; and (c) an increase in death claims.
Our net income before federal income taxes decreased from $17.4 million in the nine months ended September 30, 2023 to $11.3 million in the nine months ended September 30, 2024. In addition to the reasons described above, during the nine month period we accrued $3.5 million in legal fees awarded to the certain defendants in the trade secret lawsuit.
Our basic net income per share of Class A common stock was $0.06 and $0.23 for the three and nine months ended September 30, 2024, respectively, compared to $0.06 and $0.28 in the same prior year periods.
Financial Condition at September 30, 2024
•Total assets of $1.7 billion
•Total investments of $1.4 billion; fixed maturity securities comprised 88% of total investments
•$5.2 billion of direct insurance in force
•No debt
•Diluted net income per share of Class A common stock of $0.22
•Book value per share of Class A common stock of $4.16
EVENTS THAT IMPACTED OUR BUSINESS
From time-to-time, certain events may affect our business in ways that cause current or future results to differ from past results. See Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Events that Impacted Our Business" in our Annual Report on Form 10-K for the period ended December 31, 2023 for a discussion of certain events that have impacted and continue to impact our business, including inflation and market volatility, high interest rates and ceasing operations of our property insurance business. See also Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit for a discussion of the trade secret lawsuit, which has impacted our results of operations and could negatively impact our cash if we do not succeed in our appeal.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

OUR OPERATING SEGMENTS
We manage our business in two operating segments: Life Insurance and Home Service Insurance.
Our insurance operations are the primary focus of the Company, as these operations generate most of our income. See the discussion under Segment Operations below for a detailed analysis. The amount of direct insurance, number of policies, and average face amounts for ordinary life policies issued during the periods indicated are shown below.

Nine Months Ended September 30, |  | 2024 |  |  |  | 2023
| Amount of Insurance Issued |  | Number of Policies Issued |  | Average Policy Face Amount Issued |  | Amount of Insurance Issued |  | Number of Policies Issued |  | Average Policy Face Amount Issued
Ordinary Life Policies: |  |  |  |  |  |  |  |  |  |  |
Life Insurance: |  |  |  |  |  |  |  |  |  |  |
International | $ | 336,467,011 |  |  | 3,172 |  |  | $ | 106,074 |  |  | $ | 271,387,985 |  |  | 2,865 |  |  | $ | 94,725 |
Domestic | 364,803,806 |  |  | 32,303 |  |  | 11,293 |  |  | 6,479,830 |  |  | 616 |  |  | 10,519 |
Total Life Insurance | 701,270,817 |  |  | 35,475 |  |  | 19,768 |  |  | 277,867,815 |  |  | 3,481 |  |  | 79,824 |
Home Service Insurance | 175,988,517 |  |  | 13,800 |  |  | 12,753 |  |  | 226,307,076 |  |  | 17,501 |  |  | 12,931 |
Total | $ | 877,259,334 |  |  | 49,275 |  |  |  |  | $ | 504,174,891 |  |  | 20,982 |  |  |

As we previously disclosed, our strategic initiatives include the introduction of new products tailored to our specific markets and expansion of our distribution channels both domestically and internationally. These new products and distribution channels helped drive the 74% increase in total insurance issued in the nine months ended September 30, 2024 as compared to the prior year period.
The growth in our Life Insurance segment is primarily attributable to strong sales of our new domestic final expense products, which accounted for over half of the insurance issued through September 30, 2024. The Life Insurance segment also benefited from sales of our international whole life product, which accounted for 68% of total insurance issued internationally in this segment for the nine months ended September 30, 2024.
Insurance issued in our Home Service Insurance segment decreased for the nine months ended September 30, 2024 compared to the prior year period largely due to strategic actions intended to improve sales quality and persistency, which led to a decrease in our agent sales force as we focus on these improvements. We also believe the impact of inflation on the cost of living has affected new sales since the customer demographic is primarily middle- and lower-income individuals.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

CONSOLIDATED RESULTS OF OPERATIONS
REVENUES
Our revenues are generated primarily by insurance renewal premiums and investment income from invested assets.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |
Premiums: |  |  |  |  |  |  |
Life insurance | $ | 42,461 |  |  | 41,794 |  |  | 122,823 |  |  | 118,020 |
Accident and health insurance | 452 |  |  | 296 |  |  | 1,324 |  |  | 1,201 |
Property insurance | (16) |  |  | (64) |  |  | (18) |  |  | 780 |
Net investment income | 17,377 |  |  | 17,372 |  |  | 52,404 |  |  | 51,687 |
Investment related gains (losses), net | 827 |  |  | (892) |  |  | 1,537 |  |  | (477) |
Other income | 630 |  |  | 884 |  |  | 3,457 |  |  | 2,620 |
Total revenues | $ | 61,731 |  |  | 59,390 |  |  | 181,527 |  |  | 173,831 |

Total revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, due to significantly higher first year life insurance premiums, investment related gains and higher other income in the nine month period due to supplemental contract revenue.
The Company stopped accepting premiums for property insurance at the end of May 2023 and ceased these operations on June 30, 2023. Therefore, the table below shows a summary of our life and A&H premiums for the periods indicated.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Life and A&H premiums: |  |  |  |  |  |  |
Direct premiums: |  |  |  |  |  |  |
First year | $ | 8,790 |  |  | 5,185 |  |  | 22,614 |  |  | 13,637 |
Renewal | 35,958 |  |  | 37,303 |  |  | 105,119 |  |  | 107,061 |
Total direct life and A&H premiums | 44,748 |  |  | 42,488 |  |  | 127,733 |  |  | 120,698 |
Reinsurance | (1,835) |  |  | (398) |  |  | (3,586) |  |  | (1,477) |
Total life and A&H premiums | $ | 42,913 |  |  | 42,090 |  |  | 124,147 |  |  | 119,221 |

