-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CFX4n5DMjN+PAHoPU3yoU+Qg8ME2wZI8wqC49yvO0AK9YTeu/tEUPG8KK+rLIAA6 NBK9YF1XGSOFgQGuFH6ZxA== 0000024090-97-000007.txt : 19970515 0000024090-97-000007.hdr.sgml : 19970515 ACCESSION NUMBER: 0000024090-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIZENS INC CENTRAL INDEX KEY: 0000024090 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 840755371 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13004 FILM NUMBER: 97603212 BUSINESS ADDRESS: STREET 1: P O BOX 149151 CITY: AUSTIN STATE: TX ZIP: 78714 BUSINESS PHONE: 5128377100 MAIL ADDRESS: STREET 1: P O BOX 149151 CITY: AUSTIN STATE: TX ZIP: 78714 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL INVESTORS LIFE INC DATE OF NAME CHANGE: 19881222 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X]Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended March 31, 1997 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: 0-16509 CITIZENS, INC. (Exact name of registrant as specified in its charter) Colorado 84-0755371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 East Anderson Lane, Austin, Texas 78752 (Address of principal executive offices) (Zip Code) (512) 837-7100 (Registrant's telephone number, including area code) 7801 North Interstate 35, Austin, Texas 78753 (Former name, former address and former fiscal year, if changed since last report.) 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 [ ] No As of March 31, 1997, Registrant had 19,893,759 shares of Class A common stock, No Par Value, outstanding and 621,049 shares of Class B common stock, No Par Value, outstanding. CITIZENS, INC. AND SUBSIDIARIES INDEX Page Number Part I. Financial Information Item 1. Financial Statements Balance sheets, March 31, 1997 (Unaudited) 3 and December 31, 1996 Statements of Operations, Three-Months Ended March 31, 1997 and 1996 (Unaudited) 5 Statements of Cash Flows, Three-Months Ended March 31, 1997 and 1996 (Unaudited) 6 Notes to Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations 90 Part Other Information 1517 II. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 and December 31, 1996 (Unaudited) December March 31, 31, 1997 1996 Assets Investments: Fixed maturities held for investment, at amortized cost (market $5,054,000 in 1997 and $5,217,000 in 1996) 5,624,725 5,627,256 Fixed maturities available for sale, at lower of cost or market (cost $109,804,415 in 1997 and $110,759,634 in 1996 108,697,000 109,723,050 Equity securities, at market (cost $89,580 in 1997 and 1996) 50,155 50,155 Mortgage loans on real estate (net of reserve of $50,000 in 1997 and 1996) 1,566,395 1,672,522 Policy loans 19,828,718 19,819,125 Guaranteed student loans (net of reserve of $10,000 in 1997 and 1996) 304,845 298,683 Other long-term investments 939,519 920,345 Short-term investments 2,050,000 200,000 Total investments 139,061,357 138,311,136 Cash 3,979,597 6,085,383 Prepaid reinsurance 1,717,236 0 Reinsurance recoverable 2,680,945 1,773,541 Other receivables 661,136 594,088 Accrued investment income 1,367,170 1,682,084 Federal income tax receivable 0 357,608 Deferred policy acquisition costs 36,650,734 36,933,753 Cost of insurance acquired 7,032,582 7,219,594 Excess of cost over net assets acquired 14,291,316 13,677,800 Other intangible assets 1,586,950 1,633,625 Property, plant and equipment 5,340,300 5,442,578 Other assets 1,085,109 743,636 Total assets 215,454,432 214,454,826 (Continued) CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 and December 31, 1996 (Unaudited) December March 31, 31, 1997 1996 Liabilities and Stockholders' Equity Liabilities: Future policy benefit reserves 134,616,904 132,401,079 Dividend accumulations 3,951,378 3,961,603 Premium deposits 1,767,975 1,803,358 Policy claims payable 2,993,345 2,966,818 Other policyholders' funds 1,931,389 1,958,992 Total policy liabilities 145,260,991 143,091,850 Other liabilities 1,731,041 2,052,001 Commissions payable 674,085 928,288 Notes payable 478,668 489,166 Deferred Federal income tax 125,729 842,250 Federal income tax payable 103,351 0 Amounts held on deposit 176,103 168,255 Total liabilities 148,549,968 147,571,810 Stockholders' Equity: Common stock: Class A, no par value, 50,000,000 shares authorized, 21,838,494 shares issued in 1997 and 21,761,894 in 1996, including shares in treasury of 1,944,735 in 1997 47,340,175 45,941,552 and 2,077,947 in 1996 Class B, no par value, 1,000,000 shares authorized, 621,049 shares issued and outstanding in 1997 and 1996 283,262 283,262 Unrealized loss on investments (2,099,312) (710,166) Retained earnings 23,308,949 23,430,634 68,833,073 68,945,282 Treasury stock, at cost (1,928,609) (2,062,266) Total stockholders' equity 66,904,464 66,883,016 Commitments and contingencies Total liabilities and stockholders' equity 215,454,432 214,454,826 CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three-Months Ended March 31, 1997 and 1996 (Unaudited) Three-months ended March 31, 1997 1996 Revenues: Premiums 11,510,447 11,521,304 Annuity and Universal life considerations 