Citizens(CIA) - 2022 Q2 - Quarterly Report

Revenue and Income - Premium revenue decreased by 1.4% to $42.2 million in Q2 2022, primarily due to lower renewal premiums, partially offset by increased first-year premiums in the Life Insurance segment [129]. - Total revenues decreased to $53.7 million for the three months ended June 30, 2022, from $63.6 million in the same period of 2021, and to $109.1 million for the six months ended June 30, 2022, from $119.0 million in 2021 [162]. - Total premium income decreased by $0.6 million (1.4%) and $0.3 million (0.3%) for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 [164]. - The company reported a net loss of $3.5 million in Q2 2022, compared to a net income of $5.0 million in the same period of 2021, largely due to investment-related losses of $5.0 million [142]. - Total income (loss) before federal income tax expense for the company was a loss of $3.6 million for the three months ended June 30, 2022, compared to income of $5.6 million in the same period of 2021 [184]. Investment Performance - Net investment income increased by $0.6 million, or 3.7%, in Q2 2022, driven by a growing asset base and positive returns from private equity investments [145]. - Net investment income increased by 4.9% to $15.9 million for the three months ended June 30, 2022, and by 2.8% to $31.4 million for the six months ended June 30, 2022, compared to the same periods in 2021 [167]. - A pre-tax net unrealized loss of $125.4 million on available-for-sale securities was reported at June 30, 2022, compared to net unrealized gains of $126.9 million at December 31, 2021 [151]. - The carrying value of fixed maturity securities decreased to $1.24 billion as of June 30, 2022, from $1.47 billion at December 31, 2021, reflecting interest rate sensitivity [211]. - Net unrealized losses on fixed maturity securities totaled $125.4 million at June 30, 2022, compared to gains of $126.9 million at December 31, 2021 [243]. Claims and Benefits - Death claims decreased in both Q2 2022 and the first half of 2022 compared to the prior year, attributed to lower reported claims and retention initiatives [136]. - Total benefits and expenses decreased by $0.6 million in Q2 2022, primarily due to a $2.2 million decrease in claims and surrenders benefits [147]. - Claims and surrenders decreased by 7.5% to $27.1 million for the three months ended June 30, 2022, and by 7.3% to $55.5 million for the six months ended June 30, 2022, compared to the same periods in 2021 [171]. - Surrender benefits decreased by 14.2% and 9.4% for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 [176]. - Death claim benefits decreased by 7.3% to $4.35 million in Q2 2022 compared to $4.70 million in Q2 2021, and by 5.2% to $10.38 million for the six months ended June 30, 2022 compared to $10.95 million in the same period of 2021 [205]. Operational Efficiency - Operating expenses decreased in both Q2 2022 and the first half of 2022 compared to the same periods in 2021 [139]. - Other general expenses decreased by 9.6% and 6.4% for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 [178]. - The company continues to transform its business mix by introducing new products that are lower cost to policyholders compared to legacy products [203]. Insurance Segment Performance - Total insurance issued increased by 28.7% to $268.5 million for the six months ended June 30, 2022, compared to $208.7 million in the same period of 2021 [158]. - The Life Insurance segment's growth was driven by a new international whole life product, which accounted for 45% of total insurance issued in this segment [159]. - Life Insurance segment reported a net loss of $2.4 million for the three months ended June 30, 2022, compared to a net income of $7.1 million in the prior year period, primarily due to investment-related losses of $4.0 million [185]. - Total revenues for the Life Insurance segment decreased to $38.8 million for the three months ended June 30, 2022, down 17.7% from $47.2 million in the same period of 2021 [188]. - Claims and surrender benefits in the Life Insurance segment decreased by 17.0% to $21.6 million for the three months ended June 30, 2022, compared to $23.5 million in the same period of 2021 [198]. Cash Flow and Financial Position - The company's cash and invested assets were $1.4 billion as of June 30, 2022, with 87.4% invested in fixed maturity securities [208]. - In the six months ended June 30, 2022, the company generated $22,300,000 in net cash from operations [231]. - Net cash used in investing activities totaled $27,900,000 for the same period, with $64,700,000 invested in fixed maturity securities [232]. - Cash provided by financing activities was $700,000, primarily from the issuance of shares under the Stock Investment Plan [233]. - Cash and cash equivalents decreased to $22,407,000 as of June 30, 2022, from $27,294,000 at the end of 2021 [225]. Risk and Uncertainties - The impact of the COVID-19 pandemic remains uncertain, with potential future claims and revenue disruptions still being monitored [153]. - The company anticipates potential higher surrenders and lapses due to inflation and rising costs affecting policyholders' cash conservation [152]. - Death claims decreased to pre-pandemic levels during the first six months of 2022, following high claims in 2021 due to COVID-19 [237]. - As of June 30, 2022, domestic insurance subsidiaries maintained risk-based capital (RBC) levels above the required minimum, with a parental guarantee ensuring RBC levels above 350% [239].