Citizens swings to $422K net loss in Q3 2026
A $1.7 million reduction in the ceded reserve credit increased the reserve liability during the third quarter.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
Rhea-AI Filing Summary
Citizens, Inc. (CIA) reported third-quarter 2026 revenue of $65.038 million and a net loss of $422,000, compared with revenue of $62.808 million and net income of $2.417 million a year earlier. For the nine months ended September 30, 2026, revenue was $185.166 million and net income was $1.421 million, versus $183.546 million and $7.253 million in 2025. Operating cash flow for the nine-month period was $12.981 million, compared with $8.891 million.
Citizens attributed the third-quarter pretax-income decline primarily to a $5.1 million increase in insurance benefits paid or provided. A $13.2 million decrease in claims and surrenders was more than offset by a $16.3 million increase in future policy benefit reserves and a $1.9 million increase in policyholder liability remeasurement loss. Citizens also changed its estimate for the ceded reserve credit, reducing it by $1.7 million and increasing reserve liability. At September 30, the company reported no debt and $1.7 billion in total assets. SPLIC merged into its parent, CLOA, on October 1, 2026.
1 point · 0 major0 major · 2 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointOperating cash flow: $12.981 million for nine months, versus $8.891 million.
Negative
- Moderate pointThird-quarter result: $422,000 net loss versus $2.417 million net income.
- Minor pointNine-month net income: $1.421 million versus $7.253 million.
Filing Explained
Fixed-maturity securities’ fair-value marks run through other comprehensive income, placing their reported effect in equity rather than net income.
At
The company reports committed investment funding of up to
Key Figures
Third-quarter revenue: $65.038 million; $62.808 million in 2025
Third-quarter net income (loss): $(422,000); $2.417 million in 2025
Nine-month net income: $1.421 million; $7.253 million in 2025
+3 more
6 metrics
Third-quarter revenue
$65.038 million; $62.808 million in 2025
Three months ended September 30
Third-quarter net income (loss)
$(422,000); $2.417 million in 2025
Three months ended September 30
Nine-month net income
$1.421 million; $7.253 million in 2025
Nine months ended September 30
Operating cash flow
$12.981 million; $8.891 million in 2025
Nine months ended September 30
Future policy benefit reserves increase
$16.3 million
Third-quarter 2026 comparison described by management
Ceded reserve credit decrease
$1.7 million
Accounting estimate change recorded in the third quarter of 2026
Key Terms
ceded reserve credit, policyholder liability remeasurement, coinsurance reinsurance agreement, deferred policy acquisition costs, +1 more
5 terms
ceded reserve credit financial
"decreased the ceded reserve credit"
policyholder liability remeasurement financial
"increase in policyholder liability remeasurement loss"
coinsurance reinsurance agreement financial
"entered into a coinsurance reinsurance agreement with RGA"
deferred policy acquisition costs financial
"Deferred policy acquisition costs"
Deferred policy acquisition costs are upfront sales and onboarding expenses — such as commissions and underwriting costs — that an insurer records as an asset and then spreads out over the life of the insurance policies as the company earns premiums. For investors, these costs matter because how quickly they are written off affects reported profits and the apparent health of an insurer’s balance sheet, similar to spreading the cost of a season ticket over the months you use it.
Subpart F regulatory
"subject to Subpart F of the Internal Revenue Code"
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
Why did CIA's third-quarter pretax income decline?
Citizens reported income before federal income tax of $142,000 for the quarter, compared with $4.479 million in 2025. Management attributed the decline primarily to a $5.1 million increase in insurance benefits paid or provided. Lower claims and surrenders partly offset increases in future policy benefit reserves and policyholder liability remeasurement loss.
How much operating cash flow did CIA generate in the first nine months of 2026?
Citizens reported $12.981 million of net cash provided by operating activities for the nine months ended September 30, 2026, compared with $8.891 million for the same period in 2025.
What are the terms of CIA's revolving credit facility?
Citizens' $20 million senior secured revolving credit facility has a three-year term and matures on May 5, 2027. It permits borrowing for working capital, capital expenditures and other corporate purposes. As of September 30, 2026, Citizens had not borrowed against the facility and was in compliance with its covenants.
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For the Quarterly Period Ended September 30, 2026
OR
For the Transition Period from to
COMMISSION FILE NUMBER: 000-16509
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Current Address)
Registrant's telephone number, including area code: (512 ) 837-7100
| Securities registered pursuant to Section 12(b) of the Act | ||||||||
| (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 | ☐ | ☒ | 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 October 30, 2026, the Registrant had 50,704,766 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, 2026 (Unaudited) and December 31, 2025 | 2 | ||||||||||
Consolidated Statements of Operations and Comprehensive Income (Loss), Nine Months Ended September 30, 2026 and 2025 (Unaudited) | 4 | ||||||||||
Consolidated Statements of Stockholders' Equity, Nine Months Ended September 30, 2026 and 2025 (Unaudited) | 5 | ||||||||||
Consolidated Statements of Cash Flows, Nine Months Ended September 30, 2026 and 2025 (Unaudited) | 7 | ||||||||||
Notes to Consolidated Financial Statements (Unaudited) | 9 | ||||||||||
(1) Financial Statements | 9 | ||||||||||
(2) Accounting Pronouncements | 10 | ||||||||||
(3) Investments | 10 | ||||||||||
(4) Fair Value Measurements | 14 | ||||||||||
(5) Deferred Acquisition Costs & Cost of Insurance Acquired | 18 | ||||||||||
(6) Policyholders' Liabilities | 19 | ||||||||||
(7) Reinsurance | 26 | ||||||||||
(8) Commitments and Contingencies | 27 | ||||||||||
(9) Stockholders' Equity and Restrictions | 28 | ||||||||||
(10) Segment and Other Operating Information | 29 | ||||||||||
(11) Income Taxes | 36 | ||||||||||
(12) Other Comprehensive Income (Loss) | 37 | ||||||||||
(13) Related Party Transactions | 38 | ||||||||||
(14) Subsequent Events | 38 | ||||||||||
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 39 | |||||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 63 | |||||||||
| Item 4. | Controls and Procedures | 63 | |||||||||
| Part II. OTHER INFORMATION | |||||||||||
| Item 1. | Legal Proceedings | 64 | |||||||||
| Item 1A. | Risk Factors | 64 | |||||||||
| Item 5. | Other Information | 64 | |||||||||
| Item 6. | Exhibits | 65 | |||||||||
September 30, 2026 | 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, 2026 | December 31, 2025 | |||||||||
| (Unaudited) | |||||||||||
Assets: | |||||||||||
| Investments: | |||||||||||
Fixed maturity securities, available-for-sale, at fair value (amortized cost: $ | $ | ||||||||||
| Equity securities, at fair value | |||||||||||
| Policy loans | |||||||||||
Other long-term investments (portion measured at fair value $ | |||||||||||
| Total investments | |||||||||||
Cash and cash equivalents (restricted portion: $ | |||||||||||
| Accrued investment income | |||||||||||
| Receivable for securities | |||||||||||
| Reinsurance recoverable | |||||||||||
| Deferred policy acquisition costs | |||||||||||
| Cost of insurance acquired | |||||||||||
| Current federal income tax receivable | |||||||||||
| Property and equipment, net | |||||||||||
| Due premiums | |||||||||||
Other assets (less allowance for losses of $ | |||||||||||
| Total assets | $ | ||||||||||
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 10-Q 2
Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, Continued
| (In thousands, except share amounts) | September 30, 2026 | December 31, 2025 | |||||||||
| (Unaudited) | |||||||||||
Liabilities and Stockholders' Equity: | |||||||||||
| Liabilities: | |||||||||||
| Policy liabilities: | |||||||||||
| Future policy benefit reserves: | |||||||||||
| Life insurance | $ | ||||||||||
| Accident and health insurance | |||||||||||
| Total future policy benefit reserves | |||||||||||
| Policyholders' funds: | |||||||||||
| Annuities | |||||||||||
| Dividend accumulations | |||||||||||
| Premiums paid in advance | |||||||||||
| Policy claims payable | |||||||||||
| Other policyholders' funds | |||||||||||
| Total policyholders' funds | |||||||||||
| Total policy liabilities | |||||||||||
| Commissions payable | |||||||||||
| Deferred federal income tax liability | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Notes 7 and 8) | |||||||||||
| Stockholders' Equity: | |||||||||||
| Common stock: | |||||||||||
Class A, | |||||||||||
Class B, | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ( | |||||||||
| Treasury stock, at cost | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | ||||||||||
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Premiums | $ | ||||||||||||||||||||||
| Net investment income | |||||||||||||||||||||||
| Investment related gains (losses), net | ( | ( | |||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Benefits and Expenses: | |||||||||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||||||||
| Claims and surrenders | |||||||||||||||||||||||
| Increase (decrease) in future policy benefit reserves | ( | ( | |||||||||||||||||||||
| Policyholder liability remeasurement (gain) loss | ( | ||||||||||||||||||||||
| Policyholders' dividends | |||||||||||||||||||||||
| Total insurance benefits paid or provided | |||||||||||||||||||||||
| Commissions | |||||||||||||||||||||||
| Other general expenses | |||||||||||||||||||||||
| Capitalization of deferred policy acquisition costs | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of deferred policy acquisition costs | |||||||||||||||||||||||
| Amortization of cost of insurance acquired | |||||||||||||||||||||||
| Total benefits and expenses | |||||||||||||||||||||||
Income (loss) before federal income tax | |||||||||||||||||||||||
Federal income tax expense (benefit) | |||||||||||||||||||||||
| Net income (loss) | ( | ||||||||||||||||||||||
| Per Share Amounts: | |||||||||||||||||||||||
| Basic and diluted earnings (loss) per share of Class A common stock | ( | ||||||||||||||||||||||
| Other Comprehensive Income (Loss): | |||||||||||||||||||||||
| Unrealized gains (losses) on fixed maturity securities: | |||||||||||||||||||||||
| Unrealized holding gains (losses) arising during period | ( | ( | |||||||||||||||||||||
Reclassification adjustment for (gains) losses included in net income (loss) | ( | ( | |||||||||||||||||||||
| Unrealized gains (losses) on fixed maturity securities, net | ( | ( | |||||||||||||||||||||
| Change in current discount rate for liability for future policy benefits | ( | ( | |||||||||||||||||||||
| Income tax expense (benefit) on other comprehensive income items | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Total comprehensive income (loss) | $ | ( | ( | ( | |||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 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, 2025 | $ | ( | ( | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | ( | ( | |||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | ( | ( | |||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | ( | ( | ||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 10-Q 5
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, 2024 | $ | ( | ( | ||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | ( | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | ( | ( | |||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | ( | ( | |||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Total comprehensive income (loss) | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
| Stock-based compensation | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | ( | ( | ||||||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 10-Q 6
Table of Contents
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, (In thousands) | 2026 | 2025 | |||||||||
| Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Investment related (gains) losses on sale of investments and other assets, net | ( | ||||||||||
| Net deferred policy acquisition costs | ( | ( | |||||||||
| Amortization of cost of insurance acquired | |||||||||||
| Depreciation | |||||||||||
| Amortization of premiums and discounts on investments | |||||||||||
| Stock-based compensation | |||||||||||
| Deferred federal income tax expense (benefit) | |||||||||||
| Change in: | |||||||||||
| Accrued investment income | ( | ||||||||||
| Reinsurance recoverable | ( | ( | |||||||||
| Due premiums | |||||||||||
| Future policy benefit reserves | ( | ||||||||||
| Other policyholders' liabilities | |||||||||||
Federal income tax receivable | ( | ( | |||||||||
| Commissions payable and other liabilities | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of fixed maturity securities, available-for-sale | ( | ( | |||||||||
| Sales of fixed maturity securities, available-for-sale | |||||||||||
| Maturities and calls of fixed maturity securities, available-for-sale | |||||||||||
| Purchases of equity securities | ( | ||||||||||
Sales of equity securities | |||||||||||
| Principal payments on mortgage loan | |||||||||||
| Change in policy loans | |||||||||||
| Sales of other long-term investments | |||||||||||
| Purchases of other long-term investments | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
| See accompanying Notes to Consolidated Financial Statements. | |||||||||||
September 30, 2026 | 10-Q 7
Table of Contents
| CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES | |||||||||||
| Consolidated Statements of Cash Flows, Continued | |||||||||||
| (Unaudited) | |||||||||||
Nine Months Ended September 30, (In thousands) | 2026 | 2025 | |||||||||
| Cash flows from financing activities: | |||||||||||
| Annuity deposits | $ | ||||||||||
| Annuity withdrawals | ( | ( | |||||||||
Other share repurchases | ( | ||||||||||
| Net cash provided by (used in) financing activities | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of year | |||||||||||
| Cash and cash equivalents at end of period | $ | ||||||||||
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended September 30, 2026 and 2025, various fixed maturity issuers exchanged securities with book values of $10.3 million and $7.9 million, respectively, for securities of equal value.
The Company had $12.5 million net unsettled security trades at September 30, 2025 and none at September 30, 2026.
The Company recognized right-of-use assets of $0.2 million in exchange for new operating lease liabilities during the nine months ended September 30, 2025 and none during 2026.
See accompanying Notes to Consolidated Financial Statements.
September 30, 2026 | 10-Q 8
Table of Contents
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," the "Company," "it," "we," "us" or "our"), a Colorado corporation, and its wholly-owned subsidiaries - CICA Life Insurance Company of America ("CLOA"), Security Plan Life Insurance Company ("SPLIC"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc. ("CTI"), and 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.
The consolidated balance sheet as of September 30, 2026, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2026 and September 30, 2025 and the consolidated statements of cash flows for the nine months ended September 30, 2026 and September 30, 2025 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the financial position, results of operations, and changes in cash flows at September 30, 2026 and for comparative periods. 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, 2025 ("2025 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.