104,268 95,148 Net investment income 2,353,826 2,078,688 Other income 63,979 12,635 Realized gains (losses) on investments 117,840 (8,928) Interest expense (10,365) (28,150) 14,139,994 13,670,697 Benefits and expenses: Insurance benefits paid or provided: Increase in future policy benefit reserves 1,427,297 2,230,975 Policyholders' dividends 479,687 450,241 Claims and surrenders 7,019,684 5,529,339 Annuity expenses 185,932 230,448 9,112,601 8,441,003 Commissions 2,288,367 2,643,086 Underwriting, acquisition and insurance expenses 2,226,492 1,458,497 Capitalization of deferred policy acquisition costs (2,062,089) (2,489,597) Amortization of deferred policy acquisition costs 2,345,108 2,380,935 Amortization of cost of insurance acquired and excess of cost over net assets acquired 420,171 501,928 14,330,650 12,935,852 Income (loss) before federal income tax (190,656) $734,845 Federal income tax: Federal income tax expense (benefit) (68,972) 249,848 Net Income (Loss) (121,684) $484,997 Per Share Amounts: Net income (loss) per share of $(0.01) $0.03 common stock Weighted average shares outstanding 19,849,662 19,602,887 CITIZENS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three-Months Ended March 31, 1997 and 1996 (Unaudited) Three-months ended March 31, 1997 1996 Cash flows from operating activities: Net gain (loss) (121,684) 484,997 Adjustments to reconcile net gain to net cash provided by operating activities: Accrued investment income 314,914 291,232 Deferred policy acquisition costs 283,019 (108,662) Amortization of cost of insurance acquired and excess cost over net assets acquired 420,171 501,928 Prepaid reinsurance (1,717,236) (1,747,763) Reinsurance recoverable (907,404) 167,654 Other receivables (67,048) 416,766 Property, plant and equipment 102,278 (175,906) Future policy benefit reserves 2,215,825 3,079,677 Other policy liabilities (46,684) (56,597) Commissions payable and other liabilities (1,302,182) (2,304,783) Amounts received (paid out) as trustee 7,848 (63,371) Federal income tax payable 103,351 (1,025,106) Other, net 981,785 (739,506) Net cash provided (used) by operating activities 266,953 (1,279,440) Cash flows from investing activities: Maturity of fixed maturities 966,518 2,088,037 Sale of fixed maturities available for sale 7,841,188 9,921,092 Purchase of fixed maturities available for sale (9,724,071) (14,321,294) Principal payments on mortgage loans 106,127 68,965 Net change in guaranteed student loans (6,162) 26,638 Purchase of other long-term investments (19,174) 0 Cash from merger 0 78,436 Increase in policy loans (net) (9,593) (747,1 74) Net cash provided (used) by investing activities (845,167) (2,885,300) (Continued) CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three-Months Ended March 31, 1997 and 1996 (Unaudited) Three-months ended March 31, 1997 1996 Cash flows from financing activities: Exercise of stock options 140,500 0 Sale of stock 192,426 145,359 Repayment of note payable (10,498) (37,020) Net cash provided (used) by financing activities 322,428 108,339 Net decrease in cash and short- term investments (255,786) (4,056,401) Cash and short term investments at beginning of period 6,285,383 7,248,853 Cash and short term investments at end of period $6,029,597 $3,192,452 CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (Unaudited) (1) Financial Statements The balance sheet for March 31, 1997, the statements of operations for the three-month periods ended March 31, 1997 and 1996, and the statements of cash flows for the three-month periods then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows at March 31,1997 and for comparative periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1996 annual 10-K report filed with the Securities and Exchange Commission. The results of operations for the period ended March 31, 1997 are not necessarily indicative of the operating results for the full year. (2) Pending Merger On October 28, 1996, Citizens announced that it had signed definitive written agreements for the acquisition of American Investment Network, Inc. (American Investment), a Jackson, Mississippi, based life insurance holding company with $7.5 million in assets, $3.4 million of stockholders' equity, revenues of $3.2 million and $67 million of life insurance in force. The American Investment agreement provides that following the acquisition, American Investment shareholders will receive 1 share of Citizens Class A Common Stock for each 7.2 shares of American Investment Common Stock owned. Approximately 700,000 Class A shares are expected to be issued in connection with the transaction, which will be accounted for as a purchase. The companies will continue to operate in their respective locations under a combined management team with consolidation of computer data processing on the Citizens' system. The agreement is subject to approval by American Investment's shareholders at a meeting called for June 19, 1997. It was approved by regulatory authorities in Mississippi on April 1, 1997. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Certain statements contained in this Form 10Q are not statements of historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the "Act"), including, without limitation, the italicized statements and the statements specifically identified as forward- looking statements within this document. In addition, certain statements in future filings by the Company with the Securities and Exchange Commission, in press releases, and in oral and written statements made by or with the approval of the Company which are not statements of historical fact constitute forward- looking statements within the meaning of the Act. Examples of forward-looking statements, include, but are not limited to: (i) projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure, and other financial items, (ii) statements of plans and objectives of the Company or its management or Board of Directors including those relating to products or services, (iii) statements of future economic performance and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "may", "will" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: (i) the strength of foreign and U.S. economies in general and the strength of the local economies in which operations are conducted; (ii) the effects of and changes in trade, monetary and fiscal policies and laws; (iii) inflation, interest rates, market and monetary fluctuations and volatility; (iv) the timely development of and acceptance of new products and services and perceived overall value of these products and services by existing and potential customers; (v) changes in consumer spending, borrowing and saving habits; (vi) concentrations of business from persons residing in third world countries; (vii) acquisitions; (viii) the persistency of existing and future insurance policies sold by the Company and its subsidiaries; (ix) the dependence of the Company on its Chairman of the Board; (x) the ability to control expenses; (xi) the effect of changes in laws and regulations (including laws and regulations concerning insurance) with which the Company and its subsidiaries must comply, (xii) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board, (xiii) changes in the Company's organization and compensation plans; (xiv) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; and (xv) the success of the Company at managing the risks involved in the foregoing. Such forward-looking statements speak only as of the date on which such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events. Three-months ended March 31, 1997 and 1996 Net loss for the three-months ended March 31, 1997 was 121,684, compared to a gain of 484,997 for the same period in 1996. Revenues increased to $14,139,9949,763,884, an increase of 3.4% over the first three months of 1996 when revenues were $13,670,697. The increase in revenues was driven by a 13.2% increase in investment income. The primary reason for the loss in 1997 was a non-recurring charge of approximately $400,000 related to the acquisition of the minority interest not already owned of First American Investment Corporation for shares of the Company's stock previously held in treasury. Premium income for the first three months of 1996 was $11,510,447 compared to $11,521,304 for the same period in 1996. Production of new premiums by the agents of Citizens Insurance Company of America ("CICA") was slightly higher during the first quarter of 1996 than in the previous year. Management introduced a new line of products and an enhanced marketing self-promotion plan during mid-1996 as part of a re-emphasis of new production. During the past several years, management had not promoted new sales and recruiting so as to emphasize the growth of capital through the profitability of CICA on a statutory accounting basis. These new programs will, in the opinion of management, have considerable impact on new production once they are assimilated by the marketing force. Premium income was negatively impacted during the quarter due to the pending merger of American Liberty into CICA and the conversion of the administrative functions previously performed in Baton Rouge, Louisiana being transferred to Austin, Texas in late 1996. Additionally, management re- evaluated the commission contracts offered by American Liberty and in late 1996 notified the majority of agents writing new business that there would be a substantial reduction in the first year commission they had been receiving. Management believes that such actions will limit the production of new business by the American Liberty agents; however, the business produced will offer significantly greater opportunity for profit for the company than that previously sold. Net investment income increased 13.2% in the first three months of 1997 compared to the same period in 1996. Net investment income for the three months ended March 31, 1997 was $2,353,826 compared to $2,078,688 in 1996. This increase reflects the earnings on the growth in the Company's asset base that is occurring, as well as the higher yields that have