- Net loss of $5.1 million, or
$0.10 per share, compared to a net
loss of $2.8 million, or $0.06 per share, in the third quarter of
2021
- Adjusted operating income of $0.2
million, compared to adjusted operating loss of $4.9 million in the third quarter of
2021
- Total claims and surrenders continue to improve, declining
3.4% year-over-year
- New products continue to gain traction across both the Life
Insurance and Home Service Insurance segments
AUSTIN,
Texas, Nov. 4, 2022 /PRNewswire/ -- Citizens,
Inc. (NYSE: CIA), today reported financial results for
the third quarter ended September 30,
2022.
Net loss for the third quarter of 2022 totaled $5.1 million, or $0.10 per fully diluted class A share, compared
to a net loss of $2.8 million, or
$0.06 per fully diluted class A
share, in the prior year quarter.
Net loss of $5.1 million in the
third quarter of 2022 included $5.0
million of pre-tax net investment related losses, primarily
driven by fair value changes to the Company's limited partnership
and equity securities investments due to higher interest rates and
volatile equity markets.
Adjusted operating income, which excludes investment related
gains and losses, totaled $0.2
million for the third quarter of 2022, an improvement from a
loss of $4.9 million in the third
quarter of 2021. The year-over-year improvement was primarily due
to decreases in death claims and property claims, and an increase
in net investment income.
Management Commentary
"Our third quarter financial
results largely reflect the industrywide impacts related to
inflation and volatile equity markets, which we believe are
transitory in nature," said Company Vice Chairman and CEO,
Gerald W. Shields. "Operationally,
our newly introduced products continue to expand our policy base
and are garnering strong support from our independent agents. Our
retention initiatives have played an integral part in driving lower
surrender benefits in our international business for five straight
quarters. Additionally, our property casualty initiatives,
including higher rate actions, are reducing risk and increasing
renewal premiums in that product line. Overall, the steadfast
execution of our strategy is yielding positive results and laying
the foundation for long-term shareholder value creation."
Third Quarter 2022 Financial Highlights
Total amount of insurance issued for the third quarter of 2022
increased by 78% to $189.8 million
compared to the prior year quarter, with contributions from both
the Life Insurance and Home Service Insurance segments, reflecting
the introduction of new market specific products and continued
execution on the Company's strategy to increase the face amount of
insurance sold. Average face value per policy issued in the third
quarter of 2022 increased by 39% in the Life Insurance segment and
27% in the Home Service Insurance segment, compared to the prior
year quarter.
Total premium revenue for the third quarter of 2022 increased
1%, compared to the same year-ago period, to $43.9 million, primarily driven by higher
property insurance renewal premiums in the Home Service segment,
where last year's results were negatively impacted by catastrophic
reinsurance premiums due to Hurricane Ida. Higher first year
premiums in our Life Insurance segment also contributed to higher
premium revenue in the current year period.
First year premiums for the third quarter of 2022 were
$4.5 million, compared to
$4.7 million in the same year-ago
period, as strong first year premiums in the Life Insurance segment
were more than offset by lower first year premiums in the Home
Service segment. The Company believes the decrease was primarily
related to changes in its business mix, resulting from new product
introductions, some of which have lower costs to policyholders than
legacy products, as well as its ongoing risk-based curtailments on
property & casualty sales.
Renewal premiums for the third quarter of 2022 increased 2%,
compared to the same year-ago period, to $39.3 million, driven by higher property
insurance premiums, partially offset by higher scheduled matured
endowment in the Life Insurance segment, which more than offset
strong renewal sales and retention efforts.
Total claims and surrenders benefits for the third quarter of
2022 decreased 3.4%, compared to the same year-ago period,
primarily driven by decreases in death claims benefits and property
claims, partially offset by higher scheduled matured endowments.
Overall, death claim benefits decreased 37%, or $3.6 million, primarily due to lower COVID-19
related deaths. Matured endowments were $8.5
million, compared to $4.3
million in the prior year period. The increase in matured
endowments was expected due to the contractual timing of
maturities.
General expenses for the third quarter of 2022 increased by
$1.0 million, or 10% year-over-year,
primarily related to the Company's international sales convention,
which was not held in 2021 due to COVID-19 restrictions.
Third Quarter 2022 Segment Performance and Highlights
Life Insurance
Overall premium revenue in the Life
Insurance segment for the third quarter of 2022 decreased 2%,
compared to the same year-ago period, as strong first year premiums
were more than offset by lower renewal premiums.
