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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
COMMISSION FILE NUMBER:  000-16509

cia-20220630_g1.jpg
CITIZENS, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0755371
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

11815 Alterra Pkwy, Floor 15, Austin, TX 78758
(Current Address)

Registrant's telephone number, including area code: (512) 837-7100
Securities registered pursuant to Section 12(b) of the Act
Class A Common Stock CIA  NYSE
(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 Accelerated filer Emerging growth company
Non-accelerated filer Smaller reporting 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 August 1, 2022, the Registrant had 50,152,145 shares of Class A common stock outstanding and 0 shares of Class B common stock outstanding.





























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TABLE OF CONTENTS
Page Number
Part I. FINANCIAL INFORMATION
  Item 1.  
   
2
4
5
   
6
   
8
  Item 2.
  Item 3.
  Item 4.
Part II. OTHER INFORMATION  
  Item 1.
Item 1A.
  Item 2.
  Item 3.
  Item 4.
  Item 5.
  Item 6.


June 30, 2022 | 10-Q 1


PART I.  FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
(In thousands) June 30, 2022 December 31, 2021
Assets (Unaudited)
Investments:    
Fixed maturity securities available-for-sale, at fair value (amortized cost: $1,362,404 and $1,343,755 in 2022 and 2021, respectively)
$ 1,237,004  1,470,617 
Equity securities, at fair value 12,711  14,844 
Policy loans 78,586  80,307 
Other long-term investments (portion measured at fair value $64,732 and $56,038 in 2022 and 2021, respectively)
66,002  57,399 
Total investments 1,394,303  1,623,167 
Cash and cash equivalents 22,407  27,294 
Accrued investment income 16,497  16,197 
Reinsurance recoverable 3,426  5,539 
Deferred policy acquisition costs 140,713  140,380 
Cost of insurance acquired 10,555  10,611 
Current federal income tax receivable 1,016  762 
Property and equipment, net 13,689  14,074 
Due premiums 9,538  10,748 
Other assets (less allowance for losses of $338 and $111 in 2022 and 2021, respectively)
6,801  5,739 
Total assets $ 1,618,945  1,854,511 

See accompanying Notes to Consolidated Financial Statements.

June 30, 2022 | 10-Q 2



CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands, except share amounts) June 30, 2022 December 31, 2021
Liabilities and Stockholders' Equity (Unaudited)
Liabilities:    
Policy liabilities:    
Future policy benefit reserves:    
Life insurance $ 1,293,464  1,278,987 
Annuities 88,760  83,918 
Accident and health 745  784 
Dividend accumulations 39,622  37,760 
Premiums paid in advance 39,636  40,690 
Policy claims payable 8,475  14,590 
Other policyholders' funds 35,426  30,690 
Total policy liabilities 1,506,128  1,487,419 
Commissions payable 1,917  2,285 
Deferred federal income tax payable 1,893  15,456 
Payable for securities in process of settlement 3,291  — 
Other liabilities 29,477  28,780 
Total liabilities 1,542,706  1,533,940 
Commitments and contingencies (Note 7)
Stockholders' Equity:    
Common stock:
Class A, no par value, 100,000,000 shares authorized, 53,742,067 and 53,170,413 shares issued and outstanding in 2022 and 2021, respectively, including shares in treasury of 3,527,821 in 2022 and 3,135,738 in 2021
267,850  265,561 
Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2022 and 2021, including shares in treasury of 1,001,714 in 2022 and 2021
3,184  3,184 
Accumulated deficit (50,446) (45,565)
Accumulated other comprehensive income (loss):    
Net unrealized gains (losses) on fixed maturity securities, net of tax (122,948) 117,492 
Treasury stock, at cost (21,401) (20,101)
Total stockholders' equity 76,239  320,571 
Total liabilities and stockholders' equity $ 1,618,945  1,854,511 

See accompanying Notes to Consolidated Financial Statements.


