Citizens(CIA) - 2025 Q1 - Quarterly Report

Financial Performance - Net income before federal income tax decreased to a loss of $1.8 million in 2025 from income of$4.9 million in 2024[141] - Total revenues decreased to $55,652,000 in Q1 2025 from$57,712,000 in Q1 2024, primarily due to a $3.9 million decrease in investment related gains[167] - Income before federal income tax for the Life Insurance segment dropped to$243,000 in Q1 2025 from $5,800,000 in Q1 2024, mainly due to decreased investment related gains[188] - Home Service Insurance segment income before federal income tax fell to$0.12 million in Q1 2025 from $0.62 million in Q1 2024, a decrease of 80.6$1.1 million in the three months ended March 31, 2025, but were offset by a $2.5 million increase in total insurance benefits paid or provided[142] - Direct premium revenue increased 8$42.4 million from $39.1 million in the same period in 2024[147] - Direct first year premiums increased 49$8.8 million in the three months ended March 31, 2025, compared to 5.9 million in the same period in 2024[148] - Total life and A&H premiums increased to 39,797,000 in Q1 2025 from $38,675,000 in Q1 2024, reflecting strong first year sales[168] - Total international premiums increased to$28.79 million in Q1 2025 from $27.80 million in Q1 2024, representing a growth of 3.6$5.79 million in Q1 2025, up from $2.32 million in Q1 2024, marking a significant increase of 149.5$37,575,000 in Q1 2025 from $35,120,000 in Q1 2024, with claims and surrenders rising to$40,098,000[174] - Claims and surrenders benefits increased by 21% from $33,113,000 in Q1 2024 to$40,098,000 in Q1 2025, influenced by matured endowment policies[175] - Total claims and surrenders in the Life Insurance segment rose to $34.14 million in Q1 2025, compared to$27.36 million in Q1 2024, an increase of 24.8%[196] - Death claim benefits decreased to $1.27 million in Q1 2025 from$1.99 million in Q1 2024, a decline of 36.3%[196] Investment Performance - Investment-related losses included a $3.1 million loss in the quarter ended March 31, 2025, related to BlackRock's write-down of its Global Renewable Power Fund III[140] - Net investment income decreased slightly to$17,377,000 in Q1 2025 from $17,487,000 in Q1 2024, with an annualized yield on average invested assets at 4.52$2,894,000 were recorded in Q1 2025, compared to gains of $963,000 in Q1 2024, primarily due to a non-cash write-down of Blackrock ESG investment[171] - Investment-related losses amounted to$2.7 million in Q1 2025, compared to gains of $1.1 million in Q1 2024, indicating a negative shift in investment performance[194] Operating Expenses - Operating expenses increased due to continued investment in business growth and higher costs associated with the equity compensation program[154] - Other general expenses rose by 12$12,693,000 in Q1 2025 from $11,338,000 in Q1 2024, driven by strategic growth initiatives[181] - Other general expenses increased due to costs associated with continued investment in the growth of CICA domestic, impacting overall profitability[198] Assets and Capital - Total assets amounted to$1.7 billion, with total direct insurance in force of $5.28 billion and total investments of$1.4 billion[142] - The carrying value of fixed maturity securities increased to $1.25 billion as of March 31, 2025, from$1.22 billion at December 31, 2024, reflecting a growth of 2.0%[211] - Cash and cash equivalents decreased to $18.36 million as of March 31, 2025, down from$29.27 million at December 31, 2024, a decline of 37.4%[210] - The company had no debt as of March 31, 2025, and anticipates meeting its cash needs through cash generated by insurance operations and invested assets[225] - The company has adequate capital resources and the ability to obtain additional capital to support liquidity requirements[234] Regulatory and Strategic Actions - The company is investigating options to reduce regulatory capital and liquidity risk due to rapid growth in first-year sales exceeding current resources[244] - Regulatory capital requirements may affect the company's ability to access capital from insurance operations, necessitating potential cash contributions to subsidiaries[242] - A coinsurance agreement with RGA was entered into in Q2 2024, ceding 50% of final expense business to alleviate expense strain[240] - As of March 31, 2025, domestic insurance subsidiaries were above the required minimum risk-based capital (RBC) levels, with CICA Domestic above 350%[243] - CICA International exceeded the required minimum capital of $750,000 and maintained a premium to surplus ratio of 7 to 1 as of March 31, 2025[245] Cash Flow - Cash provided by operating activities was$0.7 million for the three months ended March 31, 2025, indicating a positive cash flow from operations[227] - Net cash outflows from investing activities totaled $11.4 million for the three months ended March 31, 2025, with$17.5 million spent on fixed maturity securities[228] Future Outlook - The company anticipates continued increases in matured endowment benefits throughout 2025, following a $6.6 million rise in Q1 2025[176] - Approximately 18% of the endowments in force will mature in the next five years, totaling about 6% of the in-force business as of March 31, 2025[236] - Surrender benefits slightly increased in the first three months of 2025, continuing a trend of higher-than-usual surrenders over the last several years[237] - Death benefit payments decreased in the three months ended March 31, 2025, indicating a potential liquidity concern due to higher than expected mortality rates[238] - CICA Domestic sales have significantly increased since Q3 2023, leading to higher commission payments and liquidity concerns[239]