Citizens(CIA) - 2018 Q4 - Annual Report

Financial Performance - Revenues increased by 6% from $230.2 million in 2014 to $244.0 million in 2018, but declined approximately 3% in 2018 compared to 2017[17] - Net income declined 85% from a net loss of $6.0 million in 2014 to a net loss of $11.1 million in 2018, impacted by non-recurring tax items[17] - Discretionary dividends on existing international policies decreased from $10.7 million in 2015 to $6.3 million in 2018[25] Assets and Investments - Assets grew 14% from $1.4 billion to $1.6 billion from 2014 to 2018[17] - The company recorded premiums from the Brazilian portion of its business of $10.0 million, representing 7.2% of total international premiums as of December 31, 2018[20] - The total fixed maturities held by the company amounted to $1,223,747 thousand, with a fair value of $1,231,039 thousand, compared to $1,169,938 thousand and $1,215,986 thousand in the previous year[500] Premiums and Market Segmentation - International direct premiums comprised approximately 96% of total direct premiums in the Life segment and 72% of total direct premiums as of December 31, 2018[33] - Domestic direct premiums comprised approximately 4% of total direct premiums in the Life segment in 2018[43] - The Domestic Home Service segment generated $47.5 million in direct premiums, accounting for 25% of the total premiums in 2018[48] Product Development and Strategy - The company plans to introduce newly enhanced products in 2019 to better align with market demands[25] - The company emphasizes personal service to compete in the home service insurance market, aiming for premium growth through direct sales[49] - The company is exploring alternatives to its current business model in response to compliance risks associated with foreign insurance laws[83] Technology and Operations - The company implemented a new Oracle ERP application in 2018, resulting in a decrease in reserves of $10.2 million and a decrease in DAC of $4.3 million, before tax[24] - The company is reviewing technology options to transition from its legacy administration system to a modernized platform for future policy administration needs[53] - The company hired a third-party investment manager in May 2018 to enhance its portfolio and investment strategies[26] Risk Management and Compliance - The enterprise risk management function analyzes risks and ensures they remain within the company's risk appetite, supporting strategic priorities[56] - Risk-based capital (RBC) requirements are imposed on the company, with actions required if the adjusted statutory capital falls below 200% of the control level[70] - CICA Ltd., the Bermuda subsidiary, is registered as a Class E insurer with total assets exceeding $500 million, subject to the Bermuda Monetary Authority's regulations[75] Investment Portfolio - Approximately 94.5% of the company's cash and investment portfolio is comprised of fixed maturity investments, policy loans, and mortgage loans on real estate[501] - The company's equity investments portfolio represented only 1.1% of total investments as of December 31, 2018, with 97.4% invested in diversified equity and bond mutual funds[509] - The company has no investments classified as trading instruments, with 100% of fixed maturities held in available-for-sale[508] Interest Rate Impact - The interest rate of the ten-year U.S. Treasury bond increased to 2.69% at December 31, 2018, from 2.40% at December 31, 2017[502] - The company performed an analysis indicating that a 100 basis point increase in interest rates would decrease the fair value of its fixed maturity investment portfolio by approximately $7.4 million[503] - The company’s fixed maturity portfolio is exposed to call risk, which may increase in a decreasing interest rate environment[505] - Net unrealized gains on fixed maturity securities decreased to $7.3 million at December 31, 2018, from $46.0 million at December 31, 2017, due to changes in bond interest rates[502]