The Company operates through two segments: International Insurance and Domestic Insurance.
International Insurance. All international policies are issued by 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 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.
Domestic Insurance. Our Domestic Insurance segment operates through our subsidiaries CLOA and MGLIC and until September 30, 2026, SPLIC. On October 1, 2026, SPLIC merged into its parent, CLOA. CLOA issues whole life, final expense and life products with living benefits throughout the U.S. while SPLIC (now branded under CLOA as "Security Plan") focuses on the life insurance needs of the lower-income markets, primarily in Louisiana, Mississippi and Arkansas. MGLIC sold and now continues to service low face amount whole life policies through funeral homes in Mississippi. Our products in this segment consist primarily of small face amounts of whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily relating to funeral and burial costs. SPLIC also issued critical illness policies through September 30, 2026.
September 30, 2026 | 10-Q 9
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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, and actuarially determined assets and liabilities. 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 Note 1 - Summary of Significant Accounting Policies in our 2025 Form 10-K, which should be read in conjunction with these accompanying consolidated financial statements.
(2) ACCOUNTING PRONOUNCEMENTS
ACCOUNTING STANDARDS NOT YET ADOPTED
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to enhance expense disclosures by requiring additional disaggregation of certain costs and expenses, on an interim and annual basis, within the footnotes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied either prospectively or retrospectively. The Company has evaluated the impact of this new guidance and determined that it will not have a material impact on the consolidated financial statements and notes thereto.
No other new accounting pronouncements issued or effective during the year had, or are expected to have, a material impact on our consolidated financial statements.
(3) INVESTMENTS
The Company invests primarily in fixed maturity securities as shown below.
Carrying Value (In thousands, except for %) | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||||||
| Cash and invested assets: | |||||||||||||||||||||||
| Fixed maturity securities | $ | % | % | ||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||
| Policy loans | |||||||||||||||||||||||
| Other long-term investments | |||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||
| Total cash and invested assets | $ | % | % | ||||||||||||||||||||
September 30, 2026 | 10-Q 10
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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, 2026 | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasuries | $ | ||||||||||||||||||||||
| U.S. Government-sponsored enterprises | |||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||
| Financial | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Utilities | |||||||||||||||||||||||
| Energy | |||||||||||||||||||||||
| Communications | |||||||||||||||||||||||
| All other | |||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||
| Total fixed maturity securities | $ | ||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasuries | $ | ||||||||||||||||||||||
| U.S. Government-sponsored enterprises | |||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||
| Financial | |||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||
| Utilities | |||||||||||||||||||||||
| Energy | |||||||||||||||||||||||
| Communications | |||||||||||||||||||||||
| All other | |||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||
| Total fixed maturity securities | $ | ||||||||||||||||||||||
September 30, 2026 | 10-Q 11
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The Company's investments in equity securities are shown below.
Fair Value (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Equity securities: | |||||||||||
| Bond mutual funds | $ | ||||||||||
Common stocks | |||||||||||
| Non-redeemable preferred stock | |||||||||||
| Total equity securities | $ | ||||||||||
VALUATION OF INVESTMENTS
The Company classifies all fixed maturity securities as available-for-sale ("AFS"), which are reported in the consolidated financial statements at fair value with the change in fair value recorded through other comprehensive income (loss). Equity securities are also measured at fair value in the consolidated financial statements with the change in fair value recorded through net income (loss). The Company recognized net investment related gains of $0.1 million and losses of $18 thousand for the three and nine months ended September 30, 2026, respectively, and gains of $0.3
The Company considers several factors in its review and evaluation of individual investments, using the process described in Note 2 - Investments in our 2025 Form 10-K to determine whether a credit valuation loss exists. For the three and nine months ended September 30, 2026 and 2025, the Company recorded no
For fixed maturity security investments that have unrealized losses as of September 30, 2026 and December 31, 2025, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows:
| September 30, 2026 | 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: | |||||||||||||||||||||||||||||||||||
| U.S. Treasuries | $ | ||||||||||||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||||||||||||||
| Financial | |||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| Utilities | |||||||||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||
| Communications | |||||||||||||||||||||||||||||||||||
| All Other | |||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | ||||||||||||||||||||||||||||||||||
September 30, 2026 | 10-Q 12
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
| December 31, 2025 | 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: | |||||||||||||||||||||||||||||||||||
| U.S. Treasuries | $ | ||||||||||||||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||||||||||||||
| Corporate: | |||||||||||||||||||||||||||||||||||
| Financial | |||||||||||||||||||||||||||||||||||
| Consumer | |||||||||||||||||||||||||||||||||||
| Utilities | |||||||||||||||||||||||||||||||||||
| Energy | |||||||||||||||||||||||||||||||||||
| Communications | |||||||||||||||||||||||||||||||||||
| All Other | |||||||||||||||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | ||||||||||||||||||||||||||||||||||
In each category of our fixed maturity securities described above, we do not intend to sell our investments, and it is unlikely that the Company will be required to sell the investments before recovery of their amortized cost bases. As of September 30, 2026 and December 31, 2025, 98.7
The unrealized losses on fixed maturity securities are due to noncredit-related factors, including changes 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, 2026 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, 2026 | Amortized Cost | Fair Value | |||||||||
| (In thousands) | |||||||||||
| Fixed maturity securities: | |||||||||||
| Due in one year or less | $ | ||||||||||
| Due after one year through five years | |||||||||||
| Due after five years through ten years | |||||||||||
| Due after ten years through twenty years | |||||||||||
| Due after twenty years | |||||||||||
| Total fixed maturity securities | $ | ||||||||||
The Company uses the specific identification method of each individual security to determine the cost basis used in the calculation of realized gains and losses related to fixed maturity security sales. The proceeds from sales and
September 30, 2026 | 10-Q 13
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
the gross realized gains and losses on fixed maturity securities, available-for-sale for the three and nine months ended September 30, 2026 and 2025 are shown in the table below.
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Fixed maturity securities, available-for-sale: | |||||||||||||||||
| Proceeds | $ | ||||||||||||||||
| Gross realized gains | $ | ||||||||||||||||
| Gross realized losses | $ | ||||||||||||||||
(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. 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 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 inactive markets; and model-derived valuations with observable inputs or significant value drivers. Valuations are determined through independent pricing services or broker quotes, utilizing industry-standard models that incorporate observable inputs - including interest rates, credit spreads, and foreign exchange rates. All key inputs are either directly observable or supported by market-executed transactions.
•Level 3 - Instruments whose significant value drivers are unobservable are estimated using non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information.
September 30, 2026 | 10-Q 14
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The following tables set forth our assets measured at fair value on a recurring basis as of September 30, 2026 and December 31, 2025.
| September 30, 2026 | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasuries and U.S. Government-sponsored enterprises | $ | ||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||
Total fixed maturity securities | |||||||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Bond mutual funds | |||||||||||||||||||||||
Common stocks | |||||||||||||||||||||||
| Non-redeemable preferred stock | |||||||||||||||||||||||
| Total equity securities | |||||||||||||||||||||||
Total financial assets (1) | $ | ||||||||||||||||||||||
| December 31, 2025 | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasuries and U.S. Government-sponsored enterprises | $ | ||||||||||||||||||||||
| States and political subdivisions | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Commercial mortgage-backed | |||||||||||||||||||||||
| Residential mortgage-backed | |||||||||||||||||||||||
| Asset-backed | |||||||||||||||||||||||
Total fixed maturity securities | |||||||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Bond mutual funds | |||||||||||||||||||||||
Common stocks | |||||||||||||||||||||||
| Non-redeemable preferred stock | |||||||||||||||||||||||
| Total equity securities | |||||||||||||||||||||||
Total financial assets (1) | $ | ||||||||||||||||||||||
(1) Total investments included in the fair value hierarchy exclude certain other long-term investments that are measured at estimated fair value using the NAV per share (or its equivalent) practical expedient. The estimated fair value of such investments was $81.0 million and $85.2 million as of September 30, 2026, and December 31, 2025, respectively.
September 30, 2026 | 10-Q 15
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
FINANCIAL INSTRUMENTS VALUATION
FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
Fixed maturity securities, available-for-sale. At September 30, 2026, fixed maturity securities classified as Level 2 and valued using a third-party pricing source totaled $1,210.8 million and comprised 93.2 % of total reported fair value of our total 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 fixed maturity securities as of September 30, 2026. For the three and nine months ended September 30, 2026, 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 as their fair values are based upon quoted market prices.
Structured note. At September 30, 2026, the Company held an investment in a structured note, which includes components classified as fixed maturity securities and other long-term investments on the consolidated balance sheets. The partner interest is measured at its NAV of $2.9 million as a practical expedient, which approximates fair value. The Company recognized investment related losses of $5 thousand and $0.4 million for the three and nine months ended September 30, 2026, respectively, related to changes in fair value on this investment. The partner interest is included in other long-term investments on the consolidated balance sheets. As of September 30, 2026, we are committed to funding this structured note investment up to $3.3 million over the next nine years .
Limited partnerships. The Company considers the 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 $2.1 million and $1.4 million and losses of $3.7 million and $2.3 million on limited partnerships held for the three and nine months ended September 30, 2026 and 2025, respectively, related to changes in fair value. These investments are included in other long-term investments on the consolidated balance sheets.
| September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||
(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 | $ | $ | |||||||||||||||||||||||
| Late-stage growth | Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale | |||||||||||||||||||||||||
| Infrastructure | Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution | |||||||||||||||||||||||||
| Total limited partnerships | $ | $ | ||||||||||||||||||||||||
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.
September 30, 2026 | 10-Q 16
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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 value 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, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (In thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
| Policy loans | $ | ||||||||||||||||||||||
| Residential mortgage loan | |||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||
| Annuity - investment contracts | |||||||||||||||||||||||
Policy loans. Policy loans had a weighted average annual interest rate of 7.7
Residential mortgage loan. The mortgage loan is secured by a residential property. The interest rate for this loan was 7.0 two years . Management estimated the fair value using an annual interest rate of 6.25
Cash and cash equivalents. Cash and cash equivalents are reported at carrying value, which approximates fair value due to their short-term nature, and are classified 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, 2026 and December 31, 2025 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.27 % to 5.62 % and 3.31 % to 4.98 %, 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.
September 30, 2026 | 10-Q 17
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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 values of these investments.
Carrying Value (In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
| Other long-term investments: | |||||||||||
| Limited partnerships | $ | ||||||||||
Structured note | |||||||||||
| FHLB common stock | |||||||||||
All other investments | |||||||||||
| Total other long-term investments | $ | ||||||||||
(5) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED
DAC
The following tables roll forward the deferred policy acquisition costs ("DAC") and cost of insurance acquired ("COIA") balances for the nine months ended September 30, 2026 and 2025 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 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, 2026 (In thousands) | Permanent | Permanent Limited Pay | Other Business | Total | ||||||||||
International Insurance: | ||||||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | ||||||||||||||
Domestic Insurance: | ||||||||||||||
| Balance, beginning of year | ||||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | ||||||||||||||
| Consolidated: | ||||||||||||||
| Balance, beginning of year | ||||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | $ | |||||||||||||
September 30, 2026 | 10-Q 18
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
Nine Months Ended September 30, 2025 (In thousands) | Permanent | Permanent Limited Pay | Other Business | Total | ||||||||||
International Insurance: | ||||||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | ||||||||||||||
Domestic Insurance: | ||||||||||||||
| Balance, beginning of year | ||||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | ||||||||||||||
| Consolidated: | ||||||||||||||
| Balance, beginning of year | ||||||||||||||
| Capitalizations | ||||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | $ | |||||||||||||
COIA
The Domestic Insurance segment is the only segment that recognizes COIA; therefore, the balances for the nine months ended September 30, 2026 and 2025 on a consolidated basis by reporting cohort are shown below.