Premium Income. Direct premiums increased 5% and 6% in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 due to strong first year premium growth in our Life Insurance segment. Renewal premiums decreased in both periods due to the high level of surrenders and matured endowments in the prior year, which negatively affect renewal premiums in the current periods.
Reinsurance ceded premiums increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
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Net Investment Income. A summary of our net investment income and annualized net investment income performance is as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands, except for %) | 2024 |  | 2023 |  | 2024 |  | 2023
Gross investment income: |  |  |  |  |  |  |
Fixed maturity securities | $ | 15,263 |  |  | 15,005 |  |  | 45,743 |  |  | 44,956 |
Equity securities | 76 |  |  | 127 |  |  | 224 |  |  | 451 |
Policy loans | 1,369 |  |  | 1,478 |  |  | 4,207 |  |  | 4,531 |
Long-term investments | 1,151 |  |  | 1,249 |  |  | 3,643 |  |  | 3,261 |
Other investment income | 230 |  |  | 166 |  |  | 651 |  |  | 430 |
Total investment income | 18,089 |  |  | 18,025 |  |  | 54,468 |  |  | 53,629 |
Investment expenses | (712) |  |  | (653) |  |  | (2,064) |  |  | (1,942) |
Net investment income | $ | 17,377 |  |  | 17,372 |  |  | 52,404 |  |  | 51,687 |
Net investment income, annualized |  |  |  |  | $ | 69,872 |  |  | 68,916 |
Average invested assets, at amortized cost |  |  |  |  | $ | 1,522,602 |  |  | 1,520,389 |
Annualized yield on average invested assets |  |  |  |  | 4.59 | % |  | 4.53 | %

Due to insurance regulations, fixed maturity securities constitute the vast majority (or 88%) of our investment portfolio based on fair value and thus provide the vast majority of our investment income. Our total investment income increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to a higher average portfolio yield on our fixed maturity securities in the current period.
Investment Related Gains (Losses), Net. We recorded investment related gains of $0.8 million and $1.5 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.9 million and $0.5 million during the same prior year periods. The gains and losses are primarily related to the fair value change of our limited partnership and equity security investments, mostly in our Life Insurance segment, due to the volatility in equity markets over the past year. We did not sell these investments; however, the changes in fair values of our equity securities are reflected as investment related gains or losses in our income statement, in addition to executed transactions that result in a gain or loss.
Other Income. Other income consists primarily of supplemental contracts issued to international policyholders in our Life Insurance segment upon the surrender or maturity of their original policies. Supplemental contracts offer our policyholders the opportunity to leave their cash with us and be paid interest at a guaranteed rate or receive an annuity, at their option.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

BENEFITS AND EXPENSES

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | $ | 36,478 |  |  | 37,723 |  |  | 104,121 |  |  | 100,798 |
Increase (decrease) in future policy benefit reserves | 471 |  |  | (3,880) |  |  | (130) |  |  | (5,802) |
Policyholder liability remeasurement (gain) loss | 1,157 |  |  | 1,024 |  |  | 2,836 |  |  | 2,860 |
Policyholders' dividends | 1,320 |  |  | 1,414 |  |  | 3,748 |  |  | 3,783 |
Total insurance benefits paid or provided | 39,426 |  |  | 36,281 |  |  | 110,575 |  |  | 101,639 |
Commissions | 12,957 |  |  | 9,444 |  |  | 35,639 |  |  | 27,340 |
Other general expenses | 12,095 |  |  | 11,949 |  |  | 40,072 |  |  | 35,477 |
Capitalization of deferred policy acquisition costs | (10,430) |  |  | (7,132) |  |  | (29,304) |  |  | (20,034) |
Amortization of deferred policy acquisition costs | 4,493 |  |  | 4,056 |  |  | 12,804 |  |  | 11,544 |
Amortization of cost of insurance acquired | 153 |  |  | 151 |  |  | 477 |  |  | 465 |
Total benefits and expenses | $ | 58,694 |  |  | 54,749 |  |  | 170,263 |  |  | 156,431 |

Payments of claims and surrenders benefits constitute the majority of our expenses. Total benefits and expenses increased in the three and nine months ended September 30, 2024 as compared to same periods in 2023 driven primarily by the costs related to our new CICA domestic business, as described above as well as a higher volume of reported claims in our Home Services Insurance segment. The $3.5 million accrual of legal fees awarded to the defendants in the trade secret lawsuit, reflected in other general expenses, also contributed to the increase in the nine months ended September 30, 2024.
Claims and Surrenders.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Claims and surrenders: |  |  |  |  |  |  |
Death claim benefits | $ | 6,768 |  |  | 4,984 |  |  | 18,924 |  |  | 16,002 |
Surrender benefits | 13,621 |  |  | 17,264 |  |  | 40,082 |  |  | 44,570 |
Endowment benefits | 1,865 |  |  | 1,932 |  |  | 5,564 |  |  | 6,117 |
Matured endowment benefits | 12,644 |  |  | 11,080 |  |  | 34,452 |  |  | 28,907 |
Property claims | — |  |  | 129 |  |  | (6) |  |  | 837 |
A&H and other policy benefits | 1,580 |  |  | 2,334 |  |  | 5,105 |  |  | 4,365 |
Total claims and surrenders | $ | 36,478 |  |  | 37,723 |  |  | 104,121 |  |  | 100,798 |