June 30, 2022 | 10-Q 3



CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except per share amounts)
2022 2021 2022 2021
Revenues:  
Premiums:    
Life insurance $ 40,761  41,438  78,507  79,080 
Accident and health insurance 280  291  566  634 
Property insurance 1,183  1,097  2,515  2,144 
Net investment income 15,892  15,320  31,379  30,564 
Investment related gains (losses), net (5,016) 4,859  (5,598) 5,151 
Other income 634  553  1,722  1,468 
Total revenues 53,734  63,558  109,091  119,041 
Benefits and Expenses:    
Insurance benefits paid or provided:    
Claims and surrenders 27,097  29,296  55,531  59,885 
Increase in future policy benefit reserves 9,378  6,287  15,947  11,519 
Policyholders' dividends 1,515  1,475  2,868  2,781 
Total insurance benefits paid or provided 37,990  37,058  74,346  74,185 
Commissions 8,924  8,801  16,597  16,958 
Other general expenses 10,400  11,503  21,430  22,885 
Capitalization of deferred policy acquisition costs (6,184) (5,787) (10,965) (10,772)
Amortization of deferred policy acquisition costs 5,970  6,074  11,787  12,257 
Amortization of cost of insurance acquired 263  309  499  676 
Total benefits and expenses 57,363  57,958  113,694  116,189 
Income (loss) before federal income tax (3,629) 5,600  (4,603) 2,852 
Federal income tax expense (benefit) (81) 578  278  1,403 
Net income (loss) (3,548) 5,022  (4,881) 1,449 
Per Share Amounts:    
Basic and diluted earnings (losses) per share of Class A common stock (0.07) 0.10  (0.10) 0.03 
Basic and diluted earnings (losses) per share of Class B common stock   0.05    0.01 
Other Comprehensive Income (Loss):    
Unrealized gains (losses) on fixed maturity securities:    
Unrealized holding gains (losses) arising during period (120,934) 31,756  (254,276) (24,142)
Reclassification adjustment for losses (gains) included in net income (loss) (24) 46  35  11 
Unrealized gains (losses) on fixed maturity securities, net (120,958) 31,802  (254,241) (24,131)
Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities (4,735) (346) (13,801) 239 
Other comprehensive income (loss) (116,223) 32,148  (240,440) (24,370)
Total comprehensive income (loss) $ (119,771) 37,170  (245,321) (22,921)
See accompanying Notes to Consolidated Financial Statements.

June 30, 2022 | 10-Q 4



CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
  Common Stock Accumulated
deficit
Accumulated other
comprehensive
 income (loss)
Treasury
stock
Total
Stock-
holders'
equity
(In thousands) Class A Class B
Balance at December 31, 2021 $ 265,561  3,184  (45,565) 117,492  (20,101) 320,571 
Comprehensive income (loss):
Net income (loss)     (1,333)     (1,333)
Unrealized investment gains (losses), net       (124,217)   (124,217)
Total comprehensive income (loss)     (1,333) (124,217)   (125,550)
Common stock issuance 1,788          1,788 
Stock-based compensation 93          93 
Balance at March 31, 2022 267,442  3,184  (46,898) (6,725) (20,101) 196,902 
Comprehensive income (loss):            
Net income (loss)     (3,548)     (3,548)
Unrealized investment gains (losses), net       (116,223)   (116,223)
Total comprehensive income (loss)     (3,548) (116,223)   (119,771)
Common stock issuance 455          455 
Acquisition of treasury stock         (1,300) (1,300)
Stock-based compensation (47)         (47)
Balance at June 30, 2022 $ 267,850  3,184  (50,446) (122,948) (21,401) 76,239 


Balance at December 31, 2020 $ 262,869  3,184  (82,352) 128,255  (11,011) 300,945 
Comprehensive income (loss):
Net income (loss) —  —  (3,573) —  —  (3,573)
Unrealized investment gains (losses), net —  —  —  (56,518) —  (56,518)
Total comprehensive income (loss) —  —  (3,573) (56,518) —  (60,091)
Stock-based compensation (14) —  —  —  —  (14)
Balance at March 31, 2021 262,855  3,184  (85,925) 71,737  (11,011) 240,840 
Comprehensive income (loss):            
Net income (loss) —  —  5,022  —  —  5,022 
Unrealized investment gains (losses), net —  —  —  32,148  —  32,148 
Total comprehensive income (loss) —  —  5,022  32,148  —  37,170 
Acquisition of treasury stock —  —  —  —  (9,090) (9,090)
Stock-based compensation 205  —  —  —  —  205 
Balance at June 30, 2021 $ 263,060  3,184  (80,903) 103,885  (20,101) 269,125 

See accompanying Notes to Consolidated Financial Statements.