(In thousands) | Permanent | Permanent Limited Pay | Other Business | Total | ||||||||||
| Nine Months Ended September 30, 2026 | ||||||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Amortization expense | ( | ( | ( | ( | ||||||||||
| Balance, end of period | $ | |||||||||||||
| Nine Months Ended September 30, 2025 | ||||||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Amortization expense | ( | ( | ( | |||||||||||
| Balance, end of period | $ | |||||||||||||
(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, 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, 2026 | 10-Q 19
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
September 30, 2026 (In thousands) | International Insurance | Domestic Insurance | |||||||||||||||||||||
| Permanent | Permanent Limited Pay | Total | Permanent | Permanent Limited Pay | Total | ||||||||||||||||||
Present Value of Expected Net Premiums: | |||||||||||||||||||||||
| Balance, beginning of year | $ | ||||||||||||||||||||||
| Beginning balance at original discount rate | $ | ||||||||||||||||||||||
| Effect of changes in cash flow assumptions | ( | ( | |||||||||||||||||||||
Effect of actual variances from expected experience | ( | ( | ( | ||||||||||||||||||||
| Adjusted beginning of year balance | |||||||||||||||||||||||
| Issuances | |||||||||||||||||||||||
| Interest accrual | |||||||||||||||||||||||
| Net premiums collected | ( | ( | ( | ( | ( | ||||||||||||||||||
| Derecognition and other | ( | ( | ( | ||||||||||||||||||||
| Ending balance at original discount rate | |||||||||||||||||||||||
| Effect of changes in discount rates | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Balance, end of period | $ | ||||||||||||||||||||||
Present Value of Expected Future Policy Benefits: | |||||||||||||||||||||||
| Balance, beginning of year | $ | ||||||||||||||||||||||
| Beginning balance at original discount rate | $ | ||||||||||||||||||||||
| Effect of changes in cash flow assumptions | ( | ( | |||||||||||||||||||||
Effect of actual variances from expected experience | ( | ( | ( | ||||||||||||||||||||
| Adjusted beginning of year balance | |||||||||||||||||||||||
| Issuances | |||||||||||||||||||||||
| Interest accrual | |||||||||||||||||||||||
| Benefit payments | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Derecognition and other | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance at original discount rate | |||||||||||||||||||||||
| Effect of changes in discount rates | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Balance, end of period | $ | ||||||||||||||||||||||
| Net liability for future policy benefits | $ | ||||||||||||||||||||||
| Plus: Flooring impact | |||||||||||||||||||||||
| Less: Reinsurance recoverable | |||||||||||||||||||||||
| Net liability for future policy benefits, after reinsurance recoverable | $ | ||||||||||||||||||||||
September 30, 2026 | 10-Q 20
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
September 30, 2025 (In thousands) | International Insurance | Domestic Insurance | |||||||||||||||||||||
| Permanent | Permanent Limited Pay | Total | Permanent | Permanent Limited Pay | Total | ||||||||||||||||||
Present Value of Expected Net Premiums: | |||||||||||||||||||||||
| Balance, beginning of year | $ | ||||||||||||||||||||||
| Beginning balance at original discount rate | $ | ||||||||||||||||||||||
| Effect of changes in cash flow assumptions | ( | ( | ( | ( | |||||||||||||||||||
Effect of actual variances from expected experience | ( | ( | ( | ||||||||||||||||||||
| Adjusted beginning of year balance | |||||||||||||||||||||||
| Issuances | |||||||||||||||||||||||
| Interest accrual | |||||||||||||||||||||||
| Net premiums collected | ( | ( | ( | ( | ( | ||||||||||||||||||
| Derecognition and other | ( | ( | |||||||||||||||||||||
| Ending balance at original discount rate | |||||||||||||||||||||||
| Effect of changes in discount rates | ( | ( | ( | ( | ( | ||||||||||||||||||
| Balance, end of period | $ | ||||||||||||||||||||||
Present Value of Expected Future Policy Benefits: | |||||||||||||||||||||||
| Balance, beginning of year | $ | ||||||||||||||||||||||
| Beginning balance at original discount rate | $ | ||||||||||||||||||||||
| Effect of changes in cash flow assumptions | ( | ( | ( | ( | |||||||||||||||||||
Effect of actual variances from expected experience | ( | ( | ( | ||||||||||||||||||||
| Adjusted beginning of year balance | |||||||||||||||||||||||
| Issuances | |||||||||||||||||||||||
| Interest accrual | |||||||||||||||||||||||
| Benefit payments | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Derecognition and other | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance at original discount rate | |||||||||||||||||||||||
| Effect of changes in discount rates | ( | ( | ( | ( | ( | ( | |||||||||||||||||
| Balance, end of period | $ | ||||||||||||||||||||||
| Net liability for future policy benefits | $ | ||||||||||||||||||||||
| Plus: Flooring impact | ( | ( | |||||||||||||||||||||
| Less: Reinsurance recoverable | |||||||||||||||||||||||
| Net liability for future policy benefits, after reinsurance recoverable | $ | ||||||||||||||||||||||
September 30, 2026 | 10-Q 21
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(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 for the periods indicated below.
September 30, 2026 | September 30, 2025 | ||||||||||||||||||||||
| (In thousands) | International Insurance | Domestic Insurance | Consolidated | International Insurance | Domestic Insurance | Consolidated | |||||||||||||||||
Life Insurance: | |||||||||||||||||||||||
| Permanent | $ | ||||||||||||||||||||||
| Permanent limited pay | |||||||||||||||||||||||
| Deferred profit liability | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total life insurance | |||||||||||||||||||||||
Accident & Health Insurance: | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total future policy benefit reserves | $ | ||||||||||||||||||||||
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, 2026 | September 30, 2025 | ||||||||||||||||||||||
| (In thousands) | International Insurance | Domestic Insurance | International Insurance | Domestic Insurance | |||||||||||||||||||
| Undiscounted: | |||||||||||||||||||||||
Permanent: | |||||||||||||||||||||||
| Expected future gross premiums | $ | ||||||||||||||||||||||
| Expected future benefit payments | |||||||||||||||||||||||
Permanent Limited Pay: | |||||||||||||||||||||||
| Expected future gross premiums | |||||||||||||||||||||||
| Expected future benefit payments | |||||||||||||||||||||||
| Discounted: | |||||||||||||||||||||||
Permanent: | |||||||||||||||||||||||
| Expected future gross premiums | $ | ||||||||||||||||||||||
| Expected future benefit payments | |||||||||||||||||||||||
Permanent Limited Pay: | |||||||||||||||||||||||
| Expected future gross premiums | |||||||||||||||||||||||
| Expected future benefit payments | |||||||||||||||||||||||
September 30, 2026 | 10-Q 22
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||||
(In thousands) | Gross Premiums | Interest Expense | Gross Premiums | Interest Expense | Gross Premiums | Interest Expense | Gross Premiums | Interest Expense | |||||||||||||||||||||||||||
International Insurance: | |||||||||||||||||||||||||||||||||||
Life Insurance: | |||||||||||||||||||||||||||||||||||
| Permanent | $ | ||||||||||||||||||||||||||||||||||
| Permanent Limited Pay | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||
| Reinsurance | |||||||||||||||||||||||||||||||||||
| Total, net of reinsurance | |||||||||||||||||||||||||||||||||||
Accident & Health Insurance: | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Total | $ | ||||||||||||||||||||||||||||||||||
Domestic Insurance: | |||||||||||||||||||||||||||||||||||
Life Insurance: | |||||||||||||||||||||||||||||||||||
| Permanent | $ | ||||||||||||||||||||||||||||||||||
| Permanent Limited Pay | |||||||||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||
| Reinsurance | |||||||||||||||||||||||||||||||||||
| Total, net of reinsurance | |||||||||||||||||||||||||||||||||||
Accident & Health Insurance: | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||
| Reinsurance | |||||||||||||||||||||||||||||||||||
| Total, net of reinsurance | |||||||||||||||||||||||||||||||||||
| Total | $ | ||||||||||||||||||||||||||||||||||
The following table provides the weighted-average durations of the liability for future policy benefits.
| September 30, 2026 | September 30, 2025 | ||||||||||||||||
| (In years) | International Insurance | Domestic Insurance | International Insurance | Domestic Insurance | |||||||||||||
Permanent: | |||||||||||||||||
| Duration at original discount rate | |||||||||||||||||
| Duration at current discount rate | |||||||||||||||||
Permanent Limited Pay: | |||||||||||||||||
| Duration at original discount rate | |||||||||||||||||
| Duration at current discount rate | |||||||||||||||||
September 30, 2026 | 10-Q 23
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The following table provides the weighted-average interest rates for the liability for future policy benefits.
| September 30, 2026 | September 30, 2025 | ||||||||||||||||
International Insurance | Domestic Insurance | International Insurance | Domestic Insurance | ||||||||||||||
Permanent: | |||||||||||||||||
| Interest rate at original discount rate | % | % | % | % | |||||||||||||
| Interest rate at current discount rate | % | % | % | % | |||||||||||||
Permanent Limited Pay: | |||||||||||||||||
| Interest rate at original discount rate | % | % | % | % | |||||||||||||
| Interest rate at current discount rate | % | % | % | % | |||||||||||||
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, 2026 (In thousands) | |||||||||||||||||
Range of Guaranteed Minimum Crediting Rates: | |||||||||||||||||
| $ | |||||||||||||||||
Greater or equal to | |||||||||||||||||
| Total | $ | ||||||||||||||||
| 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, 2025 (In thousands) | |||||||||||||||||
Range of Guaranteed Minimum Crediting Rates: | |||||||||||||||||
| $ | |||||||||||||||||
Greater or equal to | |||||||||||||||||
| Total | $ | ||||||||||||||||
September 30, 2026 | 10-Q 24
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The following tables summarize balances of and changes in policyholders' account balances.
September 30, 2026 (In thousands, except for %) | Supplemental Contracts Without Life Contingencies | Fixed Annuity | Dividend Accumulations | Premiums Paid in Advance | ||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Issuances | ||||||||||||||
| Premiums received | ||||||||||||||
| Interest credited | ||||||||||||||
| Less: | ||||||||||||||
| Surrenders and withdrawals | ||||||||||||||
| Benefit payments | ||||||||||||||
| Balance, end of period | $ | |||||||||||||
| Weighted-average crediting rates | % | % | % | % | ||||||||||
| Cash surrender value | $ | |||||||||||||
September 30, 2025 (In thousands, except for %) | Supplemental Contracts Without Life Contingencies | Fixed Annuity | Dividend Accumulations | Premiums Paid in Advance | ||||||||||
| Balance, beginning of year | $ | |||||||||||||
| Issuances | ||||||||||||||
| Premiums received | ||||||||||||||
| Interest credited | ||||||||||||||
| Other | ||||||||||||||
| Less: | ||||||||||||||
| Surrenders and withdrawals | ||||||||||||||
| Benefit payments | ||||||||||||||
| Balance, end of period | $ | |||||||||||||
| Weighted-average crediting rates | % | % | % | % | ||||||||||
| Cash surrender value | $ | |||||||||||||
September 30, 2026 | 10-Q 25
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The following table reconciles policyholders' account balances shown above to the policyholders' account balance liability in the consolidated balance sheets for the periods indicated below.
(In thousands) | September 30, 2026 | September 30, 2025 | |||||||||
| Annuities: | |||||||||||
| Supplemental contracts without life contingencies | $ | ||||||||||
| Fixed annuity | |||||||||||
| Unearned revenue reserve | |||||||||||
| Total annuities | $ | ||||||||||
Premiums paid in advance: | |||||||||||
| Premiums paid in advance | $ | ||||||||||
| Other | |||||||||||
| Total premiums paid in advance | $ | ||||||||||
(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. Prior to April 1, 2025, CICA International retained up to $100,000 on any one individual life insurance policy and reinsured the death benefit amount. For new policies beginning on such date, we generally retain amounts up to $250,000 100 % of our accidental death benefit rider coverage. In CLOA, we have a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CLOA has elected RGA to reinsure 50 % of its final expense business. The Company remains contingently liable in the event that any of the reinsurers are unable to meet their obligations under any reinsurance agreement.
Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. We obtain reinsurance from multiple reinsurers and 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).
A summary of life insurance in force, along with assumed and ceded reinsurance activity, is summarized below as of the periods indicated.
(In thousands) | September 30, 2026 | December 31, 2025 | |||||||||
Life insurance in force: | |||||||||||
| Direct life insurance in force | $ | ||||||||||
| Aggregate assumed life insurance in force | |||||||||||
| Aggregate ceded life insurance in force | ( | ( | |||||||||
| Net life insurance in force | $ | ||||||||||
September 30, 2026 | 10-Q 26
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The Company's reinsurance recoverable on ceded reinsurance was $13.8 million and $10.9 million as of September 30, 2026 and December 31, 2025, respectively. Premiums, claims and surrenders assumed and ceded, and expenses ceded for all lines of business are summarized for the periods indicated below.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Premiums from short-duration contracts: | |||||||||||||||||||||||
| Direct | $ | ||||||||||||||||||||||
| Ceded | ( | ( | ( | ( | |||||||||||||||||||
| Net premiums earned | |||||||||||||||||||||||
| Premiums from long-duration contracts: | |||||||||||||||||||||||
| Direct | |||||||||||||||||||||||
| Assumed | |||||||||||||||||||||||
| Ceded | ( | ( | ( | ( | |||||||||||||||||||
| Net premiums earned | |||||||||||||||||||||||
| Total premiums earned | $ | ||||||||||||||||||||||
| Claims and surrenders assumed | $ | ||||||||||||||||||||||
Claims and surrenders ceded | $ | ( | ( | ( | ( | ||||||||||||||||||
Commissions assumed and ceded | $ | ( | ( | ( | ( | ||||||||||||||||||
| Other general expenses ceded | $ | ( | ( | ( | ( | ||||||||||||||||||
(8) COMMITMENTS AND CONTINGENCIES
LITIGATION AND REGULATORY ACTIONS
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. ("CICA Bermuda") and CICA Life Insurance Company of America ("CLOA") (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 and Randall Riley approximately $3.5 million of their legal fees incurred during the trade secret lawsuit. On August 16, 2024, the judge signed a Final Judgment reflecting the jury decision and the court award of the legal fees. We continue to believe that Delgado and Landa are not entitled to the awarded commissions and that Riley and Buchweitz are not entitled to the awarded legal fees.
On September 17, 2024, we filed an appeal bond with the trial court in order to stay any execution of the judgment against us.
We appealed the judgment to the Court of Appeals, Third District of Texas. Consistent with the parties’ positions that oral argument was not necessary, the Court of Appeals has set the appeal for submission on the briefs on November 23, 2026.
September 30, 2026 | 10-Q 27
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
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. Item 3, Legal Proceedings and Note 8 - Commitments and Contingencies of our 2025 Form 10-K includes a discussion of our legal proceedings.
CONTRACTUAL OBLIGATIONS
As of September 30, 2026, we committed to funding investments up to $6.8 million related to limited partnership and structured note investments 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, 2026, the Company had no t borrowed any funds against the Credit Facility and was in compliance with the 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) 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
A summary of the change in the number of shares of Class A common stock and treasury stock issued is as follows:
| 2026 | 2025 | ||||||||||||||||||||||
Nine Months Ended September 30, (In thousands) | Common Stock Class A | Treasury Stock | Common Stock Class A | Treasury Stock | |||||||||||||||||||
| Balance at beginning of year | |||||||||||||||||||||||
| Stock issued for compensation | |||||||||||||||||||||||
| Balance at end of period | |||||||||||||||||||||||
September 30, 2026 | 10-Q 28
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share of Class A common stock.
