Citizens(CIA) - 2020 Q3 - Quarterly Report

Financial Performance - Citizens, Inc. reported a net loss of $7.9 million for the three months ended September 30, 2020, compared to a net income of $2.0 million in the prior year period, reflecting a decline in earnings per share by $0.20[143]. - Total revenues for the nine months ended September 30, 2020, were $173.888 million, a decrease of 3.8% compared to $180.739 million for the same period in 2019[161]. - The company reported a loss before federal income tax expense of $1,026,000 for the three months ended September 30, 2020, compared to income of $927,000 in the same period of 2019[211]. Insurance Premiums and Claims - Insurance premiums for the three months ended September 30, 2020, declined by 4.1% to $44.1 million from $46.0 million in the same period in 2019, primarily due to a 34.1% decrease in first year premiums in the Life Insurance segment[149]. - Claims and surrenders expense increased by 14.6% for the three months ended September 30, 2020, driven by higher claims in the Home Service Insurance segment and an increase in surrendered policies in the Life Insurance segment[150]. - Total claims and surrenders amounted to $32,958,000 for the three months ended September 30, 2020, compared to $28,751,000 for the same period in 2019, marking a 14.3% increase[169]. Marketing and Business Strategy - Citizens, Inc. plans to expand its Life Insurance segment into the Hispanic U.S. market in 2021, leveraging its experience in Latin America and ability to conduct transactions in Spanish and Portuguese[137]. - A new marketing campaign in the Life Insurance segment led to a 39% increase in premiums in the third quarter compared to the second quarter of 2020[139]. - The company is focusing on countermeasures to mitigate the impact of the COVID-19 pandemic on premiums, including sales promotions and virtual selling[193]. Investment Income and Assets - Net investment income remained stable at $15.0 million for the three months ended September 30, 2020, and increased to $45.1 million for the nine months ended September 30, 2020, compared to $44.2 million in the same period in 2019[149]. - The carrying value of total cash and invested assets as of September 30, 2020, was $1,614,192,000, an increase from $1,526,459,000 as of December 31, 2019[228]. - The company recorded no credit valuation losses on fixed maturity securities for the three and nine months ended September 30, 2020[242]. COVID-19 Impact - The COVID-19 pandemic has negatively impacted product sales and claims expenses, with ongoing monitoring of its effects on future results and business operations[148]. - Increased death claims were reported in the Home Service Insurance segment during Q3 2020 compared to the same period in 2019, potentially impacting liquidity due to higher payouts[255]. - The company is closely monitoring the impact of the COVID-19 pandemic on liquidity and capital resources, with potential negative impacts on sales and investment income[248]. Operational Changes - The company reorganized its Home Service Insurance distribution system, transitioning from employee agents to independent agents effective August 2020[138]. - Citizens, Inc. is focused on operational improvements, including updated underwriting processes and expanded alternative payment methods for its Home Service Insurance segment[140]. - Future policy benefit reserves decreased by 35.1% and 22.4% for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019[152]. Policy and Product Changes - The number of policies issued in the Life Insurance segment decreased by 12.1% for the nine months ended September 30, 2020, while new business applications increased by 23% in Q3 compared to Q2 2020[154]. - The Company plans to resume selling domestic ordinary whole life and endowment life insurance products in the U.S. in 2021 after discontinuing new sales in 2017[190]. - Home Service Insurance segment saw a 17.2% increase in the number of policies issued for the nine months ended September 30, 2020, compared to the same period in 2019[156]. Expenses and Financial Ratios - General expenses increased by 68.2% and 11.7% for the three and nine months ended September 30, 2020, respectively, compared to the same periods in 2019[152]. - The annualized yield on average invested assets decreased to 4.26% as of September 30, 2020, compared to 4.34% for the same period in 2019[163]. - Commissions decreased by 13.1% and 11.4% for the three and nine months ended September 30, 2020, respectively, due to lower new product sales[173].