June 30, 2022 | 10-Q 5



CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

Six Months Ended June 30,
(In thousands)
2022 2021
Cash flows from operating activities:  
Net income (loss) $ (4,881) 1,449 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Investment related (gains) losses on sale of investments and other assets 5,598  (5,151)
Net deferred policy acquisition costs 822  1,485 
Amortization of cost of insurance acquired 499  676 
Depreciation 288  761 
Amortization of premiums and discounts on investments 2,658  2,715 
Stock-based compensation 150  306 
Deferred federal income tax expense (benefit) 238  (141)
Change in:    
Accrued investment income (300) (164)
Reinsurance recoverable 2,113  931 
Due premiums 1,210  1,973 
Future policy benefit reserves 15,861  11,432 
Other policyholders' liabilities (571) 6,891 
Federal income tax payable (255) 1,555 
Commissions payable and other liabilities 246  (14,494)
Other, net (1,329) (1,246)
Net cash provided by (used in) operating activities 22,347  8,978 
Cash flows from investing activities:    
Purchases of fixed maturity securities, available-for-sale (64,689) (48,106)
Sales of fixed maturity securities, available-for-sale 28,828  7,254 
Maturities and calls of fixed maturity securities, available-for-sale 18,234  29,574 
Principal payments on mortgage loans 95 
(Increase) decrease in policy loans, net 1,721  2,697 
Sales of other long-term investments 2,699  17,341 
Purchases of other long-term investments (14,746) (12,203)
Purchases of property and equipment (51) (773)
Purchases of short-term investments (5) — 
Net cash provided by (used in) investing activities (27,914) (4,211)
See accompanying Notes to Consolidated Financial Statements.

June 30, 2022 | 10-Q 6


CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Unaudited)
Six Months Ended June 30,
(In thousands)
2022 2021
Cash flows from financing activities:    
Annuity deposits $ 4,160  4,793 
Annuity withdrawals (4,319) (4,113)
Acquisition of treasury stock (1,300) (9,090)
Issuance of common stock 2,244  — 
Other (105) (363)
Net cash provided by (used in) financing activities 680  (8,773)
Net increase (decrease) in cash and cash equivalents (4,887) (4,006)
Cash and cash equivalents at beginning of year 27,294  34,131 
Cash and cash equivalents at end of period $ 22,407  30,125 


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended June 30, 2022 and 2021, various fixed maturity issuers exchanged securities with book values of $6.1 million and $6.4 million, respectively, for securities of equal value.

The Company had $3.3 million net unsettled security trades at June 30, 2022 and $0.9 million at June 30, 2021.

The Company recognized right-of-use assets of $0.4 million in exchange for new operating lease liabilities during the six months ended June 30, 2022 and none during the six months ended June 30, 2021.


See accompanying Notes to Consolidated Financial Statements.


June 30, 2022 | 10-Q 7



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" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA"), CICA Life Ltd. ("CICA International"), Citizens National Life Insurance Company ("CNLIC"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC") and Computing Technology, Inc. ("CTI"). All significant inter-company accounts and transactions have been eliminated. Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company", "it", "we", "us" or "our".

The consolidated balance sheet as of June 30, 2022, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and six months ended June 30, 2022 and June 30, 2021 and the consolidated statements of cash flows for the six months ended June 30, 2022 and June 30, 2021 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at June 30, 2022 and for comparative periods have been made. 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, 2021 ("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.

Our Life Insurance segment operates through CICA International, CICA and CNLIC. Our international life insurance business, which operates through CICA International, issues U.S. dollar-denominated endowment contracts internationally, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance in U.S. dollar-denominated amounts sold 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 utilize rider benefits to provide additional increasing or decreasing coverage and annuity benefits to enhance accumulations. Our domestic life insurance business operates through CICA and CNLIC. CICA issues credit life and disability policies and CNLIC issues ordinary whole life policies mainly in Texas and Florida and both companies service whole life and accident and health policies primarily in the Southern U.S., Midwest and Mountain West.

Our Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.  Our products in this segment consist primarily of small face amount ordinary whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs as well as critical illness and property insurance policies, which cover dwelling and contents.

CTI provides data processing systems and services to the Company.

We converted the small block of ordinary whole life policies of CNLIC from a legacy platform to our new actuarial valuation software solution which provides enhanced modeling capabilities as of April 1, 2021. The impact of this system conversion reflected in the accompanying consolidated financial statements as of and for the three and six months ended June 30, 2021 was an increase to pretax income of $0.7 million consisting of a reduced increase in future policy benefit reserves of $0.8 million and increased amortization of deferred policy acquisition costs of $0.1 million.


June 30, 2022 | 10-Q 8



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 the 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 from those estimates.

Significant estimates include those used in the evaluation of credit allowances on fixed maturity securities, actuarially determined assets and liabilities and assumptions and valuation allowance on deferred tax assets.  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 our significant accounting policies, see Part IV, Item 15, Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K, which should be read in conjunction with these accompanying consolidated financial statements.