Death claim benefits are being impacted by the increase in policies issued over the past few years and an increase in volume of claims reported in our Home Service Insurance segment.
Surrender benefits decreased in the three and nine months ended September 30, 2024 compared to the same periods in 2023. Surrenders are primarily related to international policies that have passed their surrender charge period. We have implemented retention initiatives over the past few years, which we believe are helping to decrease surrenders.
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Matured endowment benefits increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023. We anticipated this increase based upon the contractual maturity dates of the policies.
Increase (Decrease) in Future Policy Benefit Reserves. Future policy benefit reserves reflect the liability established to provide for the payment of policy benefits that we expect to pay in the future and thus generally increase when we have a larger in force block of business due to higher sales and better persistency (i.e., more policies on which we expect to pay future benefits) and decrease when we have lower sales and persistency. In the three and nine months ended September 30, 2024, the change in future policy benefit reserves increased due to the amount of reserves on new insurance issued and the in force book of business somewhat offset by released reserves in connection with higher matured endowments.
Policyholder Liability Remeasurement (Gain) Loss. Most of our products are long-duration contracts that provide a specified, fixed amount of insurance benefit in exchange for a fixed premium. When a policy is initially issued, we establish a "net premium ratio" ("NPR") using assumptions regarding expected premiums and policyholder benefit liabilities. On a quarterly basis, we review actual versus expected experience in such quarter, which is reported as a policyholder liability remeasurement gain (if better performance than assumptions) or loss (if lower performance than assumptions). Additionally, in the third quarter of each year, we update our cash flow assumptions to recalculate the NPR, with the impact on the liability for future policy benefits recognized as a policyholder liability remeasurement on a retrospective catch-up basis. In 2024, remeasurement (gain) loss was negatively affected by updates to mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.
Commissions. Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our independent consultants and independent agents for selling our products. First year commission rates are higher than renewal commission rates and thus commissions fluctuate directly in relation to first year sales. The increases in first year sales in the three and nine months ended September 30, 2024 led to an increase in commission related expenses in both periods as compared to the prior year periods.
Capitalization of Deferred Policy Acquisition Costs. We capitalize costs related to successful sales of our insurance products, which include certain commissions, policy issuance costs, and underwriting and agency expenses. These costs vary based upon amounts of premiums received related to new and renewal business. Capitalized DAC increased in the three and nine months ended September 30, 2024, which is in line with the increases in new sales activity. Significantly lower amounts are capitalized related to renewal business in correlation with the lower commissions paid on that business compared to first year business, which has higher commission rates.
Amortization of Deferred Policy Acquisition Costs. Amortization of DAC increased in the three and nine months ended September 30, 2024, compared to the same periods in 2023. DAC is amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization.
SEGMENT OPERATIONS
We operate in two business segments:
•Life Insurance
•Home Service Insurance
These segments are reported in accordance with U.S. GAAP. The Company evaluates profit and loss performance based on net income before federal income taxes for these segments. The Company's Other Non-Insurance Enterprises include non-insurance operations such as IT and corporate-support functions, which are included in the table presented below to properly reconcile the segment information with the consolidated financial statements of the Company.
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The following table sets forth income (loss) before federal income tax by segment during the periods indicated.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Income (loss) before federal income tax: |  |  |  |  |  |
Segments: |  |  |  |  |  |  |
Life Insurance | $ | 4,416 |  |  | 6,550 |  |  | 17,688 |  |  | 20,395 |
Home Service Insurance | (80) |  |  | (443) |  |  | 1,954 |  |  | 1,514 |
Total segments | 4,336 |  |  | 6,107 |  |  | 19,642 |  |  | 21,909 |
Other Non-Insurance Enterprises | (1,299) |  |  | (1,466) |  |  | (8,378) |  |  | (4,509) |
Total income before federal income tax | $ | 3,037 |  |  | 4,641 |  |  | 11,264 |  |  | 17,400 |

LIFE INSURANCE
Detailed results of operations in the Life Insurance segment for the periods indicated are as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |
Premiums | $ | 32,201 |  |  | 31,148 |  |  | 91,667 |  |  | 86,128 |
Net investment income | 13,578 |  |  | 13,661 |  |  | 41,076 |  |  | 40,470 |
Investment related gains (losses), net | 936 |  |  | (424) |  |  | 1,743 |  |  | (123) |
Other income | 630 |  |  | 884 |  |  | 3,354 |  |  | 2,619 |
Total revenues | 47,345 |  |  | 45,269 |  |  | 137,840 |  |  | 129,094 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 30,083 |  |  | 32,419 |  |  | 86,616 |  |  | 83,826 |
Increase (decrease) in future policy benefit reserves | (1,497) |  |  | (5,587) |  |  | (4,959) |  |  | (9,270) |
Policyholder liability remeasurement (gain) loss | 1,681 |  |  | 840 |  |  | 3,360 |  |  | 2,541 |
Policyholders' dividends | 1,314 |  |  | 1,405 |  |  | 3,731 |  |  | 3,761 |
Total insurance benefits paid or provided | 31,581 |  |  | 29,077 |  |  | 88,748 |  |  | 80,858 |
Commissions | 9,549 |  |  | 5,406 |  |  | 25,052 |  |  | 14,930 |
Other general expenses | 6,791 |  |  | 6,036 |  |  | 19,752 |  |  | 17,141 |
Capitalization of deferred policy acquisition costs | (8,855) |  |  | (5,141) |  |  | (24,262) |  |  | (13,958) |
Amortization of deferred policy acquisition costs | 3,837 |  |  | 3,313 |  |  | 10,781 |  |  | 9,642 |
Amortization of cost of insurance acquired | 26 |  |  | 28 |  |  | 81 |  |  | 86 |
Total benefits and expenses | 42,929 |  |  | 38,719 |  |  | 120,152 |  |  | 108,699 |
Income before federal income tax | $ | 4,416 |  |  | 6,550 |  |  | 17,688 |  |  | 20,395 |

In our Life Insurance segment, income before federal income tax was $4.4 million and $17.7 million during the three and nine months ended September 30, 2024, respectively, compared to $6.6 million and $20.4 million during the
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same prior year periods. Our higher revenues were offset by increases in reserves, higher policyholder liability remeasurement loss and higher general expenses supporting our CICA Domestic growth.
Life Insurance segment premium breakout is detailed below.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Premiums: |  |  |  |  |  |  |
Direct premiums: |  |  |  |  |  |  |
First year | $ | 7,541 |  |  | 3,796 |  |  | 18,621 |  |  | 9,195 |
Renewal | 26,490 |  |  | 27,744 |  |  | 76,608 |  |  | 78,387 |
Total direct premiums | 34,031 |  |  | 31,540 |  |  | 95,229 |  |  | 87,582 |
Reinsurance | (1,830) |  |  | (392) |  |  | (3,562) |  |  | (1,454) |
Total premiums | $ | 32,201 |  |  | 31,148 |  |  | 91,667 |  |  | 86,128 |

Premiums. Our total premiums increased by 3% and 6% in the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 due to the 62% and 78% increase, net of reinsurance, respectively, in first year premiums. First year premiums rose significantly due to sales of our new products and expanded domestic distribution. Renewal premiums decreased in the three and nine months ended September 30, 2024 as compared to the same prior year periods. As described above, this decline is due to high surrenders and matured endowments over the last several years.
The increase in reinsurance ceded premiums in the three and nine months ended September 30, 2024, compared to the same periods in 2023, is due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
While our domestic life insurance business drove the significant increase in first year premiums, life insurance premiums are generated largely from our international policyholders living in 80 different countries across the globe. The following table sets forth our premiums by location for the three and nine months ended September 30, 2024 and 2023.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
International premiums: |  |  |  |  |  |  |
Colombia | $ | 6,512 |  |  | 6,077 |  |  | 18,538 |  |  | 18,415 |
Taiwan | 3,520 |  |  | 3,814 |  |  | 11,679 |  |  | 12,706 |
Venezuela | 3,828 |  |  | 3,804 |  |  | 10,806 |  |  | 11,208 |
Ecuador | 3,421 |  |  | 3,479 |  |  | 9,610 |  |  | 9,882 |
Argentina | 2,790 |  |  | 2,550 |  |  | 7,561 |  |  | 7,130 |
Other Non-U.S. | 9,935 |  |  | 9,866 |  |  | 28,282 |  |  | 28,241 |
Total international premiums | 30,006 |  |  | 29,590 |  |  | 86,476 |  |  | 87,582 |
Domestic premiums | 4,507 |  |  | 972 |  |  | 10,211 |  |  | 2,865 |
Reinsurance and change in premium accruals | (2,312) |  |  | 586 |  |  | (5,020) |  |  | (4,319) |
Total premiums | $ | 32,201 |  |  | 31,148 |  |  | 91,667 |  |  | 86,128 |

