- Net loss of $3.5 million, or
$0.07 per share, compared to net
income of $5.0 million, or
$0.10 per share, in the second
quarter of 2021
- Adjusted operating income of $1.4
million, an improvement compared to adjusted operating
income of $0.7 million in the second
quarter of 2021
- New products continue to gain traction across both the Life
Insurance and Home Service Insurance segments
- Total claims and surrenders continue to improve, declining
8% year-over-year
- General expenses decreased by $1.1
million or 10% year-over-year
AUSTIN,
Texas, Aug. 4, 2022 /PRNewswire/ -- Citizens,
Inc. (NYSE: CIA), today reported financial results for
the second quarter ended June 30,
2022.
Net loss for the second quarter of 2022 totaled $3.5 million, or $0.07 per fully diluted class A share, compared
to net income of $5.0 million, or
$0.10 per fully diluted class A
share, in the prior year quarter.
Net loss of $3.5 million in the
second 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 the current inflationary
environment and volatile equity markets.
Adjusted operating income, which excludes investment related
gains and losses, totaled $1.4
million for the second quarter of 2022, compared to
$0.7 million in the second quarter of
2021.
Management Commentary
"I am encouraged by the
underlying fundamental strength of our business and ability to
advance our strategic growth initiatives, despite industrywide
headwinds related to inflation and volatile equity markets," said
Company Vice Chairman and CEO, Gerald W.
Shields. "The second quarter highlights the successful
implementation and execution of our strategic plan, which has
translated to several significant achievements across the
organization. Our newly introduced products are delivering strong
initial sales across both segments, our retention initiatives
continue to drive lower surrender benefits, and our efficiency
initiatives continue to reduce operating expenses. We remain
confident that continued execution of our strategic plan will drive
sustainable growth and long-term shareholder value."
Second Quarter 2022 Financial
Highlights
Total amount of insurance issued for the second quarter of 2022
increased by 51% to $171.1 million
compared to the prior year quarter, with contributions from both
the Life Insurance and Home Service Insurance segments, reflecting
the introduction of new products and continued execution on the
Company's strategy. Average face value per policy issued in the
second quarter of 2022 increased by 26% in both the Life Insurance
and Home Service Insurance segments, compared to the prior year
quarter. Sales of newly introduced products have been strong in
both core segments and continue to gain momentum, driving 29% and
16% increases in issued applications in the Life Insurance and Home
Services Insurance segments, respectively.
Total premium revenue for the second quarter of 2022 decreased
1%, compared to the same year-ago period, to $42.2 million, on lower renewal premiums in both
segments and lower first year premiums in the Home Service
Insurance segment.
First year premiums for the second quarter of 2022 were
$4.2 million, compared to
$4.4 million in the same year-ago
period, due to lower first year premiums in the Home Services
segment. The Company believes the decrease was primarily related to
changes in our business mix, resulting from new product
introductions, some of which have lower costs to policyholders than
legacy products. First year premiums increased in the Life
Insurance segment due to strategic sales campaigns and strong sales
of a new international whole life product.
Renewal premiums for the second quarter of 2022 decreased less
than 1%, compared to the same year-ago period, to $38.0 million, on slight decreases in both
segments.
Total claims and surrenders benefits for the second quarter of
2022 decreased 8%, compared to the same year-ago period, driven by
decreases in death claim benefits and surrenders. Overall, death
claim benefits decreased 10%, or $0.6
million, primarily due to a lower volume of reported death
claims, including COVID-19 related deaths, and lower average death
claim amounts. Surrender benefits continued to improve due to
strategic retention initiatives, decreasing by 14%, or $1.9 million.
General expenses for the second quarter of 2022 decreased by
$1.1 million, or 10% year-over-year,
driven by lower employee benefit costs associated with self-insured
health benefits.
Second Quarter 2022 Segment Performance and
Highlights
Life Insurance
Overall premium revenue in the Life
Insurance segment for the second quarter of 2022 decreased by 1%,
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 second quarter of 2022 increased by
2%, compared to the same year-ago period. The increase in first
year premiums was primarily related to the successful launch of the
Company's new international whole life product, Whole Life
360TM.
Strong sales of the Whole Life 360 product positively impacted
the amount of insurance issued and number of policies issued, which
increased by 68% and 29%, respectively.
Renewal premiums for the second quarter of 2022 decreased 1%,
compared to the same year-ago period. The Company believes the
decrease in renewal premiums was primarily related to higher
matured endowments, which were expected, and lower credit life and
A&H sales, domestically.