been available in the bond market during the past year. A shift in investment strategy implemented in 1996 to shift away from U.S. Treasury instruments to government guaranteed mortgage backed securities and agency issues will, in the opinion of management continue to offer greater return with a minimum amount of additional risk. Claims and surrenders expense increased from $5,529,339 at March 31, 1996 to $7,019,684 for the same period in 1996. Death claims increased from $1,375,403 in 1997 to $804,901 in 1996. Management believes the increase in claims is a temporary situation, and not indicative of an adverse trend on the Company's international life insurance. Claims on the domestic business remained relatively stable compared to 1996. Surrender expense increased to $3,845,231 from, $2,997,205. Management constantly monitors this activity to insure that the Company's persistency is holding at levels equal to or above assumptions. The increase in the first quarter is, in management's opinion, a carryover from the impact of the termination of several well established agents during 1996. Coupons and endowments increased to $1,092,958 in 1997 from $1,074,425 in 1996. The endowment benefits are factored into the premium much like dividends and therefor, the increase does not pose a threat to future profitability. Management expects to see further increases in this category in the future. Accident and Health benefits were $490,599 in 1997, compared to $457,917 in 1996. This increase is directly related to the ALFC block of business which consists of a large block of scheduled benefit daily indemnity policies. The remaining components of claims and expenses, consisting of supplemental contracts and payments of dividends and endowments previously earned and held at interest, amounted to $215,493 in 1996, compared to $194,891 in 1996. Commission expense decreased to $2,288,367 from $2,643,086. The decrease reflects a slight decline in the amount of business issued during the quarter compared to the prior year/. Deferred policy acquisition costs capitalized in 1997 were $2,062,089 compared to $2,489,597 in the prior year. The decline is related to the relatively flat level of new sales during the quarter. Amortization of these costs was $2,345,108 for the first quarter of 1997 compared to $2,380,935 for 1996. Underwriting, acquisition and insurance expenses increased from $1,458,497 in the first quarter of 1996 to $2,226,492. The increase is primarily attributable to the absorption of the operating expenses of ALFC. Additionally, a one-time charge of approximately $400,000 was incurred during the quarter as the result of the acquisition of a 5.52% interest in First American Investment Corporation, a 94.48% subsidiary of American Liberty. Management believes such acquisition, which entailed the issuance of 133,212 shares of the Company's Class A shares previously held in treasury, will prove to be of significant benefit to the Company in the long term. The removal of First American allows the merger of American Liberty and CICA to proceed as well as remedying an unhappy block of minority holders of First American who were left without a market for their First American shares as the result of an intrastate offering that was only marginally successful. Management expects to achieve significant reductions in expenses beginning late in the second quarter of 1997 due to the execution of an agreement with Worldwide Professional Associates, Inc., an international marketing company, to manage the Company's international sales activities in exchange for an overriding commission on new sales. As a result of this agreement, the Company will eliminate approximately $900,000 of fixed overhead on an annual basis, in exchange for the variable cost of the commission override. Liquidity and Capital Resources Stockholders' equity increased to $66,904,464 at March 31, 1997 from $66,883,016 at December 31, 1996. The loss from operations, as well as a decrease in the market value of the Company's bond portfolio offset additional capital raised through the ongoing Regulation S offering, the First American acquisition and the exercise of certain stock options that had been outstanding for some time.. In May 1995 an offering under Regulation S was initiated to the Company's international policyholders. Expiring on October 31, 1997 it currently prices the shares at $7.50 and requires a three- year holding period.. As of March 31, 1997, an additional $1.1 million had been raised through the offering. Invested assets grew to $139,061,357 in 1997 from $138,311,136 at December 31, 1996. At December 31, 1996, fixed maturities have been categorized into two classifications: Fixed maturities held to maturity, which are valued at amortized cost, and fixed maturities available for sale which are valued at market. The Company does not have a plan to make material dispositions of fixed maturities during 1997; however, because of continued uncertainty regarding long-term interest rates, management cannot rule out sales