(2) ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS NOT YET ADOPTED

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. This ASU amends four key areas of the accounting and impacts disclosures for long-duration insurance and investment contracts:

Requires updated assumptions for liability measurement. Assumptions used to measure the liability for traditional insurance contracts, which are typically determined at contract inception, will now be reviewed at least annually, and, if there is a change, updated, with the effect recorded in net income;
Standardizes the liability discount rate. The liability discount rate will be a market-observable discount rate (upper-medium grade fixed-income instrument yield), with the effect of rate changes recorded in other comprehensive income;
Provides greater consistency in measurement of market risk benefits. The two previous measurement models have been reduced to one measurement model (fair value), resulting in greater uniformity across similar market-based benefits and better alignment with the fair value measurement of derivatives used to hedge capital market risk;
Simplifies amortization of deferred acquisition costs ("DAC"). Previous earnings-based amortization methods have been replaced with a more level amortization basis; and
Requires enhanced disclosures. The new disclosures include rollforwards and information about significant assumptions and the effects of changes in those assumptions.

For calendar-year public companies, the changes will be effective on January 1, 2023, however, early adoption is permitted. We will adopt this ASU effective January 1, 2023 with a transition date of January 1, 2021 using a modified retrospective approach. We continue to make progress in our implementation process that includes, but is not limited to, making significant accounting policy decisions, employing appropriate internal controls, building and updating actuarial models and systems, revising reporting processes and developing informative qualitative and quantitative disclosures. In 2022, we have begun the process of calculating our transition adjustments and preparing for the restatement of applicable periods. We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations and will be able to better assess the effects as we progress with our implementation efforts. While it is not possible to estimate the expected impact of adoption at this

June 30, 2022 | 10-Q 9



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
time, the Company believes there is a reasonable possibility that implementing this ASU may result in a material impact to accumulated other comprehensive income and future earnings patterns.

No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.

(3) SEGMENT INFORMATION

The Company has two reportable segments:  Life Insurance and Home Service Insurance.  Our Life Insurance segment primarily issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance, to non-U.S. residents through CICA International.  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 coverage and annuity benefits to enhance accumulations. CICA issues credit life, credit disability and accident and health related policies throughout the Midwest and southern U.S. CNLIC issues ordinary whole life and critical illness products in Florida and Texas.

Our Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.  Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders.  Our Home Service Insurance segment also sells property insurance policies in Louisiana and Arkansas.

The Life Insurance and Home Service Insurance portions of the company constitute separate businesses. The Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions that are included in the tables presented below to properly reconcile the segment information with the consolidated financial statements of the Company. The Company's Other Non-Insurance Enterprises is the only reportable difference between segments and consolidated operations.

The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those used in the preparation of the consolidated financial statements.  The Company evaluates profit and loss performance based on U.S. GAAP income or loss before federal income taxes for its two reportable segments.

June 30, 2022 | 10-Q 10



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated
Three Months Ended June 30, 2022
(In thousands)
Revenues:        
Premiums $ 29,834  12,390    42,224 
Net investment income 12,347  3,283  262  15,892 
Investment related gains (losses), net (3,984) (925) (107) (5,016)
Other income 633  1    634 
Total revenues 38,830  14,749  155  53,734 
Benefits and expenses:      
Insurance benefits paid or provided:        
Claims and surrenders 21,568  5,529    27,097 
Increase in future policy benefit reserves 7,576  1,802    9,378 
Policyholders' dividends 1,509  6    1,515 
Total insurance benefits paid or provided 30,653  7,337    37,990 
Commissions 4,792  4,132    8,924 
Other general expenses 5,358  3,515  1,527  10,400 
Capitalization of deferred policy acquisition costs (4,307) (1,877)   (6,184)
Amortization of deferred policy acquisition costs 4,613  1,357    5,970 
Amortization of cost of insurance acquired 84  179    263 
Total benefits and expenses 41,193  14,643  1,527  57,363 
Income (loss) before federal income tax expense $ (2,363) 106  (1,372) (3,629)

June 30, 2022 | 10-Q 11



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated
Six Months Ended June 30, 2022
(In thousands)
Revenues:        
Premiums $ 56,765  24,823    81,588 
Net investment income 24,318  6,527  534  31,379 
Investment related gains (losses), net (4,277) (1,167) (154) (5,598)
Other income 1,721  1    1,722 
Total revenues 78,527  30,184  380  109,091 
Benefits and expenses:      
Insurance benefits paid or provided:        
Claims and surrenders 43,026  12,505    55,531 
Increase in future policy benefit reserves 12,706  3,241    15,947 
Policyholders' dividends 2,859  9    2,868 
Total insurance benefits paid or provided 58,591  15,755    74,346 
Commissions 8,598  7,999    16,597 
Other general expenses 11,049  7,865  2,516  21,430 
Capitalization of deferred policy acquisition costs (7,613) (3,352)   (10,965)
Amortization of deferred policy acquisition costs 9,095  2,692    11,787 
Amortization of cost of insurance acquired 140  359    499 
Total benefits and expenses 79,860  31,318  2,516  113,694 
Income (loss) before federal income tax expense $ (1,333) (1,134) (2,136) (4,603)