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Investment Related Gains (Losses), Net. We recorded investment related gains of $0.9 million and $1.7 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.4 million and $0.1 million during the same prior year periods, resulting primarily from the change in estimated fair market value of our limited partnership investments.
Claims and Surrenders. The following table sets forth our primary claims and surrender benefits paid within our Life Insurance segment for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Claims and surrenders: |  |  |  |  |  |  |
Death claim benefits | $ | 1,614 |  |  | 978 |  |  | 4,798 |  |  | 3,117 |
Surrender benefits | 12,502 |  |  | 16,317 |  |  | 37,312 |  |  | 41,927 |
Endowment benefits | 1,862 |  |  | 1,930 |  |  | 5,558 |  |  | 6,111 |
Matured endowment benefits | 12,481 |  |  | 10,912 |  |  | 33,957 |  |  | 28,447 |
A&H and other policy benefits | 1,624 |  |  | 2,282 |  |  | 4,991 |  |  | 4,224 |
Total claims and surrenders | $ | 30,083 |  |  | 32,419 |  |  | 86,616 |  |  | 83,826 |

During the three and nine months ended September 30, 2024 and 2023, the majority of our claims and surrender benefits in our Life Insurance segment were related to payment of surrender benefits and matured endowment benefits. Many of our endowment policies are reaching their contractual maturity dates and thus matured endowment benefits are increasing. We expect this trend to continue over the next few years. Surrender benefits decreased for the three and nine months ended September 30, 2024 compared to the prior year periods which we believe is due to our retention efforts. Death claim benefits increased for the three and nine months ended September 30, 2024, compared to the prior year period as we saw a higher number of reported claims due to the increase in policies issued, primarily in our new domestic business. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims.
Increase (Decrease) in Future Policy Benefit Reserves. The change in future policy benefit reserves for the three and nine months ended September 30, 2024 and 2023 was the result of reserves released due to surrenders and higher matured endowment benefits. These releases were partially offset by increases in reserves due to insurance issued and normal increases in our in force block of business policy benefit reserves.
Policyholder Liability Remeasurement (Gain) Loss. The third quarter update to mortality and lapse assumptions for CICA Domestic negatively affected our policyholder liability remeasurement loss. This was partially offset by better than expected surrender experience in our international business.
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HOME SERVICE INSURANCE
Detailed results of operations for the Home Service Insurance segment for the periods indicated are as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Revenues: |  |  |  |  |  |  |
Premiums | $ | 10,696 |  |  | 10,878 |  |  | 32,462 |  |  | 33,873 |
Net investment income | 3,552 |  |  | 3,459 |  |  | 10,618 |  |  | 10,379 |
Investment related gains (losses), net | (111) |  |  | (370) |  |  | (179) |  |  | (283) |
Other income | — |  |  | — |  |  | 20 |  |  | 1 |
Total revenues | 14,137 |  |  | 13,967 |  |  | 42,921 |  |  | 43,970 |
Benefits and expenses: |  |  |  |  |  |  |
Insurance benefits paid or provided: |  |  |  |  |  |  |
Claims and surrenders | 6,395 |  |  | 5,304 |  |  | 17,505 |  |  | 16,972 |
Increase (decrease) in future policy benefit reserves | 1,968 |  |  | 1,707 |  |  | 4,829 |  |  | 3,468 |
Policyholder liability remeasurement (gain) loss | (524) |  |  | 184 |  |  | (524) |  |  | 319 |
Policyholders' dividends | 6 |  |  | 9 |  |  | 17 |  |  | 22 |
Total insurance benefits paid or provided | 7,845 |  |  | 7,204 |  |  | 21,827 |  |  | 20,781 |
Commissions | 3,408 |  |  | 4,038 |  |  | 10,587 |  |  | 12,410 |
Other general expenses | 3,756 |  |  | 4,293 |  |  | 11,176 |  |  | 13,060 |
Capitalization of deferred policy acquisition costs | (1,575) |  |  | (1,991) |  |  | (5,042) |  |  | (6,076) |
Amortization of deferred policy acquisition costs | 656 |  |  | 743 |  |  | 2,023 |  |  | 1,902 |
Amortization of cost of insurance acquired | 127 |  |  | 123 |  |  | 396 |  |  | 379 |
Total benefits and expenses | 14,217 |  |  | 14,410 |  |  | 40,967 |  |  | 42,456 |
Income (loss) before federal income tax | $ | (80) |  |  | (443) |  |  | 1,954 |  |  | 1,514 |

In our Home Service Insurance segment, we reported a loss before federal income tax of $0.1 million and income of $2.0 million in the three and nine months ended September 30, 2024, respectively, as compared to loss of $0.4 million and income of $1.5 million in the prior year periods. The higher income is primarily driven by a decrease in other general expenses and partially due to ceasing our property insurance operations as of June 30, 2023, which also impacted premium revenue, somewhat offset by higher death claims.
Home Service Insurance segment life and A&H premium breakout is detailed below.

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Direct life and A&H premiums: |  |  |  |  |  |  |
First year | $ | 1,249 |  |  | 1,390 |  |  | 3,993 |  |  | 4,442 |
Renewal | 9,468 |  |  | 9,558 |  |  | 28,511 |  |  | 28,674 |
Total direct life and A&H premiums | $ | 10,717 |  |  | 10,948 |  |  | 32,504 |  |  | 33,116 |

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Premiums. Our life and A&H premiums declined in the three and nine months ended September 30, 2024, respectively, compared to the same prior year periods. The decrease is largely due to strategic actions intended to improve sales quality and persistency, which actions led to a decrease in our agent sales force as we focus on these improvements. Additionally, we believe external economic pressures, such as inflation, have impacted revenue in this segment disproportionately.
Claims and Surrenders. Payments of claims and surrender benefits, which are the largest portion of our expenses, are summarized as follows:

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Claims and surrenders: |  |  |  |  |  |  |
Death claim benefits | $ | 5,154 |  |  | 4,006 |  |  | 14,126 |  |  | 12,885 |
Surrender benefits | 1,119 |  |  | 947 |  |  | 2,770 |  |  | 2,643 |
Endowment benefits | 3 |  |  | 2 |  |  | 6 |  |  | 6 |
Matured endowment benefits | 163 |  |  | 168 |  |  | 495 |  |  | 460 |
Property claims | — |  |  | 129 |  |  | (6) |  |  | 837 |
A&H and other policy benefits | (44) |  |  | 52 |  |  | 114 |  |  | 141 |
Total claims and surrenders | $ | 6,395 |  |  | 5,304 |  |  | 17,505 |  |  | 16,972 |

The majority of claims and surrender benefits in our Home Service Insurance segment are death claim benefits. Death claim benefits increased in the three and nine months ended September 30, 2024 compared to the same prior year periods due to higher volume of reported claims. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims.
Other General Expenses. General expenses decreased in the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to ceasing our property insurance business as discussed above.
OTHER NON-INSURANCE ENTERPRISES

| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Loss before federal income tax | $ | (1,299) |  |  | (1,466) |  |  | (8,378) |  |  | (4,509) |

This operating unit represents the administrative support functions for the insurance operations. Its revenues are primarily intercompany and have been eliminated in consolidation under U.S. GAAP, which typically results in a loss. Revenue in this operating unit consists primarily of net investment income and investment related gains or losses, while expenses consist of other general expenses related to corporate functions. The primary reason for the increased loss before federal income tax in the nine months ended September 30, 2024 compared to the same period in 2023 is the legal accrual described above.
INVESTMENTS
Our investments are an integral part of our business success. Our cash and invested assets at September 30, 2024 were $1.5 billion, of which 86% was invested in fixed maturity securities, all of which are classified as available-for-sale. We closely monitor the duration of our fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy our insurance obligations.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

The following table sets forth the carrying value of our investments by investment category and cash, cash equivalents and the percentage of each to total cash and invested assets.

Carrying Value | September 30, 2024 |  | December 31, 2023
(In thousands, except for %) | Amount |  | % |  | Amount |  | %
Cash, cash equivalents and invested assets: |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |
U.S. Treasury and U.S. Government-sponsored enterprises | $ | 9,753 |  |  | 0.7 | % |  | $ | 9,715 |  |  | 0.7 | %
Corporate | 832,624 |  |  | 56.4 |  |  | 787,607 |  |  | 55.1 |
States and political subdivisions (1) | 278,213 |  |  | 18.8 |  |  | 287,231 |  |  | 20.1 |
Mortgage-backed (2) | 99,464 |  |  | 6.7 |  |  | 97,294 |  |  | 6.8 |
Asset-backed | 53,443 |  |  | 3.6 |  |  | 57,134 |  |  | 4.0 |
Total fixed maturity securities | 1,273,497 |  |  | 86.2 |  |  | 1,238,981 |  |  | 86.7 |
Cash and cash equivalents | 32,382 |  |  | 2.2 |  |  | 26,997 |  |  | 1.8 |
Other investments: |  |  |  |  |  |  |
Policy loans | 72,463 |  |  | 4.9 |  |  | 75,359 |  |  | 5.3 |
Equity securities | 5,716 |  |  | 0.4 |  |  | 5,282 |  |  | 0.4 |
Other long-term investments | 93,433 |  |  | 6.3 |  |  | 82,725 |  |  | 5.8 |
Total cash, cash equivalents and invested assets | $ | 1,477,491 |  |  | 100.0 | % |  | $ | 1,429,344 |  |  | 100.0 | %

(1) Includes $119.6 million and $124.2 million of securities guaranteed by third parties at September 30, 2024 and December 31, 2023, respectively.
(2) Includes $98.3 million and $96.1 million of U.S. Government-sponsored enterprises at September 30, 2024 and December 31, 2023, respectively.
The carrying value of the Company’s fixed maturity securities investment portfolio at September 30, 2024 was $1.27 billion compared to $1.24 billion at December 31, 2023. The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of September 30, 2024 did not materially change from December 31, 2023 – the weighted average was “A” at both dates.
Cash and cash equivalents increased as of September 30, 2024 from December 31, 2023 and fluctuates from period-to-period primarily due to the timing of operating and investing activities.
Other long-term investments increased by $10.7 million as of September 30, 2024 from December 31, 2023 due to additional funding and increases in the fair market value of our limited partnership investments.
Obligations of States and Political Subdivisions
The Company’s fixed maturity securities investment portfolio at September 30, 2024 and December 31, 2023 included $278.2 million and $287.2 million, respectively, of securities that are obligations of states and political subdivisions, including municipalities (collectively referred to as the municipal bond portfolio).
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

The Company's municipal bond portfolio includes third-party guarantees. Detailed below is a presentation by the Nationally Recognized Statistical Rating Organization ("NRSRO") rating of these holdings by funding type as of September 30, 2024.

| General Obligation |  | Special Revenue |  | Other |  | Total |  | % Based on Amortized Cost
(In thousands, except for %) | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |
State and political subdivision fixed maturity securities including third-party guarantees: |  |
AAA | $ | 12,474 |  |  | 12,390 |  |  | 6,827 |  |  | 6,888 |  |  | — |  |  | — |  |  | 19,301 |  |  | 19,278 |  |  | 6.4 | %
AA | 43,781 |  |  | 43,712 |  |  | 116,000 |  |  | 128,894 |  |  | 8,737 |  |  | 8,815 |  |  | 168,518 |  |  | 181,421 |  |  | 60.5 |
A | 4,187 |  |  | 4,363 |  |  | 74,752 |  |  | 82,445 |  |  | 2,183 |  |  | 2,126 |  |  | 81,122 |  |  | 88,934 |  |  | 29.7 |
BBB | 541 |  |  | 557 |  |  | 4,197 |  |  | 4,759 |  |  | 1,436 |  |  | 1,450 |  |  | 6,174 |  |  | 6,766 |  |  | 2.3 |
BB and other | 3,028 |  |  | 3,152 |  |  | 70 |  |  | 71 |  |  | — |  |  | — |  |  | 3,098 |  |  | 3,223 |  |  | 1.1 |
Total | $ | 64,011 |  |  | 64,174 |  |  | 201,846 |  |  | 223,057 |  |  | 12,356 |  |  | 12,391 |  |  | 278,213 |  |  | 299,622 |  |  | 100.0 | %
State and political subdivision fixed maturity securities excluding third-party guarantees: |  |
AA | $ | 31,011 |  |  | 30,935 |  |  | 34,590 |  |  | 37,443 |  |  | 6,139 |  |  | 6,082 |  |  | 71,740 |  |  | 74,460 |  |  | 24.9 | %
A | 15,133 |  |  | 15,215 |  |  | 87,657 |  |  | 95,749 |  |  | 3,779 |  |  | 3,859 |  |  | 106,569 |  |  | 114,823 |  |  | 38.3 |
BBB | 2,997 |  |  | 3,173 |  |  | 20,394 |  |  | 21,854 |  |  | — |  |  | — |  |  | 23,391 |  |  | 25,027 |  |  | 8.4 |
BB and other | 14,870 |  |  | 14,851 |  |  | 59,205 |  |  | 68,011 |  |  | 2,438 |  |  | 2,450 |  |  | 76,513 |  |  | 85,312 |  |  | 28.4 |
Total | $ | 64,011 |  |  | 64,174 |  |  | 201,846 |  |  | 223,057 |  |  | 12,356 |  |  | 12,391 |  |  | 278,213 |  |  | 299,622 |  |  | 100.0 | %