Three Months Ended September 30, (In thousands, except per share amounts) | 2026 | 2025 | |||||||||
Basic and diluted earnings per share: | |||||||||||
| Net income (loss) | $ | ( | |||||||||
| Weighted average shares of Class A outstanding - basic | |||||||||||
Weighted average shares of Class A outstanding - diluted(1) | |||||||||||
| Basic and diluted earnings (loss) per share of Class A common stock | $ | ( | |||||||||
(1) Because the Company reported a net loss for the three months ended September 30, 2026, the effect of all potentially dilutive securities was excluded from the calculation of diluted earnings per share as it would be anti-dilutive
Nine Months Ended September 30, (In thousands, except per share amounts) | 2026 | 2025 | |||||||||
Basic and diluted earnings per share: | |||||||||||
| Net income (loss) | $ | ||||||||||
| Weighted average shares of Class A outstanding - basic | |||||||||||
| Weighted average shares of Class A outstanding - diluted | |||||||||||
| Basic and diluted earnings (loss) per share of Class A common stock | $ | ||||||||||
STATUTORY CAPITAL AND SURPLUS
Each of our domestic regulated insurance subsidiaries is required to meet regulatory capital requirements prescribed by the U.S. National Association of Insurance Commissioners ("NAIC"). All domestic insurance subsidiaries exceeded the minimum capital requirements at September 30, 2026. 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 CLOA's RBC remains above 350 %. CLOA's RBC exceeded 350% at September 30, 2026.
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 . At September 30, 2026, CICA International's capital exceeds both the required minimum capital and related ratio.
(10) SEGMENT AND OTHER OPERATING INFORMATION
The Company's segments are defined by management's reporting structure and operating activities. The chief operating decision maker ("CODM"), our President and Chief Executive Officer, reviews segment operating results to assess financial performance, allocate resources and make operating and strategic decisions. The Company has two reportable segments: International Insurance and Domestic Insurance.
September 30, 2026 | 10-Q 29
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
Our International Insurance segment is operated through CICA International, which issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection, and whole life insurance products, all to non-U.S. residents. These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may include rider benefits and annuity features that enhance policy accumulations. Our Domestic Insurance segment operates through CLOA, which is licensed in 43 U.S. states, the District of Columbia and Puerto Rico, and issues whole life, final expense and life products with living benefits; and MGLIC, which sold and still services life insurance policies through funeral homes in Mississippi. Prior to October 1, 2026, our Domestic Insurance segment also included SPLIC, which issued smaller whole life policies in Louisiana, Arkansas and Mississippi. SPLIC was merged into its parent, CLOA, on October 1, 2026. All policies are sold and serviced through independent agents.
The CODM evaluates the profitability of the International Insurance and Domestic Insurance segments based on the income (loss) before federal income tax, or segment profit (loss), which is measured as revenues less directly attributable to total benefits and expenses. This measure reflects the operating performance of each insurance segment and is the primary measure used by the CODM to evaluate segment results and allocate resources. The significant expense categories regularly provided to the CODM and included in the measure of segment profit (loss) are presented in the tables below.
The International Insurance and Domestic Insurance operations constitute separate businesses. In addition to these reportable segments, the Company also captures other corporate-related non-insurance revenues and expenses associated with operating the Company. These amounts are not included in the segment profit (loss) and are reported separately below to reconcile to the consolidated income (loss) before federal income tax on the consolidated statements of operations and other comprehensive income (loss).
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies included in our 2025 Form 10-K and are prepared in accordance with U.S. GAAP.
September 30, 2026 | 10-Q 30
Table of Contents
CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The tables below present segment revenues, segment profit (loss) and the significant expense categories included in the measure of segment profitability reviewed by the CODM.
| Three Months Ended September 30, 2026 | International Insurance | Domestic Insurance | Total | ||||||||||||||
| (In thousands) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Premiums | $ | ||||||||||||||||
| Net investment income | |||||||||||||||||
| Investment related gains (losses), net | ( | ||||||||||||||||
| Other income | |||||||||||||||||
| Total segment revenues | |||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Total consolidated revenues | $ | ||||||||||||||||
| Benefits and expenses: | |||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||
| Claims and surrenders | |||||||||||||||||
| Increase (decrease) in future policy benefit reserves | |||||||||||||||||
| Policyholder liability remeasurement (gain) loss | ( | ||||||||||||||||
| Policyholders' dividends | |||||||||||||||||
| Total insurance benefits paid or provided | |||||||||||||||||
| Commissions | |||||||||||||||||
| Other general expenses | |||||||||||||||||
| Capitalization of deferred policy acquisition costs | ( | ( | |||||||||||||||
| Amortization of deferred policy acquisition costs | |||||||||||||||||
| Amortization of cost of insurance acquired | |||||||||||||||||
| Total segment benefits and expenses | |||||||||||||||||
| Segment profit (loss) | $ | ( | |||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Stock-based compensation expense | ( | ||||||||||||||||
| Other non-insurance expenses | ( | ||||||||||||||||
| Income (loss) before federal income tax | $ | ||||||||||||||||
September 30, 2026 | 10-Q 31
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
International Insurance | Domestic Insurance | Total | |||||||||||||||
| Nine Months Ended September 30, 2026 | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Premiums | $ | ||||||||||||||||
| Net investment income | |||||||||||||||||
| Investment related gains (losses), net | ( | ||||||||||||||||
| Other income | |||||||||||||||||
| Total segment revenues | |||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Total consolidated revenues | $ | ||||||||||||||||
| Benefits and expenses: | |||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||
| Claims and surrenders | |||||||||||||||||
| Increase (decrease) in future policy benefit reserves | ( | ||||||||||||||||
| Policyholder liability remeasurement (gain) loss | ( | ||||||||||||||||
| Policyholders' dividends | |||||||||||||||||
| Total insurance benefits paid or provided | |||||||||||||||||
| Commissions | |||||||||||||||||
| Other general expenses | |||||||||||||||||
| Capitalization of deferred policy acquisition costs | ( | ( | |||||||||||||||
| Amortization of deferred policy acquisition costs | |||||||||||||||||
| Amortization of cost of insurance acquired | |||||||||||||||||
| Total segment benefits and expenses | |||||||||||||||||
| Segment profit (loss) | $ | ||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Stock-based compensation expense | ( | ||||||||||||||||
| Other non-insurance expenses | ( | ||||||||||||||||
| Income (loss) before federal income tax | $ | ||||||||||||||||
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
International Insurance | Domestic Insurance | Total | |||||||||||||||
| Three Months Ended September 30, 2025 | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Premiums | $ | ||||||||||||||||
| Net investment income | |||||||||||||||||
| Investment related gains (losses), net | ( | ( | |||||||||||||||
| Other income | |||||||||||||||||
| Total segment revenues | |||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Total consolidated revenues | $ | ||||||||||||||||
| Benefits and expenses: | |||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||
| Claims and surrenders | |||||||||||||||||
| Increase (decrease) in future policy benefit reserves | ( | ||||||||||||||||
| Policyholder liability remeasurement (gain) loss | ( | ||||||||||||||||
| Policyholders' dividends | |||||||||||||||||
| Total insurance benefits paid or provided | |||||||||||||||||
| Commissions | |||||||||||||||||
| Other general expenses | |||||||||||||||||
| Capitalization of deferred policy acquisition costs | ( | ( | |||||||||||||||
| Amortization of deferred policy acquisition costs | |||||||||||||||||
| Amortization of cost of insurance acquired | |||||||||||||||||
| Total segment benefits and expenses | |||||||||||||||||
| Segment profit (loss) | $ | ( | |||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Stock-based compensation expense | ( | ||||||||||||||||
| Other non-insurance expenses | ( | ||||||||||||||||
| Income (loss) before federal income tax | $ | ||||||||||||||||
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
International Insurance | Domestic Insurance | Total | |||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Premiums | $ | ||||||||||||||||
| Net investment income | |||||||||||||||||
| Investment related gains (losses), net | ( | ( | |||||||||||||||
| Other income | |||||||||||||||||
| Total segment revenues | |||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Total consolidated revenues | $ | ||||||||||||||||
| Benefits and expenses: | |||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||
| Claims and surrenders | |||||||||||||||||
| Increase (decrease) in future policy benefit reserves | ( | ||||||||||||||||
| Policyholder liability remeasurement (gain) loss | ( | ||||||||||||||||
| Policyholders' dividends | |||||||||||||||||
| Total insurance benefits paid or provided | |||||||||||||||||
| Commissions | |||||||||||||||||
| Other general expenses | |||||||||||||||||
| Capitalization of deferred policy acquisition costs | ( | ( | |||||||||||||||
| Amortization of deferred policy acquisition costs | |||||||||||||||||
| Amortization of cost of insurance acquired | |||||||||||||||||
| Total segment benefits and expenses | |||||||||||||||||
| Segment profit (loss) | $ | ||||||||||||||||
| Other non-insurance revenues | |||||||||||||||||
| Stock-based compensation expense | ( | ||||||||||||||||
| Other non-insurance expenses | ( | ||||||||||||||||
| Income (loss) before federal income tax | $ | ||||||||||||||||
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
The Company categorizes premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and any premiums received thereafter are renewal premiums.
A summary of the International Insurance segment premium breakout is detailed below.
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Direct premiums: | |||||||||||||||||||||||
| First year | $ | ||||||||||||||||||||||
| Renewal | |||||||||||||||||||||||
| Total direct premiums | |||||||||||||||||||||||
Reinsurance | ( | ( | ( | ( | |||||||||||||||||||
| Total premiums | $ | ||||||||||||||||||||||
A summary of the Domestic Insurance segment premium breakout is detailed below.
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Direct premiums: | |||||||||||||||||||||||
| First year | $ | ||||||||||||||||||||||
| Renewal | |||||||||||||||||||||||
Total direct premiums | |||||||||||||||||||||||
| Reinsurance | ( | ( | ( | ( | |||||||||||||||||||
Total premiums | $ | ||||||||||||||||||||||
The tables below provide a reconciliation of assets by reportable segment to total consolidated assets as presented on the consolidated balance sheets as of the periods indicated. Assets not directly attributable to the Company's reportable segments are reflected as other corporate assets.
September 30, 2026 (In thousands) | International | Domestic | Total | ||||||||||||||
| Assets: | |||||||||||||||||
| Segment Assets: | |||||||||||||||||
| Cash, cash equivalents and investments | $ | ||||||||||||||||
| DAC and COIA | |||||||||||||||||
| Other assets | |||||||||||||||||
| Total segment assets | $ | ||||||||||||||||
| Other corporate assets | |||||||||||||||||
| Total assets | $ | ||||||||||||||||
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
December 31, 2025 (In thousands) | International | Domestic | Total | ||||||||||||||
| Assets: | |||||||||||||||||
| Segment Assets: | |||||||||||||||||
| Cash, cash equivalents and investments | $ | ||||||||||||||||
| DAC and COIA | |||||||||||||||||
| Other assets | |||||||||||||||||
| Total segment assets | $ | ||||||||||||||||
| Other corporate assets | |||||||||||||||||
| Total assets | $ | ||||||||||||||||
GEOGRAPHIC INFORMATION
The following table sets forth the Company's annual total of earned premiums by country of policyholder residence for the periods indicated.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Premiums by Area: | |||||||||||||||||||||||
| United States | $ | ||||||||||||||||||||||
| Colombia | |||||||||||||||||||||||
| Ecuador | |||||||||||||||||||||||
| Argentina | |||||||||||||||||||||||
| Taiwan | |||||||||||||||||||||||
| Venezuela | |||||||||||||||||||||||
| Other foreign countries | |||||||||||||||||||||||
| Total premiums by area | |||||||||||||||||||||||
| Reinsurance and change in premium accruals | ( | ( | ( | ( | |||||||||||||||||||
| Total premiums | $ | ||||||||||||||||||||||
(11) INCOME TAXES
The effective tax rate is the ratio of federal income tax expense or tax benefit over pre-tax income. For the three and nine months ended September 30, 2026, the effective tax expense rate was 397.2 % and 28.5 %, respectively, compared to an effective tax expense rate of 46.0 % and 24.5 % for the same periods in 2025, respectively. CICA International is considered a controlled foreign corporation for federal income tax purposes. As a result, the insurance activity of CICA International is subject to Subpart F of the Internal Revenue Code and is included in Citizens’ taxable income. 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 commencing in 2023. The effective tax rate varies from the prevailing corporate federal income tax rate of 21% mainly due to the impact of Subpart F and the reduced Puerto Rico income tax rate.
At September 30, 2026 and 2025, 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 $5.8 million and $4.2 million at September 30, 2026 and 2025, respectively, in accumulated other comprehensive income (loss) on the consolidated balance sheets.