Total claims and surrenders benefits for the second quarter of
2022 declined 8% year-over-year, driven by lower volumes of death
claims and surrenders, partially offset by higher matured
endowments. Policy surrenders decreased 17%, compared to the same
year ago period, driven by the Company's strategic policy
initiatives aimed at reducing early withdrawals. Death claims
decreased 18%, compared to the prior year period, which was
negatively impacted by elevated claims, including COVID-19 related
deaths.
Home Service Insurance
Total premium revenue in the
Home Service Insurance segment for the second quarter of 2022
decreased 2%, compared to the prior year quarter. We believe the
decrease is associated with the change in the Company's business
mix as new product offerings including, Security Plan Plus™ and
Critical Illness are introduced into the market.
First year premiums for the second 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 the
aforementioned changes in our business mix, and to a lesser extent,
difficult comparison to the prior year period, which was a strong
selling period due to government stimulus and assistance programs.
Despite the overall decline in first year premiums, life insurance
issued increased by $18 million, or
32%.
Renewal premiums for the second quarter of 2022 of $11.0 million were flat, compared to the prior
year period, driven by lower life insurance premiums that more than
offset year-over-year increases in property premiums, which
resulted from higher rates.
Total claims and surrenders benefits for the second quarter of
2022 decreased 4%, compared to the same year-ago period. The
decrease was driven by a lower volume of reported death claims,
including COVID-19 reported claims, lower matured endowment
benefits, and lower property claims, partially offset by higher
surrenders.
Investments
Net investment income for the second
quarter of 2022 was $15.9 million, an
improvement compared to $15.3 million
in the prior year period. The increase in net investment income was
driven by higher income from limited partnerships, and fixed
maturity securities, partially offset by higher investment expense,
compared to the second quarter of 2021.The average pre-tax yield on
the investment portfolio was 4.25%, an improvement compared to
4.22% in the prior year period.
The Company invests the vast majority of total investments into
fixed maturity securities. We reported a pre-tax net unrealized
loss of $125.4 million on our
available-for-sale securities at June 30,
2022. This compares to net unrealized gains of $142.1 million at June 30,
2021, with the year-over-year decrease primarily driven by
higher interest rates.
The carrying value of the Company's fixed maturity securities
investment portfolio at June 30, 2022 was $1.2 billion compared to $1.4 billion at March 31, 2022. This decline
reflects the impact of interest rate sensitivity on the fair value
of fixed maturity securities.
Investment related gains (losses), net
Investment
related losses in the second quarter of 2022 were $5.0 million, compared to a $4.9 million gain in the second 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 June 30,
2022, book value per Class A common share, including
Accumulated Other Comprehensive Income (AOCI), was $1.52, compared to $5.42 in the prior year period the year-over-year
decrease was primarily driven by higher interest rates.
Book value per Class A common share, excluding AOCI, was
$3.97 for the second quarter 2022, or
a 19% increase from 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
June 30
|
|
Six months ended
June 30
|
For the periods
ended as of
|
|
(In thousands,
except share data)
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
data
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
1,618,945
|
|
1,814,001
|
|
$
|
1,618,945
|
|
1,814,001
|
Total
liabilities
|
|
1,542,706
|
|
1,544,876
|
|
|
1,542,706
|
|
1,544,876
|
Total stockholders'
equity
|
|
76,239
|
|
269,125
|
|
|
76,239
|
|
269,125
|
Life insurance in
force
|
|
4,218,214
|
|
4,151,475
|
|
|
4,218,214
|
|
4,151,475
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
$
|
42,224
|
|
42,826
|
|
$
|
81,588
|
|
81,858
|
Net investment
income
|
|
15,892
|
|
15,320
|
|
|
31,379
|
|
30,564
|
Investment related
gains (losses)
|
|
(5,016)
|
|
4,859
|
|
|
(5,598)
|
|
5,151
|
Total
Revenues
|
|
53,734
|
|
63,558
|
|
|
109,091
|
|
119,041
|
|
|
|
|
|
|
|
|
|
|
Claims and
Surrenders
|
|
27,097
|
|
29,296
|
|
|
55,531
|
|
59,885
|
Other general
expenses
|
|
10,400
|
|
11,503
|
|
|
21,430
|
|
22,885
|
Total benefits and
expenses
|
|
57,363
|
|
57,958
|
|
|
113,694
|
|
116,189
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
(3,629)
|
|
5,600
|
|
|
(4,603)
|
|
2,852
|
Federal income tax
benefit
|
|
81
|
|
578
|
|
|
278
|
|
1,403
|
Net income
(loss)
|
|
(3,548)
|
|
5,022
|
|
|
(4,881)
|
|
1,449
|
|
|
|
|
|
|
|
|
|
|
Per share
data
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
|
1.52
|
|
5.42
|
|
|
1.52
|
|
5.42
|
Basic and diluted
earnings (loss) per
|
|
|
|
|
|
|
|
|
|
share of Class A
common stock
|
|
(0.07)
|
|
0.10
|
|
|
(0.10)
|
|
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. A new whole
life product was introduced in Florida in 2021.