The table below shows the categories in which the Company held investments in special revenue bonds that were greater than 10% of fair value based upon the Company's total municipal bond portfolio at September 30, 2024.

(In thousands, except for %) | Fair Value |  | Amortized Cost |  | % of Total Fair Value
Education | $ | 46,097 |  |  | 50,772 |  |  | 16.6 | %
Utilities | 41,471 |  |  | 44,153 |  |  | 14.9 |
Transportation | 34,807 |  |  | 40,551 |  |  | 12.5 |

The Company's municipal bond portfolio is spread across many states, however, municipal bonds from Texas and California comprise the most significant concentration of the total municipal bond portfolio as of September 30, 2024. The Company holds 22% and 16% of its municipal bond portfolio in Texas and California issuers, respectively, as of September 30, 2024. There were no other states or individual issuer holdings that represented or exceeded 10% of the total municipal bond portfolio as of September 30, 2024.
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CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS

The table below represents the Company's detailed exposure to municipal bonds in Texas at September 30, 2024.

| General Obligation |  | Special Revenue |  | Other |  | Total
(In thousands) | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost
Texas state and political subdivision fixed maturity securities including third-party guarantees:
AAA | $ | 11,963 |  |  | 11,886 |  |  | 2,638 |  |  | 2,633 |  |  | — |  |  | — |  |  | 14,601 |  |  | 14,519 |
AA | 16,163 |  |  | 16,145 |  |  | 15,385 |  |  | 17,559 |  |  | — |  |  | — |  |  | 31,548 |  |  | 33,704 |
A | — |  |  | — |  |  | 14,682 |  |  | 18,059 |  |  | — |  |  | — |  |  | 14,682 |  |  | 18,059 |
Total | $ | 28,126 |  |  | 28,031 |  |  | 32,705 |  |  | 38,251 |  |  | — |  |  | — |  |  | 60,831 |  |  | 66,282 |
Texas state and political subdivision fixed maturity securities excluding third-party guarantees:
AA | $ | 23,533 |  |  | 23,441 |  |  | 3,281 |  |  | 3,688 |  |  | — |  |  | — |  |  | 26,814 |  |  | 27,129 |
A | 3,092 |  |  | 3,090 |  |  | 16,492 |  |  | 18,073 |  |  | — |  |  | — |  |  | 19,584 |  |  | 21,163 |
BBB | — |  |  | — |  |  | 3,306 |  |  | 3,415 |  |  | — |  |  | — |  |  | 3,306 |  |  | 3,415 |
BB and other | 1,501 |  |  | 1,500 |  |  | 9,626 |  |  | 13,075 |  |  | — |  |  | — |  |  | 11,127 |  |  | 14,575 |
Total | $ | 28,126 |  |  | 28,031 |  |  | 32,705 |  |  | 38,251 |  |  | — |  |  | — |  |  | 60,831 |  |  | 66,282 |

The table below represents the Company's detailed exposure to municipal bonds in California at September 30, 2024.

| General Obligation |  | Special Revenue |  | Other |  | Total
(In thousands) | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost |  | Fair Value |  | Amortized Cost
California state and political subdivision fixed maturity securities including third-party guarantees:
AA | $ | 2,145 |  |  | 2,074 |  |  | 30,294 |  |  | 34,941 |  |  | 2,599 |  |  | 2,733 |  |  | 35,038 |  |  | 39,748 |
A | 1,365 |  |  | 1,650 |  |  | 7,328 |  |  | 8,688 |  |  | — |  |  | — |  |  | 8,693 |  |  | 10,338 |
Total | $ | 3,510 |  |  | 3,724 |  |  | 37,622 |  |  | 43,629 |  |  | 2,599 |  |  | 2,733 |  |  | 43,731 |  |  | 50,086 |
California state and political subdivision fixed maturity securities excluding third-party guarantees:
AA | $ | 469 |  |  | 445 |  |  | 4,408 |  |  | 5,057 |  |  | — |  |  | — |  |  | 4,877 |  |  | 5,502 |
A | 3,041 |  |  | 3,279 |  |  | 18,430 |  |  | 21,531 |  |  | 2,599 |  |  | 2,733 |  |  | 24,070 |  |  | 27,543 |
BB and other | — |  |  | — |  |  | 14,784 |  |  | 17,041 |  |  | — |  |  | — |  |  | 14,784 |  |  | 17,041 |
Total | $ | 3,510 |  |  | 3,724 |  |  | 37,622 |  |  | 43,629 |  |  | 2,599 |  |  | 2,733 |  |  | 43,731 |  |  | 50,086 |

IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY AND EQUITY SECURITIES
The Company did not record any credit valuation allowances on fixed maturity securities in either of the three and nine months ended September 30, 2024 or 2023.
Information on both unrealized and realized gains and losses by category is set forth in Part I, Item 1, Note 3. Investments of the notes to our consolidated financial statements herein.
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LIQUIDITY AND CAPITAL RESOURCES
Below are our primary capital resources (based on carrying value of each) as of the periods indicated.