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
(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, 2026 and 2025. The following table provides a rollforward of accumulated other comprehensive income (loss) for the periods indicated below.
| (In thousands) | Unrealized Gains and Losses on Available for Sale Securities | Discount Rate for Liability for Future Policy Benefits | Other Comprehensive Income (Loss) | |||||||||||||||||
Balance at December 31, 2025, net of tax | $ | ( | ( | |||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ( | |||||||||||||||||||
Amounts reclassified from other comprehensive income (loss), before tax | ||||||||||||||||||||
Income tax benefit (expense) | ( | ( | ||||||||||||||||||
Balance at March 31, 2026, net of tax | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ( | ( | ||||||||||||||||||
| Amounts reclassified from other comprehensive income (loss), before tax | ( | ( | ||||||||||||||||||
| Income tax benefit (expense) | ( | |||||||||||||||||||
Balance at June 30, 2026, net of tax | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ( | ( | ||||||||||||||||||
| Amounts reclassified from other comprehensive income (loss), before tax | ||||||||||||||||||||
| Income tax benefit (expense) | ( | ( | ||||||||||||||||||
Balance at September 30, 2026, net of tax | $ | ( | ( | |||||||||||||||||
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CITIZENS, INC. | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |||||||
(Unaudited) | ||||||||
| (In thousands) | Unrealized Gains and Losses on Available for Sale Securities | Discount Rate for Liability for Future Policy Benefits | Other Comprehensive Income (Loss) | |||||||||||||||||
Balance at December 31, 2024, net of tax | $ | ( | ( | |||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ( | |||||||||||||||||||
Amounts reclassified from other comprehensive income (loss), before tax | ||||||||||||||||||||
Income tax benefit (expense) | ( | ( | ||||||||||||||||||
Balance at March 31, 2025, net of tax | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ||||||||||||||||||||
| Amounts reclassified from other comprehensive income (loss), before tax | ||||||||||||||||||||
| Income tax benefit (expense) | ( | ( | ( | |||||||||||||||||
Balance at June 30, 2025, net of tax | ( | ( | ||||||||||||||||||
| Other comprehensive income (loss) before reclassification, before tax | ( | ( | ||||||||||||||||||
| Amounts reclassified from other comprehensive income (loss), before tax | ( | ( | ||||||||||||||||||
| Income tax benefit (expense) | ( | |||||||||||||||||||
Balance at September 30, 2025, net of tax | $ | ( | ( | |||||||||||||||||
(13) 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, 2025, 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 at www.sec.gov that contains reports, proxy statements, and other information regarding issuers, including the Company, that file electronically with the SEC. Our own website, www.citizensinc.com, provides free access to the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings made by our executive officers and directors, and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These materials are made available on our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC. Information contained on, or accessible through, our website is not incorporated by reference into, and should not be considered part of, 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, 2025 to September 30, 2026 and the material changes in our results of operations for the three and nine months ended September 30, 2026 as compared to the same periods in 2025. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.
OVERVIEW
For over 55 years, Citizens has been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. We conduct insurance related operations through our insurance subsidiaries, which provide benefits to policyholders globally. We specialize in offering primarily individual 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 – International Insurance and Domestic Insurance; and (2) net investment income. In addition to reserving for and paying insurance benefits 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 | |||||||
We operate in two segments - International Insurance and Domestic Insurance. Our International Insurance segment operates through CICA Life, A.I., a Puerto Rican insurer, referred to as "CICA International". Our Domestic Insurance segment operates through our subsidiaries CICA Life Insurance Company of America ("CLOA") and Magnolia Guaranty Life Insurance Company ("MGLIC"). Prior to October 1, 2026, we also operated through Security Plan Life Insurance Company ("SPLIC"). SPLIC was merged into its parent, CLOA, on such date and is now operated through CLOA as the "Security Plan" brand.
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 (1) the factors described in Item 1A, Risk Factors in our Annual Report on Form 10-K for the period ended December 31, 2025 ("2025 Form 10-K"); and (2) the events described in Management's Discussion and Analysis of Financial Condition and Results of Operations - "Events that Impacted Our Business" in the 2025 Form 10-K.
Earthquakes in South America
Venezuela represents one of our most significant markets in the International Insurance segment. In our Quarterly Report on Form 10-Q for the quarter and six-months ended June 30, 2026, we reported that we established a $0.5 million death claim liability. Because death claims from Venezuela have been lower than expected since the earthquakes, we have reduced the death claim liability to $250,000, which is reflected as a $250,000 reduction to death claim liability in the third quarter.
Colombia, our largest international market, also experienced a significant earthquake in August 2026; however, this earthquake has not significantly affected our death benefit claims.
We continue to maintain diligent oversight and will update our projections to the extent new information becomes available.
Reinsurance Ceded
In 2024, in order to support the growth in our Domestic Insurance business, we entered into a coinsurance reinsurance agreement with RGA Reinsurance Company ("RGA" and the agreement, the "RGA Agreement") under which RGA co-insures 50% of our Domestic Insurance final expense business issued since April 1, 2024. When we cede insurance to RGA, we take a credit to the liability for future policy benefit reserves based on the amount of business ceded. During the third quarter of 2026, we changed our accounting estimate for this reserve credit to incorporate data with enhanced accuracy, which decreased the ceded reserve credit by $1.7 million and correspondingly increased the reserve liability. The adjustment was recorded in the third quarter of 2026.
FINANCIAL HIGHLIGHTS
Summary
Q3: Income before federal income tax decreased to $0.1 million in the three months ended September 30, 2026 compared to $4.5 million in the same prior year period. Despite a $1.5 million increase in premium revenue and a $2.6 million increase in investment related gains and losses, the decrease was driven by a $5.1 million increase in insurance benefits paid or provided. Although we experienced a $13.2 million decrease in claims and surrenders benefits due to the expected contractual decreases of matured endowments, this was more than offset by a $16.3 million increase in future policy benefit reserves and a $1.9 million increase in policyholder liability remeasurement loss. The $16.3 million increase in future policy benefit reserves was due to:
•the $1.7 million decreased ceded reserve credit;
•the large amount of reserves released in the prior year period as we paid out matured endowments and released the corresponding reserves; and
•the increased business in our Domestic Insurance segment.
September 30, 2026 | 10-Q 40
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| CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS | |||||||
YTD: Income before federal income tax in the nine months ended September 30, 2026 decreased to $2.0 million from $9.6 million in the same year period. Despite a $2.0 million increase in premium revenue and a $2.6 million increase in investment related gains and losses, the decrease was driven by increase in insurance benefits paid or provided for the reasons described above.
Financial Condition at September 30, 2026
•Total assets of $1.7 billion
•Total direct insurance in force of $5.6 billion
•Total investments of $1.4 billion; fixed maturity securities comprised 89% of total investments
•No debt
•Book value per share of Class A common stock of $4.37
•Adjusted book value per share of Class A common stock of $6.441
•Diluted earnings per share of Class A common stock for the nine months ended of $0.03
THE FACTORS THAT DRIVE OUR OPERATING RESULTS
We see the following as the primary factors that drive our operating results.
Revenue items
•Sales of our products and the premiums we receive from these sales
•Investments and the income that they generate
Benefit and expense items
•Insurance benefits paid and provided
•Operating expenses
Revenue Items
Sales of our Products. We believe sales statistics are meaningful to gain an understanding of, among other things, the attractiveness of our products, how the 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 compared to prior year periods, and how we view trends with respect to sales and retention.
One sales factor that is key to our profitability is product mix. We offer a competitive product mix designed to meet the needs of our specific customer demographics and actively manage new product margins and in-force profitability. Product mix can have an impact on profitability; when we sell a higher volume of lower-margin products, we may receive more premiums but may not be as profitable as in periods when we sell a greater percentage of higher-margin products. Our product mix has been trending towards sales of our newer whole life products, which have a smaller margin than sales of our international endowment products. We expect this trend in our International Insurance segment to continue due to the anticipated volumes of endowment maturities being replaced by higher volumes of whole life products.
Customer retention, or persistency, is another key factor influencing both revenue and profitability. Persistency refers to the extent to which policyholders keep their insurance policies in force over time rather than allowing them to lapse, surrender, or terminate. Persistency is a key measure because we spend a significant amount of money acquiring a policyholder upfront (e.g., commissions, underwriting, marketing) and expect to recover those costs over many years. A highly persistent block of business is one where policyholders continue paying premiums and maintaining coverage for many years. Unfavorable persistency is characterized by higher than expected policy lapses, surrenders, or terminations, which can negatively impact profitability by reducing the in-force block of
1 Adjusted book value per share of 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.
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| CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS | |||||||
business generating premiums, coupled with an increase in reserves resulting from less projected future premiums, as well as an acceleration in the recognition of deferred acquisition costs. While we have been experiencing low persistency in our Domestic Insurance final expense business, we actively monitor persistency trends across our product lines and customer segments, and where less than desired persistency is observed, we may take targeted retention actions; however, there can be no assurance that such efforts will fully offset the financial impact of higher than expected policy terminations.
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 any premiums received thereafter are renewal premiums.
Throughout the MD&A, we refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to our reinsurers. Direct premium revenue increased 7% and 5% in the three and nine months ended September 30, 2026, respectively, to $50.0 million and $142.1 million, respectively, from $46.6 million and $135.3 million in the three and nine months ended September 30, 2025, respectively. This increase was driven by sales and renewal premiums in our Domestic Insurance segment.
First Year Premiums. Direct first year premiums increased 9% and 5% in the three and nine months ended September 30, 2026 to $10.4 million and $29.1 million, respectively, from $9.5 million and $27.8 million in the three and nine months ended September 30, 2025, respectively, driven by sales in our Domestic Insurance segment and from an increased number of producing agents. First year premium growth primarily resulted from our CLOA final expense business.
Renewal Premiums. Our direct renewal premiums in the three and nine months ended September 30, 2026 increased primarily due to strong sales in prior periods in our Domestic Insurance segment, leading to higher number of policies paying renewal premiums in the current period. Premium growth was constrained by unfavorable persistency in our Domestic Insurance segment, as well as the high level of surrenders and matured endowments in our International Insurance segment during the last few years, both of which have lowered the number of policies remaining in force and paying renewal premiums.
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| CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS | |||||||
Investment Income. Our net investment income decreased for the three and nine months ended September 30, 2026 compared to the same prior year periods. The decreases were primarily attributable to a $1.7 million dividend from a limited partnership investment recognized in the 2025 periods, along with comparatively higher investment expenses in the current year periods.
Benefit and Expense Items
Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus key to our profitability. The three largest components of this expense are reflected in the graph below.
2025 was our highest year for contractually maturing endowments and thus, as expected, we are experiencing a significant decrease in 2026.
Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Operating expenses are meaningful to gain an understanding of how we manage our business, including among other things, salaries, benefits, and spending on growth initiatives. Our operating expenses increased by $1.5
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| CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS | |||||||
million and $2.8 million in the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods due to continued investment in supporting the growth of our business.
RESERVES AND ACTUARIAL ASSUMPTIONS
Because life insurance benefits are often paid many years after premiums are received, we establish reserves for future policy benefits to provide for our estimated obligations to policyholders. These reserves are determined using actuarial assumptions regarding mortality, persistency, expenses, and investment returns and are intended to ensure that adequate funds are available to satisfy future policyholder benefits and related obligations. These actuarial assumptions are reviewed periodically to reflect emerging experience and changes in expectations and our operating results will be affected to the extent there is a variance between our actuarial assumptions and actual experience. This is reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss) as: (1) an increase (decrease) in the liability for future policy benefit reserves and (2) policyholder liability remeasurement (gain) loss.
Increase (decrease) in future policy benefit reserves. Future policy benefit reserves reflect the liability established to provide for the future payment of policy benefits and thus they generally increase when we have a larger in force block of business due to higher sales and 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, 2026, the change in reserves increased by $16.3 million and $22.9 million, respectively, compared to the same periods in 2025. The increases in the 2026 periods primarily reflect additional reserves due to our growing in-force business, combined with lower reserve releases from endowment maturities. Endowment maturities continue to occur, but at a lower level than in the 2025 periods and therefore provide less of an offset to reserve growth. The increases in the 2026 period also reflect the decrease to the ceded reserve credit of $1.7 million discussed above.
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, the best estimate assumptions are updated every year in our third quarter and are reflected on our income statement as a policyholder liability remeasurement gain or loss. In the three and nine months ended September 30, 2026, we experienced policyholder remeasurement losses of $1.4 million and $4.0 million, respectively, compared to a gain of $0.5 million in the three months ended September 30, 2025 and a loss of $0.7 million in the nine months ended September 30, 2025. The variances in both periods were primarily driven by the favorable impact in 2025 from changes to mortality, lapse and accrual assumption updates, along with unfavorable actual-to-expected experience in the International Insurance segment in 2026, partially offset by a favorable year-over-year variance in the impact of best estimate assumption updates.
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INSURANCE ISSUED AND INFORCE
The amount of direct insurance, number of policies, and average face amounts for life policies issued during the periods indicated are shown below.
| Nine Months Ended September 30, | 2026 | 2025 | |||||||||||||||||||||||||||||||||
| (In thousands, except # of policies issued) | Amount of Insurance Issued | # of Policies Issued | Average Policy Face Amount Issued | Amount of Insurance Issued | # of Policies Issued | Average Policy Face Amount Issued | |||||||||||||||||||||||||||||
| Issued: | |||||||||||||||||||||||||||||||||||
| International | $ | 296,030 | 2,725 | $ | 109 | $ | 344,990 | 3,084 | $ | 112 | |||||||||||||||||||||||||
| Domestic | 504,955 | 63,337 | 8 | 432,612 | 47,204 | 9 | |||||||||||||||||||||||||||||
Total issued | $ | 800,985 | 66,062 | $ | 777,602 | 50,288 | |||||||||||||||||||||||||||||
In the first nine months of 2026, we issued $801.0 million in new direct insurance, compared to $777.6 million issued in the first nine months of 2025.
The number of insurance policies issued, average policy face amount and total insurance issued in our International Insurance segment decreased in the nine months ended September 30, 2026 as compared to the prior year period due to lower volume and product mix. More endowment products were sold in the 2026 period than in 2025; these products generally have lower policy face amounts than our whole life product.
In our Domestic Insurance segment, we continue to experience strong sales and increased number of policies issued of our final expense products. The use of information to enhance underwriting decisions with additional medical and lab data from third parties is resulting in issuance of policies with lower face amounts, as expected.
The amount of direct insurance inforce for the periods indicated is shown below.
Overall insurance inforce has grown due to the issuance of new business, but growth has been and will be impacted by persistency rates, policy maturities and surrenders.