First year premiums for the third quarter of 2022 increased by
5%, compared to the same year-ago period. The increase in first
year premiums was primarily related to strategic sales campaigns
and continued strong sales of the Company's international whole
life product, Whole Life 360TM.
Sales of the Whole Life 360 product continue to have a positive
impact on the amount of insurance issued and number of policies
issued, which increased by 77% and 10%, respectively, compared to
the same year-ago period. Since its launch in March 2022, Whole Life 360 has accounted for 31%
of total insurance issued.
Renewal premiums for the third quarter of 2022 decreased 2%,
compared to the same year-ago period. The decrease in renewal
premiums was primarily related to higher matured endowments, which
more than offset strong sales in the quarter and the Company's
ongoing retention efforts.
Total claims and surrenders benefits for the third quarter of
2022 increased 10% year-over-year, driven by higher matured
endowments. Death claims decreased 54%, compared to the prior year
period, driven by a decrease in the volume of reported claims in
the Company's international business.
Home Service Insurance
Total premium revenue in the
Home Service Insurance segment for the third quarter of 2022
increased 9%, compared to the prior year quarter, due to the
negative impact Hurricane Ida had on property premiums in 2021.
First year premiums for the third quarter of 2022 were
$1.4 million, compared to
$1.7 million in the prior year
quarter. The decline in first year premiums was driven by continued
risk-based curtailments of property insurance premium revenues and
lower life insurance premium revenues. The Company believes the
decrease in life premiums is primarily related to changes in its
business mix. Despite the overall decline in first year premiums,
life insurance issued increased by $34
million, or 81%.
Renewal premiums for the third quarter of 2022 increased
$1.4 million, or 14%, compared to the
prior year period, primarily driven by the aforementioned property
reinsurance reinstatement premiums. Excluding this reinstatement
premium, renewal premiums for the third quarter of 2022 increased
$0.2 million, or 2%, primarily driven
by rate increases on our property casualty business products and
collection efforts by our independent agents.
Total claims and surrenders benefits for the third quarter of
2022 decreased 35%, compared to the same year-ago period. The
decrease was driven by a lower volume of reported death claims,
including COVID-19 reported claims, and lower property claims,
partially offset by slightly higher surrenders.
Investments
Net investment income for the third
quarter of 2022 was $16.6 million, an
improvement compared to $15.5 million
in the prior year period. The increase in net investment income was
primarily driven by reinvestment of the Company's growing
diversified invested asset base at higher interest rates, and
income from limited partnerships, compared to the third quarter of
2021. The average pre-tax yield on the investment portfolio was
4.30%, an improvement compared to 4.24% in the prior year
period.
Due to an increase in prevailing interest rates, the carrying
value of the Company's fixed maturity securities investment
portfolio at September 30, 2022 was $1.2 billion, compared to $1.5 billion at September 30, 2021. Fixed
maturity securities represented approximately 88% of the Company's
investment portfolio. Approximately 99% of the Company's fixed
maturity portfolio is rated investment grade. The Company's
investment philosophy of holding debt securities until maturity
mitigates concerns associated with temporary market value
fluctuations.
Due to rising interest rates, the Company reported a pre-tax net
unrealized loss of $213.7 million on
its available-for-sale securities at September 30, 2022. This compares to net
unrealized gains of $132.4 million at
September 30, 2021.
Investment related gains (losses), net
Investment
related losses in the third quarter of 2022 were $5.0 million, compared to a $2.1 million gain in the third quarter of 2021.
The losses are primarily due to the inflationary environment and
volatility in equity markets, which resulted in fair value changes
to the Company's limited partnership and equity securities
investments.
Book Value
As of September 30,
2022, book value per Class A common share, including
Accumulated Other Comprehensive Income (AOCI), was ($0.28), compared to $5.34 in the prior year period. The
year-over-year decrease was primarily driven by the impact of
higher interest rates on the Company's investment portfolio.
Adjusted book value per Class A common share, which excludes
AOCI, was $3.87 for the third quarter
2022, compared to $3.29 in the
prior-year period.
About Citizens, Inc.
Citizens, Inc. is a financial
services company listed on the New York Stock Exchange under the
symbol CIA. The Company utilizes a three-pronged strategy for
growth based upon worldwide sales of U.S. dollar denominated whole
life cash value insurance policies, life insurance product sales in
the U.S. and final expense and limited liability property product
sales in the U.S. For more information, visit
www.citizensinc.com.