June 30, 2022 | 10-Q 12



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated
Three Months Ended June 30, 2021
(In thousands)
Revenues:        
Premiums $ 30,138  12,688  —  42,826 
Net investment income 11,879  3,243  198  15,320 
Investment related gains (losses), net 4,644  206  4,859 
Other income 553  —  —  553 
Total revenues 47,214  16,137  207  63,558 
Benefits and expenses:        
Insurance benefits paid or provided:        
Claims and surrenders 23,531  5,765  —  29,296 
Increase in future policy benefit reserves 4,054  2,233  —  6,287 
Policyholders' dividends 1,466  —  1,475 
Total insurance benefits paid or provided 29,051  8,007  —  37,058 
Commissions 4,398  4,403  —  8,801 
Other general expenses 5,147  4,084  2,272  11,503 
Capitalization of deferred policy acquisition costs (3,816) (1,971) —  (5,787)
Amortization of deferred policy acquisition costs 5,200  874  —  6,074 
Amortization of cost of insurance acquired 107  202  —  309 
Total benefits and expenses 40,087  15,599  2,272  57,958 
Income (loss) before federal income tax expense $ 7,127  538  (2,065) 5,600 

June 30, 2022 | 10-Q 13



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated
Six Months Ended June 30, 2021
(In thousands)
Revenues:        
Premiums $ 57,201  24,657  —  81,858 
Net investment income 23,477  6,588  499  30,564 
Investment related gains (losses), net 4,536  429  186  5,151 
Other income 1,466  —  1,468 
Total revenues 86,680  31,676  685  119,041 
Benefits and expenses:        
Insurance benefits paid or provided:        
Claims and surrenders 46,801  13,084  —  59,885 
Increase in future policy benefit reserves 7,712  3,807  —  11,519 
Policyholders' dividends 2,762  19  —  2,781 
Total insurance benefits paid or provided 57,275  16,910  —  74,185 
Commissions 8,629  8,329  —  16,958 
Other general expenses 10,373  7,878  4,634  22,885 
Capitalization of deferred policy acquisition costs (7,377) (3,395) —  (10,772)
Amortization of deferred policy acquisition costs 10,548  1,709  —  12,257 
Amortization of cost of insurance acquired 211  465  —  676 
Total benefits and expenses 79,659  31,896  4,634  116,189 
Income (loss) before federal income tax expense $ 7,021  (220) (3,949) 2,852 


June 30, 2022 | 10-Q 14



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4) 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. The two 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. In April 2021, we repurchased all of the outstanding Class B common stock, which is now classified as treasury stock. As a result, all of the directors are elected by the holders of the Class A common stock. Citizens has never issued any preferred stock.

A summary of the change in gross number of shares of Class A and Class B common stock and treasury stock is as follows:
Six Months Ended June 30,
2022 2021
(In thousands) Common Stock Treasury Common Stock Treasury
Class A Class B Stock Class A Class B Stock
Balance at beginning of year 53,170  1,002  4,138  52,654  1,002  3,136 
Stock issued under stock investment plan 475      —  —  — 
Stock issued for compensation 81      112  —  — 
Acquisition of Class A shares     392  —  —  — 
Acquisition of Class B shares       —  —  1,002 
Other share issuance 16      —  —  — 
Balance at end of period 53,742  1,002  4,530  52,766  1,002  4,138 


June 30, 2022 | 10-Q 15



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings (loss) per share.

Three Months Ended June 30, 2022 2021
(In thousands, except per share amounts)
Basic and diluted earnings (loss) per share:    
Numerator:    
Net income (loss) $ (3,548) 5,022 
Net income (loss) allocated to Class A common stock $ (3,548) 5,010 
Net income (loss) allocated to Class B common stock   12 
Net income (loss) $ (3,548) 5,022 
Denominator:    
Weighted average shares of Class A outstanding - basic 50,373  49,602 
Weighted average shares of Class A outstanding - diluted 51,065  50,192 
Weighted average shares of Class B outstanding - basic and diluted   250 
Basic and diluted earnings (loss) per share of Class A common stock $ (0.07) 0.10 
Basic and diluted earnings (loss) per share of Class B common stock   0.05 