CONSOLIDATED RESULTS OF OPERATIONS
REVENUES
Our revenues are generated primarily by life insurance premiums and investment income from invested assets. Total revenues increased in the three and nine months ended September 30, 2026, as compared to the same prior
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year periods, primarily due to the improvements in investment related gains (losses) resulting from favorable changes in market value of the underlying assets, as well as continued increases in our premium revenue.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
Premiums | $ | 44,803 | 43,303 | 128,444 | 126,488 | ||||||||||||||||||
| Net investment income | 18,052 | 19,117 | 52,387 | 53,663 | |||||||||||||||||||
| Investment related gains (losses), net | 1,389 | (1,255) | 879 | (1,741) | |||||||||||||||||||
| Other income | 794 | 1,643 | 3,456 | 5,136 | |||||||||||||||||||
| Total revenues | $ | 65,038 | 62,808 | 185,166 | 183,546 | ||||||||||||||||||
Premiums
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
(In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Direct premiums: | |||||||||||||||||||||||
| First year | $ | 10,410 | 9,520 | 29,139 | 27,772 | ||||||||||||||||||
| Renewal | 39,636 | 37,072 | 112,944 | 107,571 | |||||||||||||||||||
Total direct premiums | 50,046 | 46,592 | 142,083 | 135,343 | |||||||||||||||||||
Reinsurance | (5,243) | (3,289) | (13,639) | (8,855) | |||||||||||||||||||
Total premiums | $ | 44,803 | 43,303 | 128,444 | 126,488 | ||||||||||||||||||
Our first year direct premiums increased 9% and 5% in the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025 due to continued strong sales and expanded distribution in our Domestic Insurance segment.
Direct renewal premiums also increased due to first year sales in prior periods in our Domestic Insurance segment that led to higher number of policies paying renewal premiums in the current periods. This growth more than offset the effects of high level of surrenders and matured endowment benefits paid in our International Insurance segment over the last few years, which has lowered the number of policies paying renewal premiums in this segment.
Reinsurance premiums ceded increased in the three and nine months ended September 30, 2026 compared to the same periods in 2025 due to the RGA Agreement that provides more capacity for growth in our Domestic Insurance segment. Since we cede 50% of the direct premiums we receive for our CLOA final expense products to RGA, as sales of these products increase, reinsurance ceded to RGA also increases.
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Net Investment Income. A summary of our net investment income performance is as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands, except for %) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Gross investment income: | |||||||||||||||||||||||
| Fixed maturity securities | $ | 16,480 | 15,795 | 48,892 | 46,761 | ||||||||||||||||||
| Equity securities | 11 | 54 | 34 | 201 | |||||||||||||||||||
| Policy loans | 1,238 | 1,295 | 3,731 | 3,961 | |||||||||||||||||||
Other long-term investments | 1,131 | 2,758 | 2,714 | 4,963 | |||||||||||||||||||
| Total investment income | 18,860 | 19,902 | 55,371 | 55,886 | |||||||||||||||||||
| Investment expenses | (808) | (785) | (2,984) | (2,223) | |||||||||||||||||||
| Net investment income | $ | 18,052 | 19,117 | 52,387 | 53,663 | ||||||||||||||||||
| Net investment income, annualized | $ | 69,849 | 70,992 | ||||||||||||||||||||
| Average invested assets, at amortized cost | $ | 1,559,330 | 1,535,070 | ||||||||||||||||||||
| Annualized yield on average invested assets | 4.48 | % | 4.62 | % | |||||||||||||||||||
Fixed maturity securities constitute the vast majority, or 89%, of our investment portfolio based on fair value and thus provide the majority of our net investment income. Our fixed maturity investment portfolio, primarily invested in callable securities, faced challenges due to the sustained low interest rate environment for the 10 years prior to 2021. Many securities were called between 2019 and 2021, which required us to reinvest in lower interest rate fixed maturity assets, which impacts net investment income and yields. In order to enhance yields, we are investing in new opportunities, including investment grade private placement fixed income securities and other asset classes, while maintaining a prudent risk profile. Additionally, as we have discussed, we had high levels of surrenders and matured endowments in our International Insurance segment over the last few years as a large number of our endowment policies reached their contractual maturity dates. Despite the high level of cash outflow due to this activity, the Company has experienced stable levels of net investment income over the last several years. We believe the decrease and anticipated continued decrease in benefit outflows, alongside our sustained investment performance, as well as our investment into new asset classes, positions the Company well to improve our net investment income as we move beyond the peak maturity cycle.
Despite growth in our fixed maturity securities portfolio, the lower annualized yield for the nine-month period and the decreases in net investment income for the three and nine months ended September 30, 2026, compared to the prior year periods, were primarily attributable to a $1.7 million dividend from a limited partnership investment recognized in the 2025 periods, along with comparatively higher investment expenses in the current year periods.
Investment Related Gains (Losses), Net. We recorded investment related gains of $1.4 million and $0.9 million during the three and nine months ended September 30, 2026, respectively, compared to investment related losses of $1.3 million and $1.7 million during the same prior year periods, respectively, primarily in our International Insurance segment. The gain or loss between periods is primarily attributable to changes in the estimated fair market value of our limited partnership investments, which can vary considerably based on market conditions and underlying fund performance.
Other Income. Other income is derived mainly from supplemental contracts issued to policyholders in our International 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. We expect other income to decline as our matured endowments decline, as this income is primarily related to supplemental contracts issued to policyholders when their endowments mature. The
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net impact from these supplemental contracts on the consolidated financial statements is minimal as the reserve liability set up for these policies offsets any recognized income.
BENEFITS AND EXPENSES
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||||||||
| Claims and surrenders | $ | 31,066 | 44,276 | 104,470 | 124,594 | ||||||||||||||||||
| Increase (decrease) in future policy benefit reserves | 9,499 | (6,760) | 7,988 | (14,960) | |||||||||||||||||||
| Policyholder liability remeasurement (gain) loss | 1,393 | (459) | 3,980 | 720 | |||||||||||||||||||
| Policyholders' dividends | 1,535 | 1,377 | 4,030 | 3,987 | |||||||||||||||||||
| Total insurance benefits paid or provided | 43,493 | 38,434 | 120,468 | 114,341 | |||||||||||||||||||
| Commissions | 11,787 | 11,655 | 33,963 | 34,339 | |||||||||||||||||||
| Other general expenses | 14,795 | 13,291 | 42,257 | 39,443 | |||||||||||||||||||
| Capitalization of deferred policy acquisition costs | (10,539) | (9,974) | (29,200) | (28,543) | |||||||||||||||||||
| Amortization of deferred policy acquisition costs | 5,236 | 4,795 | 15,236 | 14,055 | |||||||||||||||||||
| Amortization of cost of insurance acquired | 124 | 128 | 455 | 305 | |||||||||||||||||||
| Total benefits and expenses | $ | 64,896 | 58,329 | 183,179 | 173,940 | ||||||||||||||||||
Payments of claims and surrenders benefits, which constitute the vast majority of our expenses, declined in both the three and nine months ended September 30, 2026.
Claims and Surrenders.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
Claims and surrenders: | |||||||||||||||||||||||
| Death claim benefits | $ | 6,453 | 5,373 | 20,617 | 16,301 | ||||||||||||||||||
| Surrender benefits | 11,328 | 13,697 | 35,361 | 39,674 | |||||||||||||||||||
| Endowment benefits | 1,335 | 1,495 | 4,141 | 4,716 | |||||||||||||||||||
| Matured endowment benefits | 9,186 | 21,672 | 36,833 | 57,551 | |||||||||||||||||||
| A&H and other policy benefits | 2,764 | 2,039 | 7,518 | 6,352 | |||||||||||||||||||
| Total claims and surrenders | $ | 31,066 | 44,276 | 104,470 | 124,594 | ||||||||||||||||||
Death claim benefits increased in the three and nine months ended September 30, 2026 compared to the same periods in 2025 due to a higher volume of claims, especially in our expanding Domestic Insurance business. While we maintain diligent oversight of claims activities, we expect this rise in line with the expansion of our business. Many of these death claims may be partially offset by our reinsurance coverage.
The vast majority of our surrender benefits payments are made on policies surrendered in our International Insurance segment. These policies are generally policies that have been in place for many years, built up cash values, and have little or no surrender charges remaining. Surrender benefits decreased 17% and 11% in the three
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and nine months ended September 30, 2026, respectively, compared to the prior year periods and can vary from one period to another.
As we have previously disclosed, 2025 was the year in which the highest number of our endowment policies reached their contractual maturity dates and thus matured endowment benefits decreased in the three and nine months ended September 30, 2026 compared to the prior year periods. Compared to peak endowment activity in 2025, we expect maturity benefits to be lower in 2026.
Commissions. Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our 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. Although first year sales increased in the three and nine months ended September 30, 2026 as compared to the same periods in 2025, commissions were relatively flat in the three months ended September 30, 2026 and decreased in the nine months ended September 30, 2026. This reduction reflected a combination of lower International Insurance segment sales volume and product mix changes to sales of products with lower commission rates.
Other General Expenses. Total general expenses increased $1.5 million and $2.8 million in the three and nine months ended September 30, 2026, respectively, as compared to the prior year periods due to continued investment in supporting the growth of our business.
Capitalization of Deferred Policy Acquisition Costs ("DAC"). 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 and ceded related to new and renewal business.
Amortization of Deferred Policy Acquisition Costs. Our deferred policy acquisition costs ("DAC") are amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization. As described above, unfavorable persistency leads to accelerated amortization of deferred policy acquisition costs, which contributed to the increased costs in both the three and nine months ended September 30, 2026.
Federal Income Tax. We reported lower federal income tax expenses in the three and nine months ended September 30, 2026 as compared to the prior year periods. Despite the lower federal income tax expense, the effective tax benefit rate increase in the current quarter primarily reflects lower taxable U.S. income and higher discrete tax adjustments recorded during the period. Excluding the discrete tax adjustments, the effective tax benefit rate for the three and nine months ended September 30, 2026 would be 267.5% and 19.0%, respectively. In the three months ended September 30, 2026, the Company recognized a $0.9 million return-to-provision true-up related to 2025 Subpart F income adjustments from partnership investments, which increased tax expense for the quarter. See Note 11 - Income Taxes herein.
SEGMENT OPERATIONS
We operate in two business segments: International Insurance and Domestic Insurance.
These segments are reported in accordance with U.S. GAAP. The Company evaluates profit and loss performance based on U.S. GAAP income (loss) before federal income tax for these segments. The Company's other non-insurance operations include non-insurance activities and corporate-support functions, which are presented in the table presented below to reconcile 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) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
Income (loss) before federal income tax: | |||||||||||||||||||||||
| Segments: | |||||||||||||||||||||||
International Insurance | $ | 3,497 | (122) | 8,226 | 6,810 | ||||||||||||||||||
Domestic Insurance | (866) | 6,635 | 1,999 | 9,821 | |||||||||||||||||||
| Total segments | 2,631 | 6,513 | 10,225 | 16,631 | |||||||||||||||||||
| Other non-insurance operations | (2,489) | (2,034) | (8,238) | (7,025) | |||||||||||||||||||
Total income (loss) before federal income tax | $ | 142 | 4,479 | 1,987 | 9,606 | ||||||||||||||||||
INTERNATIONAL INSURANCE
Detailed results of operations in the International Insurance segment for the periods indicated are as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
Premiums | $ | 29,101 | 28,760 | 82,668 | 83,246 | ||||||||||||||||||
| Net investment income | 12,519 | 13,915 | 36,248 | 38,122 | |||||||||||||||||||
| Investment related gains (losses), net | 1,637 | (2,055) | 1,412 | (1,987) | |||||||||||||||||||
| Other income | 791 | 1,513 | 3,439 | 4,991 | |||||||||||||||||||
| Total revenues | 44,048 | 42,133 | 123,767 | 124,372 | |||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||||||||
| Claims and surrenders | 22,972 | 38,039 | 80,990 | 105,472 | |||||||||||||||||||
| Increase (decrease) in future policy benefit reserves | 4,437 | (10,230) | (2,638) | (24,051) | |||||||||||||||||||
| Policyholder liability remeasurement (gain) loss | 1,872 | 3,855 | 4,963 | 5,054 | |||||||||||||||||||
| Policyholders' dividends | 1,488 | 1,305 | 3,865 | 3,719 | |||||||||||||||||||
| Total insurance benefits paid or provided | 30,769 | 32,969 | 87,180 | 90,194 | |||||||||||||||||||
| Commissions | 4,950 | 5,487 | 14,331 | 15,775 | |||||||||||||||||||
| Other general expenses | 5,743 | 5,541 | 16,538 | 16,154 | |||||||||||||||||||
| Capitalization of deferred policy acquisition costs | (4,532) | (5,301) | (13,229) | (15,048) | |||||||||||||||||||
| Amortization of deferred policy acquisition costs | 3,621 | 3,559 | 10,721 | 10,487 | |||||||||||||||||||
| Total benefits and expenses | 40,551 | 42,255 | 115,541 | 117,562 | |||||||||||||||||||
| Income (loss) before federal income tax | $ | 3,497 | (122) | 8,226 | 6,810 | ||||||||||||||||||
In the three and nine months ended September 30, 2026, income before federal income tax in the International Insurance segment increased by $3.6 million and $1.4 million, respectively, driven by improved investment related gains and losses, significantly lower claims and surrenders benefits paid and lower policyholder liability remeasurement loss. The policyholder liability remeasurement loss variance in the International Insurance segment
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for both periods primarily reflect differences in the year-over-year impact of best estimate assumption updates, including accrual amounts in 2025 along with unfavorable variance from actual-to-expected experience in 2026.
Revenues
Premium breakout is detailed below.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Direct premiums: | |||||||||||||||||||||||
| First year | $ | 3,381 | 4,080 | 10,212 | 11,286 | ||||||||||||||||||
| Renewal | 26,288 | 25,141 | 73,924 | 73,320 | |||||||||||||||||||
| Total direct premiums | 29,669 | 29,221 | 84,136 | 84,606 | |||||||||||||||||||
Reinsurance | (568) | (461) | (1,468) | (1,360) | |||||||||||||||||||
| Total premiums | $ | 29,101 | 28,760 | 82,668 | 83,246 | ||||||||||||||||||
First year sales have been impacted by a lower number of producing agents.