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
June 30
|
|
Six months ended
June 30
|
For the periods
ended as of
|
|
(In thousands,
except share data)
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
LIFE INSURANCE
SEGMENT
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
1,209,055
|
|
1,370,932
|
|
$
|
1,209,055
|
|
1,370,932
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
|
29,834
|
|
30,138
|
|
|
56,765
|
|
57,201
|
Net investment
income
|
|
12,347
|
|
11,879
|
|
|
24,318
|
|
23,477
|
Investment related
gains (losses)
|
|
(3,984)
|
|
4,644
|
|
|
(4,277)
|
|
4,536
|
Total
revenues
|
|
38,830
|
|
47,214
|
|
|
78,527
|
|
86,680
|
|
|
|
|
|
|
|
|
|
|
Claims and
surrenders
|
|
21,568
|
|
23,531
|
|
|
43,026
|
|
46,801
|
Total benefits and
expenses
|
|
41,193
|
|
40,087
|
|
|
79,860
|
|
79,659
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
(2,363)
|
|
7,127
|
|
|
(1,333)
|
|
7,021
|
|
|
|
|
|
|
|
|
|
|
HOME SERVICE
INSURANCE SEGMENT
|
|
|
|
|
|
|
|
Total
assets
|
$
|
355,732
|
|
390,280
|
|
$
|
355,732
|
|
390,280
|
Net income (loss)
items
|
|
|
|
|
|
|
|
|
|
Insurance
premiums
|
|
12,390
|
|
12,688
|
|
|
24,823
|
|
24,657
|
Net investment
income
|
|
3,283
|
|
3,243
|
|
|
6,527
|
|
6,588
|
Investment related
gains (losses)
|
|
(925)
|
|
206
|
|
|
(1,167)
|
|
429
|
Total
revenues
|
|
14,749
|
|
16,137
|
|
|
30,184
|
|
31,676
|
|
|
|
|
|
|
|
|
|
|
Claims and
surrenders
|
|
5,529
|
|
5,765
|
|
|
12,505
|
|
13,084
|
Total benefits and
expenses
|
|
14,643
|
|
15,599
|
|
|
31,318
|
|
31,896
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
|
106
|
|
538
|
|
|
(1,134)
|
|
(220)
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP
Reconciliation
Reconciliation of
Adjusted Income (Loss) Before Federal Income Tax
|
|
|
Three months
ended
June 30
|
|
Six months ended
June 30
|
For the periods
ended as of
|
|
Unaudited (thousands
of dollars)
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating
Income
|
|
|
|
|
|
|
|
|
|
Income (loss) before
federal income tax
|
$
|
(3,629)
|
|
5,600
|
|
$
|
(4,603)
|
|
2,852
|
Less:
|
|
|
|
|
|
|
|
|
|
Excluded investment
related gains (losses)
|
|
(5,016)
|
|
4,859
|
|
|
(5,598)
|
|
5,151
|
Total
adjustments
|
|
(5,016)
|
|
4,859
|
|
|
(5,598)
|
|
5,151
|
|
|
|
|
|
|
|
|
|
|
Adjusted income
(loss) before federal
income
tax
|
$
|
1,387
|
|
741
|
|
$
|
995
|
|
(2,299)
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Book Value per Class A Common Share
|
|
As of June 30,
|
Unaudited (thousands
of dollars, except share data)
|
|
2022
|
|
2021
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
Stockholders'
equity, including AOCI
|
$
|
76,239
|
|
269,125
|
AOCI
|
|
(122,948)
|
|
103,885
|
Stockholders'
equity, excluding AOCI
|
$
|
199,187
|
|
165,240
|
|
|
|
|
|
Book
value
|
|
|
|
|
Book value,
including AOCI
|
$
|
1.52
|
|
5.42
|
Per share impact of
AOCI
|
|
(2.45)
|
|
2.09
|
Book value,
excluding AOCI
|
$
|
3.97
|
|
3.33
|
|
|
|
|
|
|
|
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.