(In thousands) | September 30, 2024 |  | December 31, 2023
Fixed maturity securities | $ | 1,273,497 |  |  | 1,238,981 |
Cash and cash equivalents | 32,382 |  |  | 26,997 |

Liquidity refers to a company's ability to generate or obtain sufficient cash to meet the needs of its operations. Our liquidity is primarily derived from our cash flow from operations, our cash and cash equivalents, and our portfolio of marketable securities. We may also derive liquidity by accessing our Credit Facility (described below) or may raise capital by selling shares in our SIP (as defined below) or by other traditional means. Citizens has no debt as of September 30, 2024.
Cash from Operating Activities. Cash provided by operating activities is an important liquidity metric because it reflects, during a given period, the amount of cash generated that is available to pay our operating expenses, invest in our business or make strategic acquisitions. In the nine months ended September 30, 2024, our operations provided $21.1 million in net cash.
Cash from Investing Activities. We have traditionally also had significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments. These cash flows, for the most part, are reinvested in new investments. In the nine months ended September 30, 2024, we had net cash outflows from investing activities of $13.3 million as we continue to invest excess funds in this high interest rate environment. The investing activities fluctuate from period to period due to timing of security activities such as calls and maturities and reinvestment of those funds. 86% of our total cash, cash equivalents and investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs.
PARENT COMPANY LIQUIDITY AND CAPITAL RESOURCES
Citizens is a holding company and has minimal operations of its own. Citizens' assets consist of the capital stock of its subsidiaries, cash and investments. Citizens' liquidity requirements are met primarily from two sources: cash generated from its operating subsidiaries and its invested assets. Citizens' ability to obtain cash from its insurance subsidiaries depends primarily upon the availability of statutorily permissible payments, including payments Citizens receives from service agreements with its insurance subsidiaries and dividends from the subsidiaries. The ability to make payments to the holding company is limited by applicable laws of the U.S. states of domicile and by the Puerto Rico Office of Commissioner of Insurance, which all subject insurance operations to significant regulatory restrictions. These laws and regulations require, among other things, that our insurance subsidiaries maintain minimum solvency or premium to surplus ratio requirements, which limit the amount of dividends that can be paid to the holding company. The regulations also require approval of our service agreements with the applicable regulatory authority in order to prevent insurance subsidiaries from moving large amounts of cash to the less regulated holding company.
In addition to the above-mentioned sources of cash, we offer a Stock Investment Plan ("SIP"), whereby investors, policyholders, independent contractors and agents, employees and directors can directly purchase our stock. At our option, purchases of stock under the SIP can be made from newly issued or treasury stock, rather than in the open market, in which case, we can raise capital by selling our shares.
We renewed our Credit Facility with Regions Bank on May 3, 2024 for an additional three years. See Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements, herein, for a description of the Credit Facility. The Credit Facility provides additional liquidity to the Company for short-term or longer-term needs. As of September 30, 2024, we have not borrowed any money under the Credit Facility.
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INSURANCE COMPANY SUBSIDIARY LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of our insurance operations are primarily met by premium revenues, investment income and proceeds from investment maturities, calls or sales. Primary cash needs are for payments of policyholder benefits, investment purchases, policy acquisition costs and other operating expenses. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flow to meet our obligations. As we have discussed, we have been growing our domestic business by developing new products and expanding our distribution channels, which has led to an increase in first year premiums (i.e., new sales) of 50% from 2023 to 2024. When selling new policies, we incur upfront policy acquisition costs, such as agent commission payments. While historically, cash flows from our operations have been sufficient to meet our cash needs, we have entered into a reinsurance agreement with RGA to help with some of the costs, and the insurance companies also have the available-for-sale fixed maturity investment portfolio available to create additional cash flows if required. Two of our insurance subsidiaries are members of the Federal Home Loan Bank ("FHLB") of Dallas. FHLB membership provides the insurance subsidiaries with access to various low-cost collateralized borrowings and funding agreements. While not the only source of additional liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed.
We believe that we have adequate capital resources and ability to obtain additional capital if needed to support the short-term and longer-term liquidity requirements of our insurance operations. See Contractual Obligations and Off-balance Sheet Arrangements in our Form 10-K and below for a discussion of known and estimated cash needs. Cash flow projections and cash flow tests under various market interest rate scenarios are performed annually to assist in evaluating liquidity needs and adequacy.
Trends, Demands and Restrictions on our Uses of Cash
Because claims and surrenders are our largest expense, a primary liquidity concern is the risk of either (i) an extraordinary level of early policyholder surrenders, or (ii) higher than expected mortality experience. Our death benefit payments increased in the nine months ended September 30, 2024, which is expected as the amount of insurance issued has increased significantly over the past couple of years. Surrender benefits, which have been higher than usual the last several years, slightly decreased in the first nine months of 2024. In order to mitigate the risk of early policyholder surrenders, we include provisions in our insurance policies, such as surrender charges, that help limit and discourage early withdrawal, but as many of our policies have reached the age where surrender charges have expired or significantly decreased, we have experienced high levels of surrenders. We believe that surrenders have been high due to other reasons, including the loss of one of our biggest distributors in Venezuela in 2018, increasing interest rates, which may encourage policyholders to seek higher rates of returns in different investment products, post-pandemic beliefs that life insurance may not be as important as it was during the pandemic, and inflationary pressures, which may cause policyholders to want the cash values of their policies due to decreased purchasing power elsewhere. To the extent that early surrenders are higher than expected, our liquidity could be negatively impacted due to benefit payments as well as lower renewal premiums. We continue to monitor surrenders and early withdrawals and focus on our retention initiatives.
Our endowment products have contractual maturity dates and provide the policyholder with alternatives once the policy matures - they can choose to take a lump sum payout or leave the money on deposit at interest with the Company. Approximately 17% of the endowments in force, totaling approximately 6% of our in force business as of September 30, 2024, will mature in the next five years. Policyholder election behavior is unknown, but if too many policyholders elect lump sum distributions, the Company could be exposed to liquidity risk in years of high maturities. Meeting these distributions could require the Company to sell its investments at inopportune times to pay policyholder withdrawals. Alternatively, if the policyholders were to leave the money on deposit with the Company at interest, our profitability could be impacted if the product guaranteed rate is higher than the market rate we are earning on our investments. We currently anticipate that our available operating cash flow and capital resources will be adequate to meet our needs for funds, but we are closely monitoring our policyholder behavior patterns.
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In our CICA Domestic business, we pay advance commissions on some of our insurance products, meaning we pay an agent their commission immediately upon sale of a policy, rather than "as earned", or when premiums are received by us. Because of this, another liquidity concern is the risk that rapid growth in first year sales of these products could create a significant increase in commission payments, which increases expenses and thus reduces our statutory capital until the commissions are recouped from premiums paid. CICA Domestic sales have increased significantly since the third quarter of 2023 and continue to grow rapidly. To mitigate this risk and strain on capital, we entered into a coinsurance agreement with RGA in the second quarter of 2024 and elected to cede 50% of our final expense business to RGA, which alleviates some of the strain on expenses. We may also seek other options, such as loans at the holding company level (from the Credit Facility or otherwise) that would allow us to reduce the liquidity risk should CICA Domestic's required commission payments exceed current resources. If we are unable to borrow money to contribute capital to CICA Domestic, we could be exposed to cash flow strain.
See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1. Legal Proceedings - Trade Secret Lawsuit, for a discussion of the trade secret lawsuit, which could negatively impact our cash if we do not succeed in our appeal.
Regulatory Restrictions on our Use of Cash
As discussed above, we are subject to regulatory capital requirements that could affect the Company’s ability to access capital from our insurance operations or cause the Company to have to put additional cash in our wholly-owned subsidiaries.
Our domestic companies are subject to minimum capital requirements set by the NAIC in the form of risk-based capital ("RBC"). RBC considers the type of business written by an insurance company, the quality of its assets, and various other aspects of an insurance company's business to develop a minimum level of capital called "Authorized Control Level Risk-Based Capital". This level of capital is then compared to an adjusted statutory capital that includes capital and surplus as reported under statutory accounting principles, plus certain investment reserves. Should the ratio of adjusted statutory capital to control level RBC fall below 200% for our domestic companies, a series of remedial actions by the affected company would be required. Additionally, we have a Capital Maintenance Agreement between Citizens and CICA Domestic, Citizens' wholly-owned subsidiary domiciled in Colorado, that would require Citizens to contribute capital to CICA Domestic in order to maintain a RBC level above 350%. At September 30, 2024, our domestic insurance subsidiaries were above the required minimum RBC levels and CICA Domestic was above 350%.
For CICA Domestic, commission advances are non-admitted assets, which increases required regulatory capital and reduces the excess capital available. As discussed above, management is investigating various options in order to reduce both regulatory capital and liquidity risk should the capital required to support this pace of growth exceed current resources. Citizens may have to contribute capital to CICA Domestic to maintain the required RBC ratio.
CICA International is a Puerto Rico domiciled company. The Insurance Code of Puerto Rico does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the OIC that includes proposed minimum capital and surplus. CICA International is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1. CICA International began issuing new business as of January 1, 2023 and received the transfer of all of CICA Bermuda's in force insurance business as of August 31, 2023. At September 30, 2024, CICA International exceeded the required minimum capital and related ratio.
Any capital that Citizens is required to contribute to its insurance subsidiaries could negatively impact the Company's capital resources and liquidity.
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CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
As of September 30, 2024, we have no additional contractual obligations or off-balance sheet arrangements other than those described in Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements herein and in Part II, Item 7, Contractual Obligations and Off-Balance Sheet Arrangements in our Form 10-K. We do not utilize special purpose entities as investment vehicles, nor are there any such entities in which we have an investment that engage in speculative activities of any nature, and we do not use such investments to hedge our investment positions.
CRITICAL ACCOUNTING POLICIES
We believe that the accounting policies set forth in Part I, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - "Critical Accounting Policies" and Part IV, Item 15, Note 1. Summary of Significant Accounting Policies of our consolidated financial statements in our Form 10-K continue to describe the significant judgments and estimates used in the preparation of our consolidated financial statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we have elected to comply with certain scaled disclosure reporting obligations and therefore are not required to provide the information required by this Item.
Item 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.
Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2024. Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and such information is accumulated and reported to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the three months ended September 30, 2024, there were no changes in the Company's internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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CITIZENS, INC. |

PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Trade Secret Lawsuit
In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”. The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd. (Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us. Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims.
As previously disclosed, the jury found that Citizens should pay Alexis Delgado and Carlos Nalsen Landa, former independent consultants, approximately $1.3 million for “money had and received”, an equitable theory that claimed that the Citizens Companies would be unjustly enriched if they didn’t pay past and future commissions to Delgado and Landa. Additionally, the trial court awarded defendants Michael P. Buchweitz (“Buchweitz”) and Randall Riley (“Riley”) approximately $3.5 million of their legal fees. On August 16, 2024, the judge signed a Final Judgment reflecting the jury decision and the court award of the legal fees. We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received. We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.
We intend to appeal the judgment against us and accordingly on September 16, 2024, we filed a Limited Motion for Partial New Trial on these issues. On September 17, 2024, we filed an appeal bond with the court in order to stay any execution of the judgment against us.
Item 1A. RISK FACTORS
Part I, Item 1A. Risk Factors of our Form 10-K includes a discussion of our risk factors. There have been no material changes in the three months ended September 30, 2024 from the risk factors included in our Form 10-K.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.

Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
Item 5(a)
In August 2024, our Chief Marketing Officer, Robert Mauldin III, transitioned to a part-time strategic sales consultant where he continues to retain responsibility and perform policy-making functions for our international sales division by providing strategic advice, product design and enhancement consultation, leadership for both our sales and
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CITIZENS, INC. |

marketing teams, and relationship management. He also serves as chair of the steering committee for SPLIC in our Home Services Insurance segment.
In connection with the shift in responsibilities and hours, the Company and Mr. Mauldin entered into a Services Agreement effective as of August 2, 2024 (the "Mauldin Agreement"). Pursuant to the Mauldin Agreement, beginning on September 1, 2024, Mr. Mauldin is paid (i) a monthly fee in the amount of $2,500, plus (ii) a daily service fee in the amount of $2,282 per full day of services provided. It is anticipated that he will provide services for 8 full days per month. Additionally, he is reimbursed for reasonable travel expenses.
Item 5(b)
None.
Item 5(c)
During the three months ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Citizens, Inc. securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” Additionally, Citizens did not adopt or terminate any Rule 10b5-1 trading arrangement during the three months ended September 30, 2024.
Item 6. EXHIBITS

Exhibit Number |  | The following exhibits are filed herewith:
3.1 |  | Restated and Amended Articles of Incorporation dated March 4, 2004 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 15, 2004)
3.2 |  | Amended and Restated Bylaws dated June 2, 2021 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on June 7, 2021)
1 0.1*† |  | Services Agreement between Citizens, Inc. and Robert M. Mauldin III effective August 2, 2024*†
31.1* |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
31.2* |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
32.1* |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
32.2* |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
101* |  | Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q*
104* |  | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set*

* Filed herewith.
† Indicates management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | CITIZENS, INC.
|  | By: | /s/ Jon Stenberg
|  |  | Jon Stenberg
|  |  | President & Chief Executive Officer
|  | By: | /s/ Jeffery P. Conklin
|  |  | Jeffery P. Conklin
|  |  | Vice President, Chief Financial Officer, Chief Investment Officer & Treasurer
Date: | November 7, 2024 |  |

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