Six Months Ended June 30, 2022 2021
(In thousands, except per share amounts)
Basic and diluted earnings (loss) per share:
Numerator:
Net income (loss) $ (4,881) 1,449 
Net income (loss) allocated to Class A common stock $ (4,881) 1,441 
Net income (loss) allocated to Class B common stock  
Net income (loss) $ (4,881) 1,449 
Denominator:
Weighted average shares of Class A outstanding - basic 50,278  49,578 
Weighted average shares of Class A outstanding - diluted 50,970  50,145 
Weighted average shares of Class B outstanding - basic and diluted   572 
Basic and diluted earnings (loss) per share of Class A common stock $ (0.10) 0.03 
Basic and diluted earnings (loss) per share of Class B common stock   0.01 

CAPITAL AND SURPLUS

Each of our regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements. These include capital requirements imposed by the U.S. National Association of Insurance Commissioners ("NAIC") and the Bermuda Monetary Authority ("BMA"). All insurance subsidiaries exceeded the minimum capital requirements at June 30, 2022.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation or excess risk, the BMA has established a threshold capital level (termed the Target Capital Level ("TCL")), which is set at 120% of a

June 30, 2022 | 10-Q 16



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
company’s enhanced capital requirement. The TCL serves as an early warning tool for the BMA. As of June 30, 2022, CICA International was above the TCL threshold. At the request of the BMA, on April 15, 2021, Citizens and CICA International entered into a Keep Well Agreement. The Keep Well Agreement requires Citizens to contribute up to $10 million in capital to CICA International as necessary to ensure that CICA International has a minimum capital level of 120% (equal to the TCL). Since CICA International’s capital level currently exceeds 120%, Citizens is not currently required to make a capital contribution.

(5) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 87.4% of total cash and invested assets at June 30, 2022, as shown below.

Carrying Value
(In thousands, except for %)
June 30, 2022 December 31, 2021
Amount % Amount %
Cash and invested assets:
Fixed maturity securities $ 1,237,004  87.4  % 1,470,617  89.0  %
Equity securities 12,711  0.9  % 14,844  0.9  %
Policy loans 78,586  5.5  % 80,307  4.9  %
Other long-term investments 66,002  4.7  % 57,399  3.5  %
Cash and cash equivalents 22,407  1.5  % 27,294  1.7  %
Total cash and invested assets $ 1,416,710  100.0  % 1,650,461  100.0  %

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
June 30, 2022
(In thousands)
Fixed maturity securities:        
Available-for-sale:        
U.S. Treasury securities $ 9,471  458  7  9,922 
U.S. Government-sponsored enterprises 3,449  485    3,934 
States and political subdivisions 359,199  5,913  21,723  343,389 
Corporate:
Financial 229,937  675  29,961  200,651 
Consumer 238,842  1,781  31,996  208,627 
Utilities 110,093  191  17,654  92,630 
Energy 75,292  21  8,884  66,429 
All other 187,706  869  22,150  166,425 
Residential mortgage-backed 111,950  197  2,133  110,014 
Asset-backed 36,364  28  1,513  34,879 
Foreign governments 101  3    104 
Total fixed maturity securities $ 1,362,404  10,621  136,021  1,237,004 


June 30, 2022 | 10-Q 17



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2021
(In thousands)
Fixed maturity securities:        
Available-for-sale:        
U.S. Treasury securities $ 9,515  1,097  10,611 
U.S. Government-sponsored enterprises 3,463  996  —  4,459 
States and political subdivisions 356,594  28,056  692  383,958 
Corporate:
Financial 213,652  22,477  172  235,957 
Consumer 219,223  23,658  900  241,981 
Utilities 105,738  7,358  801  112,295 
Energy 76,989  7,334  68  84,255 
All other 196,403  22,497  380  218,520 
Residential mortgage-backed 117,755  16,046  133,795 
Asset-backed 44,322  368  14  44,676 
Foreign governments 101  —  110 
Total fixed maturity securities $ 1,343,755  129,896  3,034  1,470,617 
 
Most of the Company's equity securities are diversified stock and bond mutual funds.
 
Fair Value
(In thousands)
June 30, 2022 December 31, 2021
Equity securities:  
Stock mutual funds $ 3,148  3,571 
Bond mutual funds 4,407  5,060 
Common stock 981  990 
Non-redeemable preferred stock 11  161 
Non-redeemable preferred stock fund 4,164  5,062 
Total equity securities $ 12,711  14,844 

VALUATION OF INVESTMENTS

Available-for-sale ("AFS") fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income. The Company recognized net investment related losses of $1.2 million and $2.0 million on equity securities held for the three and six months ended June 30, 2022 and gains of $0.3 million and $0.6 million for the same periods ended June 30, 2021, respectively.