Explanatory Notes on Use of Non-GAAP Measures
Adjusted Operating Income
Adjusted Operating Income is
a non-GAAP measure that is computed as pre-tax GAAP operating
income, excluding net investment related gains (losses). Management
believes that this metric is meaningful, as it allows investors to
evaluate underlying profitability and enhances comparability across
periods, by excluding items that are heavily impacted by investment
market fluctuations and other economic factors and are not
indicative of operating trends. Management believes that the
pre-tax metric is a more useful comparison than the post-tax
metric, as the Company's effective tax rate can fluctuate
significantly from quarter-to-quarter.
Adjusted Book Value Per Class A Common Share
Adjusted
book value per Class A common share is a non-GAAP measure that is
calculated by dividing actual Class A common stockholders' equity,
excluding AOCI, by the number of Class A common shares outstanding
at the end of the period. Management believes this metric is
meaningful, as it allows investors to evaluate underlying book
value growth by excluding the impact of interest rate
volatility.
Selected
Consolidated Financial Data
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
For the periods
ended as of
|
|
(In thousands,
except share data)
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
data
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
1,540,950
|
|
1,831,498
|
|
$
|
1,540,950
|
|
1,831,498
|
Total
liabilities
|
|
1,555,178
|
|
1,566,467
|
|
|
1,555,178
|
|
1,566,467
|
Total stockholders'
equity (deficit)
|
|
(14,228)
|
|
265,031
|
|
|
(14,228)
|
|
265,031
|
Life insurance in
force
|
|
4,269,674
|
|
4,168,925
|
|
|
4,269,674
|
|
4,168,925
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
$
|
43,875
|
|
43,327
|
|
$
|
125,463
|
|
125,185
|
Net investment
income
|
|
16,604
|
|
15,454
|
|
|
47,983
|
|
46,018
|
Investment related
gains (losses) net
|
|
(4,991)
|
|
2,126
|
|
|
(10,589)
|
|
7,277
|
Total
revenues
|
|
56,176
|
|
61,584
|
|
|
165,267
|
|
180,625
|
|
|
|
|
|
|
|
|
|
|
Claims and
surrenders
|
|
30,729
|
|
31,816
|
|
|
86,260
|
|
91,701
|
Other general
expenses
|
|
11,559
|
|
10,542
|
|
|
32,989
|
|
33,427
|
Total benefits and
expenses
|
|
60,963
|
|
64,311
|
|
|
174,657
|
|
180,500
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
(4,787)
|
|
(2,727)
|
|
|
(9,390)
|
|
125
|
Federal income tax
expense (benefit)
|
|
344
|
|
72
|
|
|
622
|
|
1,475
|
Net income
(loss)
|
|
(5,131)
|
|
(2,799)
|
|
|
(10,012)
|
|
(1,350)
|
|
|
|
|
|
|
|
|
|
|
Per share
data
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
|
(0.28)
|
|
5.34
|
|
|
(0.28)
|
|
5.34
|
Basic and diluted
earnings (loss) per
|
|
|
|
|
|
|
|
|
|
share of Class A common stock
|
|
(0.10)
|
|
(0.06)
|
|
|
(0.20)
|
|
(0.03)
|
Definition of Reported Segments
The Company operates
in two business segments as detailed below.
Life Insurance – The Life Insurance segment primarily issues
U.S. dollar-denominated ordinary whole life insurance and endowment
policies predominantly sold to non-U.S. residents, located
principally in Latin America and
the Pacific Rim. These products
are sold through independent marketing consultants.
Home Service Insurance – The Home Service Insurance segment
provides final expense life insurance and property insurance
policies marketed to middle- and lower-income households, and whole
life products with higher face values, in Louisiana, Mississippi, and Arkansas. These products are sold through
independent agents and funeral homes.