Our International Insurance segment derives its premiums from policyholders residing in over 80 different countries across the globe. The following table sets forth our premiums by location for the three and nine months ended September 30, 2026 and 2025.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Premiums by Area: | |||||||||||||||||||||||
| Colombia | $ | 7,175 | 7,088 | 20,752 | 20,103 | ||||||||||||||||||
| Ecuador | 3,636 | 3,527 | 9,900 | 10,093 | |||||||||||||||||||
| Argentina | 3,457 | 3,180 | 9,273 | 8,199 | |||||||||||||||||||
| Taiwan | 2,786 | 3,031 | 9,239 | 10,084 | |||||||||||||||||||
| Venezuela | 2,592 | 3,258 | 8,929 | 9,930 | |||||||||||||||||||
Other | 10,054 | 9,884 | 28,623 | 28,916 | |||||||||||||||||||
| Total premiums by area | 29,700 | 29,968 | 86,716 | 87,325 | |||||||||||||||||||
Reinsurance and change in premium accruals | (599) | (1,208) | (4,048) | (4,079) | |||||||||||||||||||
Total premiums | $ | 29,101 | 28,760 | 82,668 | 83,246 | ||||||||||||||||||
Sales in Taiwan have been declining recently due to leadership succession related difficulties within our primary distribution agency in Taiwan and regulatory challenges.
We are facing some headwinds in Venezuela that may affect premium revenues. Because of the recent political instability in Venezuela, our reinsurers will not reinsure policies issued in Venezuela and accordingly we have had to decline a few very large policies. We are seeking additional reinsurance support for this business. Additionally, the strength of the U.S. dollar, combined with policyholders' difficulties in obtaining dollars, may constrain their ability to remit premiums. We continue to closely monitor emerging trends in our Venezuela business.
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Benefits and Expenses.
Claims and surrender benefits breakout is detailed below.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
Claims and surrenders: | |||||||||||||||||||||||
| Death claim benefits | $ | 131 | 987 | 2,695 | 1,923 | ||||||||||||||||||
| Surrender benefits | 9,834 | 12,154 | 30,979 | 36,042 | |||||||||||||||||||
| Endowment benefits | 1,335 | 1,493 | 4,138 | 4,712 | |||||||||||||||||||
| Matured endowment benefits | 8,994 | 21,500 | 36,168 | 56,999 | |||||||||||||||||||
| A&H and other policy benefits | 2,678 | 1,905 | 7,010 | 5,796 | |||||||||||||||||||
| Total claims and surrenders | $ | 22,972 | 38,039 | 80,990 | 105,472 | ||||||||||||||||||
As discussed, the majority of our claims and surrender benefits in this segment are related to payment of matured endowment and surrender benefits. Matured endowment benefits peaked in 2025 and decreased in the three and nine months ended September 30, 2026 compared to the prior year periods, as contractually expected. Surrender benefits are also a large component of this expense; often as surrender charges expire on endowments after certain periods, policyholders surrender their policies to access the cash value. Accordingly, as our block of maturing endowments decreases, surrenders will generally decrease as well.
Increase (Decrease) in Future Policy Benefit Reserves. In the three and nine months ended September 30, 2026, our reserves increased by $14.7 million and $21.4 million, respectively, compared to the same periods in 2025. The larger reserve increases in 2026 primarily reflect a substantially lower offset from reserve releases associated with maturing endowments and lower surrenders, with a partial offset from lower reserve growth from fewer new supplemental contracts.
Policyholder Liability Remeasurement (Gain) Loss. In the three and nine months ended September 30, 2026, we experienced policyholder remeasurement losses of $1.9 million and $5.0 million, respectively, compared to losses of $3.9 million and $5.1 million in the three and nine months ended September 30, 2025, respectively. The variances in both periods primarily reflect differences in the year-over-year impact of best estimate assumption updates, including accrual amounts in 2025, and actual-to-expected experience.
Commissions. Commissions decreased, reflecting a combination of lower first year sales as well as a shift to sales of products with lower commission rates.
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DOMESTIC INSURANCE
Detailed results of operations for the Domestic Insurance segment for the periods indicated are as follows:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
Premiums | $ | 15,702 | 14,543 | 45,776 | 43,242 | ||||||||||||||||||
| Net investment income | 5,350 | 5,008 | 15,565 | 14,986 | |||||||||||||||||||
| Investment related gains (losses), net | (256) | 791 | (534) | 235 | |||||||||||||||||||
| Other income | 3 | 5 | 17 | 20 | |||||||||||||||||||
| Total revenues | 20,799 | 20,347 | 60,824 | 58,483 | |||||||||||||||||||
| Benefits and expenses: | |||||||||||||||||||||||
| Insurance benefits paid or provided: | |||||||||||||||||||||||
| Claims and surrenders | 8,094 | 6,237 | 23,480 | 19,122 | |||||||||||||||||||
| Increase (decrease) in future policy benefit reserves | 5,062 | 3,470 | 10,626 | 9,091 | |||||||||||||||||||
| Policyholder liability remeasurement (gain) loss | (479) | (4,314) | (983) | (4,334) | |||||||||||||||||||
| Policyholders' dividends | 47 | 72 | 165 | 268 | |||||||||||||||||||
| Total insurance benefits paid or provided | 12,724 | 5,465 | 33,288 | 24,147 | |||||||||||||||||||
| Commissions | 6,837 | 6,168 | 19,632 | 18,564 | |||||||||||||||||||
| Other general expenses | 6,372 | 5,388 | 16,906 | 15,573 | |||||||||||||||||||
| Capitalization of deferred policy acquisition costs | (6,007) | (4,673) | (15,971) | (13,495) | |||||||||||||||||||
| Amortization of deferred policy acquisition costs | 1,615 | 1,236 | 4,515 | 3,568 | |||||||||||||||||||
| Amortization of cost of insurance acquired | 124 | 128 | 455 | 305 | |||||||||||||||||||
| Total benefits and expenses | 21,665 | 13,712 | 58,825 | 48,662 | |||||||||||||||||||
| Income (loss) before federal income tax | $ | (866) | 6,635 | 1,999 | 9,821 | ||||||||||||||||||
For the three and nine months ended September 30, 2026, this segment reported a loss before federal income tax of $0.9 million compared to income of $6.6 million in the prior year quarter and income before federal income tax of $2.0 million compared to $9.8 million in the prior year nine-month period. The primary factors driving the decrease were investment related losses (versus gains in the prior year periods) and an increase in total insurance benefits paid or provided. Total insurance benefits paid or provided increased by $7.3 million and $9.1 million for the respective periods, driven by higher claims and surrenders paid and increases in future policy benefit reserves, trends we expect to continue as this segment has experienced significant business growth over the last several years and continues to do so.
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Revenues
Premium breakout is detailed below:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
Direct premiums: | |||||||||||||||||||||||
| First year | $ | 7,029 | 5,440 | 18,927 | 16,486 | ||||||||||||||||||
| Renewal | 13,348 | 11,931 | 39,020 | 34,251 | |||||||||||||||||||
Total direct premiums | 20,377 | 17,371 | 57,947 | 50,737 | |||||||||||||||||||
Reinsurance | (4,675) | (2,828) | (12,171) | (7,495) | |||||||||||||||||||
Total premiums | $ | 15,702 | 14,543 | 45,776 | 43,242 | ||||||||||||||||||
Premiums for the three and nine months ended September 30, 2026 were $15.7 million and $45.8 million, respectively, reflecting increases of $1.2 million and $2.5 million over the prior year periods, due to sustained first-year sales and strong renewal year premiums from prior year sales. As mentioned above, due to the RGA Agreement, reinsurance ceded also continues to grow.
Benefits and Expenses.
Claims and surrender benefits breakout is detailed below:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
Claims and surrenders: | |||||||||||||||||||||||
| Death claim benefits | $ | 6,322 | 4,386 | 17,922 | 14,378 | ||||||||||||||||||
| Surrender benefits | 1,494 | 1,543 | 4,382 | 3,632 | |||||||||||||||||||
| Endowment benefits | — | 2 | 3 | 4 | |||||||||||||||||||
| Matured endowment benefits | 192 | 172 | 665 | 552 | |||||||||||||||||||
| A&H and other policy benefits | 86 | 134 | 508 | 556 | |||||||||||||||||||
| Total claims and surrenders | $ | 8,094 | 6,237 | 23,480 | 19,122 | ||||||||||||||||||
In our Domestic Insurance segment, the majority of claims and surrender benefits are death claim benefits. Death claim benefits increased in the three and nine months ended September 30, 2026 compared to the same prior year periods due primarily to a higher volume of reported claims. The Company carefully tracks mortality experience as an important measure of performance, which can fluctuate from quarter to quarter based on reported claims. While we monitor claims activities, we expect a rise in claims corresponding with business expansion. A portion of these death claims are offset by our reinsurance coverage.
Increase (Decrease) in Future Policy Benefit Reserves. In the three and nine months ended September 30, 2026, our reserves increased by 1,592 and 1,535, respectively, compared to the same periods in 2025. These increases were driven by a change in our accounting estimate for the ceded reserve credit to replace high-level estimates with actual historical transactional experience from the second quarter of 2024 through the third quarter of 2026, resulting in a decrease to the ceded reserve credit of $1.7 million and a corresponding increase to reserve liability.
Policyholder Liability Remeasurement (Gain) Loss. In the three and nine months ended September 30, 2026, we experienced policyholder remeasurement gains of $0.5 million and $1.0 million, respectively, compared to gains of $4.3 million in both the three and nine months ended September 30, 2025. The variances in both periods primarily
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reflect differences in the year-over-year impact of best estimate assumption updates, driven largely by accrual amounts in 2025, as well as actual-to-expected experience.
OTHER NON-INSURANCE OPERATIONS
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
(In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Loss before federal income tax | $ | (2,489) | (2,034) | (8,238) | (7,025) | ||||||||||||||||||
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. For the three and nine months ended September 30, 2026, the increased loss before federal income tax compared to the same periods in 2025 is mainly due to higher general expenses to support our growth initiatives.
INVESTMENTS
Our investments are an integral part of our business success, as we invest the majority of premiums collected to pay for future benefits and rely on net investment income for our ongoing operations. Our cash and invested assets at September 30, 2026 were $1,382.4 million, of which 88% 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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The following table shows the carrying value of our investments by investment category and the percentage of each to total cash, cash equivalents and invested assets.
| Carrying Value | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||
| (In thousands, except for %) | Amount | % | Amount | % | |||||||||||||||||||
| Cash, cash equivalents and invested assets: | |||||||||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasuries and U.S. Government-sponsored enterprises | $ | 6,760 | 0.5 | % | $ | 7,008 | 0.5 | % | |||||||||||||||
| Corporate | 835,633 | 60.4 | 866,870 | 59.2 | |||||||||||||||||||
States and political subdivisions (1) | 241,797 | 17.5 | 268,792 | 18.3 | |||||||||||||||||||
Mortgage-backed (2) | 101,247 | 7.3 | 111,982 | 7.6 | |||||||||||||||||||
| Asset-backed | 30,922 | 2.2 | 33,209 | 2.3 | |||||||||||||||||||
| Total fixed maturity securities | 1,216,359 | 87.9 | 1,287,861 | 87.9 | |||||||||||||||||||
| Cash and cash equivalents | 17,586 | 1.3 | 22,976 | 1.6 | |||||||||||||||||||
| Other investments: | |||||||||||||||||||||||
| Policy loans | 65,832 | 4.8 | 67,455 | 4.6 | |||||||||||||||||||
| Equity securities | 1,338 | 0.1 | 1,356 | 0.1 | |||||||||||||||||||
| Other long-term investments | 81,271 | 5.9 | 85,439 | 5.8 | |||||||||||||||||||
| Total cash, cash equivalents and invested assets | $ | 1,382,386 | 100.0 | % | $ | 1,465,087 | 100.0 | % | |||||||||||||||
(1) Includes $91.7 million and $106.9 million of securities guaranteed by third parties at September 30, 2026 and December 31, 2025, respectively.
(2) Includes $84.8 million and $101.1 million of U.S. Government-sponsored enterprises at September 30, 2026 and December 31, 2025, respectively.
The carrying value of the Company’s fixed maturity securities investment portfolio at September 30, 2026 was $1.2 billion compared to $1.3 billion at December 31, 2025. This decrease primarily reflects the impact of interest rate sensitivity on the fair value of our fixed maturity securities. The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of September 30, 2026 did not materially change from December 31, 2025 – the weighted average was “A” at both dates.
Cash and cash equivalents decreased as of September 30, 2026 from December 31, 2025 and fluctuate from period to period primarily due to the timing of operating and investing activities.
As of September 30, 2026, other long-term investments decreased by $4.2 million compared to December 31, 2025, primarily due to return of capital distribution and the impact of changes in the fair market value in our limited partnership holdings.