The Company considers several factors in its review and evaluation of individual investments, using the process described in Part IV, Item 15, Note 2. Investments in the notes to the consolidated financial statements of our Form 10-K to determine whether a credit valuation loss exists. For the three and six months ended June 30, 2022 and 2021, the Company recorded no credit valuation losses on fixed maturity securities.


June 30, 2022 | 10-Q 18



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables present the fair values and gross unrealized losses of fixed maturity securities that are not deemed to have credit losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position at June 30, 2022 and December 31, 2021.

June 30, 2022 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:                
Available-for-sale securities:                  
U.S. Treasury securities $ 66  7  2        66  7  2 
States and political subdivisions 149,297  21,429  171  720  294  2  150,017  21,723  173 
Corporate:
Financial 181,314  29,539  218  887  422  1  182,201  29,961  219 
Consumer 175,856  30,776  213  2,842  1,220  7  178,698  31,996  220 
Utilities 83,987  15,311  132  4,986  2,343  5  88,973  17,654  137 
Energy 64,778  8,884  77        64,778  8,884  77 
All Other 146,713  21,215  171  2,427  935  1  149,140  22,150  172 
Residential mortgage-backed 82,801  2,133  72        82,801  2,133  72 
Asset-backed 30,469  1,436  35  1,643  77  2  32,112  1,513  37 
Total fixed maturity securities $ 915,281  130,730  1,091  13,505  5,291  18  928,786  136,021  1,109 

December 31, 2021 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:                
Available-for-sale securities:                  
U.S. Treasury securities $ 72  —  —  —  72 
States and political subdivisions 21,715  692  15  —  —  —  21,715  692  15 
Corporate:
Financial 8,059  86  15  1,227  86  9,286  172  16 
Consumer 29,494  777  28  2,419  123  31,913  900  29 
Utilities 19,072  401  14  4,523  400  23,595  801  18 
Energy 7,381  68  —  —  —  7,381  68 
All Other 14,312  380  16  —  —  —  14,312  380  16 
Residential mortgage-backed 1,084  —  —  —  1,084 
Asset-backed 9,078  12  11  663  9,741  14  12 
Total fixed maturity securities $ 110,267  2,423  115  8,832  611  119,099  3,034  122 

In each category of our fixed maturity securities described above, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. These unrealized losses on fixed maturity securities are due to noncredit-related factors, including widening credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of

June 30, 2022 | 10-Q 19



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. As of June 30, 2022 and December 31, 2021, 97.6% and 98.0%, respectively, of the fair value of our fixed maturity securities portfolio was rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an ongoing basis as future information may become available which could result in an allowance being recorded.

The amortized cost and fair value of fixed maturity securities at June 30, 2022 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.

June 30, 2022 Amortized
Cost
Fair
Value
(In thousands)
Fixed maturity securities:    
Due in one year or less $ 34,225  34,518 
Due after one year through five years 116,768  117,642 
Due after five years through ten years 214,234  210,114 
Due after ten years 997,177  874,730 
Total fixed maturity securities $ 1,362,404  1,237,004 

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.  

Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 2022 2021 2022 2021
Fixed maturity securities, available-for-sale:
Proceeds $ 27,728  —  28,828  7,254 
Gross realized gains $ 101  —  101  100 
Gross realized losses $ (102) —  (102)

The Company sold 16 and 17 AFS fixed maturity securities during the three and six months ended June 30, 2022 and 0 and 18 during the three and six months ended June 30, 2021, respectively.

(6) 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.  We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through comprehensive income (loss). We also report our equity securities and other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations.

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

June 30, 2022 | 10-Q 20



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 markets that are not active; and model-derived valuations whose inputs or whose significant value drivers are observable.
Level 3 - Instruments whose significant value drivers are unobservable.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments.

Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes.  These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments.  All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace.  Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities.

Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information.  We have no investments in this category.


June 30, 2022 | 10-Q 21



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables set forth our assets that are measured at fair value on a recurring basis as of the dates indicated.