Selected Segment
Financial Data
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
For the periods
ended as of
|
|
(In thousands,
except share data)
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
LIFE INSURANCE
SEGMENT
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
1,148,820
|
|
1,379,666
|
|
$
|
1,148,820
|
|
1,379,666
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
|
31,696
|
|
32,198
|
|
|
88,461
|
|
89,399
|
Net investment
income
|
|
12,806
|
|
11,991
|
|
|
37,124
|
|
35,468
|
Investment related
gains (losses)
|
|
(4,367)
|
|
1,205
|
|
|
(8,644)
|
|
5,741
|
Total
revenues
|
|
40,817
|
|
46,070
|
|
|
119,344
|
|
132,750
|
|
|
|
|
|
|
|
|
|
|
Claims and
surrenders
|
|
24,742
|
|
22,565
|
|
|
67,768
|
|
69,366
|
Total benefits and
expenses
|
|
43,748
|
|
44,384
|
|
|
123,608
|
|
124,043
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
(2,931)
|
|
1,686
|
|
|
(4,264)
|
|
8,707
|
|
|
|
|
|
|
|
|
|
|
HOME SERVICE
INSURANCE SEGMENT
|
|
|
|
|
|
|
|
Total
assets
|
$
|
336,782
|
|
399,183
|
|
$
|
336,782
|
|
399,183
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
|
12,179
|
|
11,129
|
|
|
37,002
|
|
35,786
|
Net investment
income
|
|
3,527
|
|
3,238
|
|
|
10,054
|
|
9,826
|
Investment related
gains (losses)
|
|
(462)
|
|
(36)
|
|
|
(1,629)
|
|
393
|
Total
revenues
|
|
15,244
|
|
14,332
|
|
|
45,428
|
|
46,008
|
|
|
|
|
|
|
|
|
|
|
Claims and
surrenders
|
|
5,987
|
|
9,251
|
|
|
18,492
|
|
22,335
|
Total benefits and
expenses
|
|
15,900
|
|
18,431
|
|
|
47,218
|
|
50,327
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
(656)
|
|
(4,099)
|
|
|
(1,790)
|
|
(4,319)
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP Reconciliation
|
Reconciliation of Adjusted Income (Loss) Before
Federal Income Tax
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
For the periods ended
|
|
Unaudited (In thousands)
|
|
2022
|
|
2021
|
|
|
2022
|
2021
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Income
|
|
|
|
|
|
|
|
|
|
Income (loss) before federal income
tax
|
$
|
(4,787)
|
|
(2,727)
|
|
$
|
(9,390)
|
|
125
|
Less:
|
|
|
|
|
|
|
|
|
|
Excluded investment
related gains (losses)
|
|
(4,991)
|
|
2,126
|
|
|
(10,589)
|
|
7,277
|
Adjusted income (loss) before
federal
income tax
|
$
|
204
|
|
(4,853)
|
|
$
|
1,199
|
|
(7,152)
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Book Value per Class A Common Share
|
|
For the periods
ended as of
|
Nine months
ended
September
30,
|
Unaudited (In
thousands, except share data)
|
|
2022
|
|
2021
|
|
|
|
|
|
Stockholders' equity
(deficit)
|
|
|
|
|
Stockholders' equity
(deficit), including AOCI
|
$
|
(14,228)
|
|
265,031
|
Less:
|
|
|
|
|
AOCI
|
|
(207,539)
|
|
102,490
|
Stockholders'
equity, excluding AOCI
|
$
|
193,311
|
|
162,541
|
|
|
|
|
|
Book
value
|
|
|
|
|
Book value,
including AOCI
|
$
|
(0.28)
|
|
5.34
|
Per share impact of
AOCI
|
|
(4.15)
|
|
2.05
|
Book value,
excluding AOCI
|
$
|
3.87
|
|
3.29
|
|
|
|
|
|
|
Forward-Looking Statements
This press release contains
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," "intends," "plans," "predicts," "will,"
"would," "could," "can," "may," and similar terms. Such
forward-looking statements may relate to the Company's expectations
regarding the impact of the COVID-19 pandemic, business
performance, operational strategy, and other financial and
operational measures. Such statements are not guarantees of future
performance and involve certain risks, uncertainties, and
assumptions, which are difficult to predict and many of which are
beyond our control. Therefore, actual outcomes and results may
differ materially from those matters expressed or implied in such
forward-looking statements. The risks, uncertainties and
assumptions that are involved in our forward-looking statements
include, but are not limited to the risk factors discussed in our
most recently filed periodic reports on Form 10-K and Form 10-Q.
The Company assumes no obligation to revise or update any
forward-looking statements for any reason, except as required by
law. You should be aware that factors not referred to herein
could affect the accuracy of our forward-looking statements and use
caution and common sense when considering our forward-looking
statements.
Contact Information
Investors
Matthew
Hausch and Matt Glover
Gateway Group, Inc.
(949) 574-3860
CIA@gatewayir.com
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SOURCE Citizens, Inc.