Obligations of States and Political Subdivisions
20% of the Company’s fixed maturity securities investment portfolio at September 30, 2026 consists of municipal bonds, which are securities that are obligations of states and political subdivisions. A portion of these municipal
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bonds includes third-party guarantees, which enhance a bond's credit rating. A presentation of our municipal bonds by credit rating and third-party guarantee is below.
| 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 | $ | 11,497 | 11,396 | 11,743 | 12,876 | 3,125 | 3,235 | 26,365 | 27,507 | 9.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| AA | 35,225 | 36,674 | 105,896 | 130,043 | 4,626 | 5,106 | 145,747 | 171,823 | 60.6 | ||||||||||||||||||||||||||||||||||||||||||||
| A | 2,584 | 3,022 | 54,056 | 66,722 | 2,046 | 2,115 | 58,686 | 71,859 | 25.4 | ||||||||||||||||||||||||||||||||||||||||||||
| BBB | 90 | 93 | 8,514 | 9,454 | — | — | 8,604 | 9,547 | 3.4 | ||||||||||||||||||||||||||||||||||||||||||||
| BB and other | 2,395 | 2,529 | — | — | — | — | 2,395 | 2,529 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 51,791 | 53,714 | 180,209 | 219,095 | 9,797 | 10,456 | 241,797 | 283,265 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
State and political subdivision fixed maturity securities excluding third-party guarantees: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| AAA | $ | — | — | 170 | 190 | 3,125 | 3,235 | 3,295 | 3,425 | 1.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| AA | 29,359 | 30,173 | 38,776 | 47,471 | 994 | 1,067 | 69,129 | 78,711 | 27.8 | ||||||||||||||||||||||||||||||||||||||||||||
| A | 9,973 | 10,575 | 86,948 | 108,545 | 3,756 | 4,092 | 100,677 | 123,212 | 43.5 | ||||||||||||||||||||||||||||||||||||||||||||
| BBB | 2,256 | 2,569 | 23,071 | 26,588 | 42 | 55 | 25,369 | 29,212 | 10.3 | ||||||||||||||||||||||||||||||||||||||||||||
| BB and other | 10,203 | 10,397 | 31,244 | 36,301 | 1,880 | 2,007 | 43,327 | 48,705 | 17.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 51,791 | 53,714 | 180,209 | 219,095 | 9,797 | 10,456 | 241,797 | 283,265 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||
The table below shows the categories in which we held investments in special revenue municipal bonds that were greater than 10% of the fair value of our total municipal bond portfolio at September 30, 2026.
| (In thousands, except for %) | Fair Value | Amortized Cost | % of Total Fair Value | ||||||||||||||
| Utilities | $ | 36,492 | 42,694 | 15.1 | % | ||||||||||||
| Education | 36,521 | 44,848 | 15.1 | ||||||||||||||
| Transportation | 29,796 | 39,517 | 12.3 | ||||||||||||||
The Company's municipal bond portfolio consists of bonds from states and political subdivisions in many states. As of September 30, 2026, municipal bonds from issuers in Texas and California comprised 23% and 18%, respectively, of the portfolio. There were no other states or individual issuer holdings equal to or greater than 10% of the total municipal bond portfolio as of September 30, 2026.
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The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in Texas at September 30, 2026.
| 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 | $ | 10,997 | 10,895 | 2,330 | 2,496 | — | — | 13,327 | 13,391 | ||||||||||||||||||||||||||||||||||||||
| AA | 12,545 | 12,742 | 15,819 | 19,704 | 43 | 55 | 28,407 | 32,501 | |||||||||||||||||||||||||||||||||||||||
| A | — | — | 10,162 | 14,730 | — | — | 10,162 | 14,730 | |||||||||||||||||||||||||||||||||||||||
| BBB | — | — | 2,946 | 2,920 | — | — | 2,946 | 2,920 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 23,542 | 23,637 | 31,257 | 39,850 | 43 | 55 | 54,842 | 63,542 | ||||||||||||||||||||||||||||||||||||||
Texas state and political subdivision fixed maturity securities excluding third-party guarantees: | |||||||||||||||||||||||||||||||||||||||||||||||
| AA | $ | 19,519 | 19,612 | 4,554 | 5,553 | — | — | 24,073 | 25,165 | ||||||||||||||||||||||||||||||||||||||
| A | 3,089 | 3,090 | 19,148 | 26,120 | — | — | 22,237 | 29,210 | |||||||||||||||||||||||||||||||||||||||
| BBB | — | — | 5,986 | 6,282 | 43 | 55 | 6,029 | 6,337 | |||||||||||||||||||||||||||||||||||||||
| BB and other | 934 | 935 | 1,569 | 1,895 | — | — | 2,503 | 2,830 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 23,542 | 23,637 | 31,257 | 39,850 | 43 | 55 | 54,842 | 63,542 | ||||||||||||||||||||||||||||||||||||||
The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in California at September 30, 2026.
| 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 | $ | 1,969 | 2,129 | 30,807 | 39,770 | 4,276 | 4,744 | 37,052 | 46,643 | ||||||||||||||||||||||||||||||||||||||
| A | 1,220 | 1,650 | 5,582 | 6,808 | — | — | 6,802 | 8,458 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,189 | 3,779 | 36,389 | 46,578 | 4,276 | 4,744 | 43,854 | 55,101 | ||||||||||||||||||||||||||||||||||||||
California state and political subdivision fixed maturity securities excluding third-party guarantees: | |||||||||||||||||||||||||||||||||||||||||||||||
| AA | $ | 412 | 446 | 5,715 | 7,868 | 686 | 760 | 6,813 | 9,074 | ||||||||||||||||||||||||||||||||||||||
| A | 2,777 | 3,333 | 17,084 | 21,672 | 1,710 | 1,976 | 21,571 | 26,981 | |||||||||||||||||||||||||||||||||||||||
| BB and other | — | — | 13,590 | 17,038 | 1,880 | 2,008 | 15,470 | 19,046 | |||||||||||||||||||||||||||||||||||||||
| Total | $ | 3,189 | 3,779 | 36,389 | 46,578 | 4,276 | 4,744 | 43,854 | 55,101 | ||||||||||||||||||||||||||||||||||||||
IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY SECURITIES
We analyze our available-for-sale ("AFS") fixed maturity securities that are experiencing unrealized losses to ascertain if there is an expectation of credit related impairments. We did not record any credit valuation allowances on fixed maturity securities in either of the three and nine months ended September 30, 2026 or 2025.
Gross unrealized losses on AFS fixed maturity securities amounted to $235.5 million as of September 30, 2026 and $154.3 million as of December 31, 2025. This increase in gross unrealized losses during 2026 was a result of the increase in average market interest rates in 2026 as compared to 2025.
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Information on both unrealized and realized gains and losses by category is set forth in Note 3 - Investments herein.
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, 2026 | December 31, 2025 | |||||||||
| Fixed maturity securities | $ | 1,216,359 | 1,287,861 | ||||||||
| Cash and cash equivalents | 17,586 | 22,976 | |||||||||
Liquidity refers to a company's ability to generate sufficient cash flows to meet the needs of its operations. 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 operating expenses, invest in our business or make strategic acquisitions. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flows to meet our obligations. In the nine months ended September 30, 2026, our operations provided $13.0 million of net cash.
We anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets. 89% of our investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs. Additionally, we may raise capital by selling shares in our SIP (as defined below) and we may also access our Credit Facility if needed (also described below). Citizens had no debt as of September 30, 2026.
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. The investing activities fluctuate from period to period due to timing of securities activities such as calls, maturities and reinvestment of those funds. We purchased $80.3 million of fixed maturity securities, and we also used $1.9 million to purchase other long-term investments in the first nine months of 2026.
PARENT COMPANY LIQUIDITY AND CAPITAL RESOURCES
Citizens is a holding company and has minimal operations of its own. Our assets consist of the capital stock of our subsidiaries, cash and investments. Our liquidity requirements are met primarily from two sources: cash generated from our operating subsidiaries and our invested assets. Our ability to obtain cash from our insurance subsidiaries depends primarily upon the availability of statutorily permissible payments, including payments we receive from service agreements with our 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"), which allows investors, policyholders, independent contractors and agents, employees and directors to 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 Note 8 - Commitments and Contingencies herein for a description of the Credit Facility. The Credit Facility provides
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additional liquidity to the Company for short-term or longer-term needs. We have not borrowed any money under the Credit Facility.
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, and 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, including the use of reinsurance to limit their exposure to the risk of loss as well as enhance their capital position. As we have discussed, we have been growing our domestic CLOA business by developing new products and expanding our distribution channels, which has led to increases in first year direct premiums (i.e., new sales) in our Domestic Insurance segment in the last few years. 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, in April 2024 we entered into the RGA Agreement whereby we cede 50% of the CLOA final expense business to RGA and in return they share in certain policy acquisition and operating costs, which alleviates part of the capital strain of issuing the new business. Pursuant to the RGA Agreement, we have the option to cede up to 80% of the CLOA final expense business to RGA in order to create more capacity for growth. Additional sources of cash flow and liquidity include the available-for-sale fixed maturity investment portfolio our subsidiaries hold and the Federal Home Loan Bank ("FHLB") of Dallas, of which CLOA is a member. FHLB membership provides CLOA with access to various low-cost collateralized borrowings and funding agreements that could provide CLOA 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 2025 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
Payments of benefits for claims and surrenders and commissions are our largest use of cash. There are three primary components of payments of benefits - matured endowments, surrenders and death claims.
Matured Endowments. 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 18% of the endowments in force will mature in the next five years, totaling approximately 5% of our in force business as of September 30, 2026. 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, and we are closely monitoring our policyholder behavior patterns, and in 2024, introduced a new product designed to allow policyholders with maturing endowments to purchase a new life insurance policy.
Surrenders. Surrender benefits, which have been high the last several years, slightly decreased during 2025 and continued to decrease in the first nine months of 2026. 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 withdrawals, but as many of our policies reach 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
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may encourage policyholders to seek higher rates of return 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 use of cash could be higher than expected. We continue to monitor surrenders and early withdrawals and focus on our retention initiatives and efforts to retain cash when policyholders surrender their policies.
Our liquidity is also negatively impacted by high matured endowments and surrenders, as they lead to lower renewal premiums.
Death Claims. Our product pricing assumes a certain mortality rate and thus a primary liquidity concern is the risk of a higher than expected mortality experience.
Other significant uses of cash.
Commissions. Another significant use of cash is payment of commissions. In our Domestic Insurance segment, we pay advance commissions on some of our insurance products, meaning we pay an agent a portion of their first year 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 that rapid growth in first year sales of these products creates a significant increase in commission payments. CLOA sales have increased significantly since the third quarter of 2023. In order to offset some of this strain on our capital, we entered into the coinsurance agreement with RGA in the second quarter of 2024 and elected to cede 50% of our final expense business to RGA. 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 the required commission payments exceed current resources.
New Technology Ecosystem. Because the core of our proprietary policyholder administration system is over 50 years old, we have decided to utilize modern, third-party platforms to support our products and related systems (e.g., commissions, customer and agent portals) moving forward. While use of third-party systems will increase our use of cash, they will importantly allow us to create a broader product portfolio in order to expand our offerings over time and provide greater diversification of income and revenues across multiple product lines. On October 9, 2026, we filed a Current Report on Form 8-K disclosing a Master Service Agreement we entered into with Bestow Agency LLC ("Bestow"), pursuant to which the Company obtained hosted access to Bestow’s proprietary web-based software as a service platform for use in connection with the Company’s insurance processing, underwriting, policy administration, and related functions. In connection with this Master Service Agreement, the Company entered into Orders under which Bestow is obligated to configure, implement, host, operate and maintain the Company's cloud-based platform for the Company's final expense (simplified issue whole life) life insurance products. The Orders also contemplate adding three additional insurance products to the platform, supporting the Company's long-term strategy of diversifying its insurance products and revenue base.
See Note 8 - Commitments and Contingencies, as well as Legal Proceedings - "Trade Secret Lawsuit" in our 2025 Form 10-K 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 insurance 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.
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| CITIZENS, INC. | MANAGEMENT'S DISCUSSION & ANALYSIS | |||||||
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 CLOA, Citizens' wholly-owned subsidiary domiciled in Colorado, that would require Citizens to contribute capital to CLOA in order to maintain an RBC level above 350%. At September 30, 2026, our domestic insurance subsidiaries were above the required minimum RBC levels and CLOA was above 350%.
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. At September 30, 2026, CICA International exceeded the required minimum capital and related ratio.
Any capital that Citizens is required to contribute to its insurance subsidiaries would negatively impact the holding Company's capital resources and liquidity.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
As of September 30, 2026, we have no additional contractual obligations or off-balance sheet arrangements other than those described in Note 8 - Commitments and Contingencies herein and in Contractual Obligations and Off-Balance Sheet Arrangements in our 2025 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations - "Critical Accounting Policies" and Note 1 - Summary of Significant Accounting Policies in our 2025 Form 10-K continue to describe the significant judgments and estimates used in the preparation of our consolidated financial statements.
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| CITIZENS, INC. | ||||||||
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we 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, 2026. 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, 2026 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, 2026, 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
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. ("CICA Bermuda") and CICA Life Insurance Company of America ("CLOA") (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 and Randall Riley approximately $3.5 million of their legal fees incurred during the trade secret lawsuit. On August 16, 2024, the judge signed a Final Judgment reflecting the jury decision and the court award of the legal fees. We continue to believe that Delgado and Landa are not entitled to the awarded commissions and that Riley and Buchweitz are not entitled to the awarded legal fees.
On September 17, 2024, we filed an appeal bond with the trial court in order to stay any execution of the judgment against us.
We appealed the judgment to the Court of Appeals, Third District of Texas. Consistent with the parties’ positions that oral argument was not necessary, the Court of Appeals has set the appeal for submission on the briefs on November 23, 2026.
Item 1A. RISK FACTORS
Item 1A. Risk Factors of our 2025 Form 10-K includes a discussion of our risk factors. There have been no material changes in the three months ended September 30, 2026 from the risk factors included in our 2025 Form 10-K.
Item 5. OTHER INFORMATION
Item 5 (c) Trading Arrangements
During the three months ended September 30, 2026, none
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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) | |||||||
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 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.
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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 | |||||||||||
Chief Financial Officer, Chief Investment Officer & Treasurer | |||||||||||
| Date: | November 5, 2026 | ||||||||||
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