June 30, 2022 Level 1 Level 2 Level 3 Total
Fair Value
(In thousands)
Financial Assets
Fixed maturity securities available-for-sale:        
U.S. Treasury and U.S. Government-sponsored enterprises $ 9,922  3,934    13,856 
States and political subdivisions   343,389    343,389 
Corporate 48  734,714    734,762 
Residential mortgage-backed   110,014    110,014 
Asset-backed   34,879    34,879 
Foreign governments   104    104 
Total fixed maturity securities available-for-sale 9,970  1,227,034    1,237,004 
Equity securities:        
Stock mutual funds 3,148      3,148 
Bond mutual funds 4,407      4,407 
Common stock 981      981 
Non-redeemable preferred stock 11      11 
Non-redeemable preferred stock fund 4,164      4,164 
Total equity securities 12,711      12,711 
Other long-term investments (1)
      64,732 
Total financial assets $ 22,681  1,227,034    1,314,447 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

June 30, 2022 | 10-Q 22



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2021 Level 1 Level 2 Level 3 Total
Fair Value
(In thousands)
Financial Assets
Fixed maturity securities available-for-sale:        
U.S. Treasury and U.S. Government-sponsored enterprises $ 10,611  4,459  —  15,070 
States and political subdivisions —  383,958  —  383,958 
Corporate 51  892,957  —  893,008 
Residential mortgage-backed —  133,795  —  133,795 
Asset-backed —  44,676  —  44,676 
Foreign governments —  110  —  110 
Total fixed maturity securities available-for-sale 10,662  1,459,955  —  1,470,617 
Equity securities:        
Stock mutual funds 3,571  —  —  3,571 
Bond mutual funds 5,060  —  —  5,060 
Common stock 990  —  —  990 
Non-redeemable preferred stock 161  —  —  161 
Non-redeemable preferred stock fund 5,062  —  —  5,062 
Total equity securities 14,844  —  —  14,844 
Other long-term investments (1)
—  —  —  56,038 
Total financial assets $ 25,506  1,459,955  —  1,541,499 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
 
FINANCIAL INSTRUMENTS VALUATION

FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE

Fixed maturity securities, available-for-sale.  At June 30, 2022, fixed maturity securities, valued using a third-party pricing source, totaled $1.2 billion for Level 2 assets and comprised 93.3% of total reported fair value of our 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 assets at June 30, 2022. For the six months ended June 30, 2022, 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 assets as their fair values are based upon quoted market prices.

Limited partnerships. The Company considers the net asset value ("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 tables include 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. Changes in the NAV of our limited partnerships are recorded through net income. The Company recognized net investment related losses of $4.4 million and $5.2 million on limited partnerships held for the three and six months ended June 30, 2022 and net realized gains of $4.0 million and $4.5 million for the three and six months ended June 30,

June 30, 2022 | 10-Q 23



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2021, respectively. These investments are included in other long-term investments on the consolidated balance sheets.

June 30, 2022 December 31, 2021
Fair Value
 Using NAV Per Share
Unfunded Commit-
ments
Range
(in years)
Fair Value
 Using NAV Per Share
Unfunded Commit-
ments
Range
(in years)
(In thousands, except years)
Limited partnerships
Middle market Investments in privately-originated, performing senior secured debt primarily in North America-based companies $ 31,776  8,326  5 $ 21,947  18,712  10
Global equity fund Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth 8,707    0 10,607  —  0
Late-stage growth Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale 19,314  27,256 
5 to 7
20,468  4,459  6
Infrastructure Investments in climate infrastructure assets, focusing on renewable power generation in wind and solar energy 4,935  14,988  11 3,016  16,653  12
Total limited partnerships $ 64,732  50,570  $ 56,038  39,824 

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the partnerships 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. The global equity fund is redeemable monthly.

We initially estimate the fair value of investments in limited partnerships by reference to the transaction price. Subsequently, we obtain the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are audited annually. We carried no limited partnership investments at cost at June 30, 2022 and December 31, 2021.

We review the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets.  Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. There were no transfers in or out of Level 3 during the six months ended June 30, 2022 or 2021.

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 fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.


June 30, 2022 | 10-Q 24



CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The carrying amount and fair value for the financial assets and liabilities on the consolidated balance sheets not otherwise disclosed for the periods indicated are as follows:

  June 30, 2022 December 31, 2021
(In thousands) Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Financial Assets:        
Policy loans $ 78,586  78,586  80,307  80,307 
Commercial mortgage loan 1,000  1,000  1,000  1,000 
Residential mortgage loans 52  54  148  169 
Cash and cash equivalents 22,407  22,407  27,294  27,294 
Financial Liabilities:        
Annuity - investment contracts 65,616  62,181  64,384  72,352 

Policy loans. Policy loans had a weighted average annual interest rate of 7.7% at June 30, 2022 and December 31, 2021 and no specified maturity dates. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy.

Commercial mortgage loan. We financed $1.0 million of the sale of our training facility at a 6.0% interest rate. The loan is due in less than 1 year. Due to the short-term nature of the loan, the carrying value approximates fair value and is considered a Level 3 asset in the fair value hierarchy.

Residential mortgage loans.