during 1997. Fixed maturities held to maturity, amounting to $5,624,725 consist primarily of U.S. Treasury securities. Management has the intent and believes the Company has the ability to hold the securities to maturity. The Company's mortgage loan portfolio, which constitutes 1.2% of invested assets at December 31, 1996, (1.1% at March 31, 1997) has historically been composed of small residential loans in Texas. At December 31, 1996, no mortgage loans were in default. Management has established a reserve of $50,000 at March 31, 1997 and December 31, 1996 (approximately 3% of the mortgage portfolio's balance) to cover potential unforeseen losses in the Company's mortgage portfolio. Policy loans comprise 14.3% of invested assets at December 31, 1996 compared to 14.3% at December 31, 1996. These loans, which are secured by the underlying policy values, have yields ranging from 5% to 10% percent and maturities that are related to the maturity or termination of the applicable policies. Management believes that the Company maintains more than adequate liquidity despite the uncertain maturities of these loans. Cash balances of the Company in its primary depository, Texas Commerce Bank Austin, Texas, were significantly in excess of Federal Deposit Insurance Corporation (FDIC) coverage at March 31, 1997 and December 31, 1996. Management monitors the solvency of all financial institutions in which it has funds to minimize the exposure for loss. At March 31, 1997, management does not believe the Company is at risk for such a loss. During 1997, the Company intends to utilize short-term Treasury Bills and highly- rated commercial paper as cash management tools to minimize excess cash balances and enhance return. In February 1992, the Company paid cash for an 80,000 square foot office building in Austin, Texas to serve as its primary office. This building will, in the opinion of management, provide adequate space for the Company's operations for many years. Renovation and remodeling of the property began in the third quarter of 1992 and the Company relocated to the building in September 1993. The Company occupies approximately 27,000 square feet of space in the building. The Company's former office property, consisting of approximately 13,000 square feet in Austin, with a carrying value of $146,000 was leased to a third party on a triple-net basis for three years during 1995. The lease provided that the party can purchase the building during the first 18 months of the lease for $850,000 cash, with no lease payments applying to the purchase price. The option period expired in 1996. The property is being re-marketed with a $1.5 million asking price. The tenant retains a right of first refusal for the remainder of the lease. CICA owned 1,955,457 shares of Citizens Class A common stock at December 31, 1996 (1,822,245 at March 31, 1997). For statutory accounting purposes, CICA received written approval from the Colorado Insurance Department to carry its investment in Citizens at 50% of the fair market value limited to 7% of admitted assets ($8,310,000), which differs from prescribed statutory accounting practices. Statutory accounting practices prescribed by Colorado require that the Company carry its investment at market value reduced by the percentage ownership of Citizens by CICA, limited to 2% of admitted assets. As of December 31, 1996, that permitted transaction increased statutory surplus by $4,000,000 over what it would have been had prescribed accounting practices been followed. In the Citizens' consolidated financial statements, this stock is shown as treasury stock. During 1995, Citizens re-acquired 115,943 of these shares and retired them. During 1997, approximately 133,212 shares were issued in conjunction with the First American transaction. CICA had outstanding at March 31, 1997 and December 31, 1996, a $466,000 surplus debenture payable to Citizens. For statutory accounting purposes, this debenture is a component of surplus, while for GAAP it is eliminated in consolidation. Citizens has recognized a liability for its related obligation to a bank in a like amount. The NAICNational Association of Insurance Commissioners ("NAIC") has established minimum capital requirements in the form of Risk- Based Capital ("RBC"). Risk-based capital factors the type of business written by a company, the quality of its assets, and various other factors into account to develop a minimum level of capital called "authorized control level risk-based capital" and compares this level to an adjusted statutory capital that includes capital and surplus as reported under Statutory Accounting Principles, plus certain investment reserves. Should the ratio of adjusted statutory capital to control level risk- based capital fall below 200%, a series of actions by the Company would begin. At December 31, 1996 and 1995, CICA, ALLIC and CILIC were well above required minimum levels. Financial Accounting Standards In May 1993, the FASB issued Statement 114 "Accounting by Creditors for Impairment of a Loan" ("Statement 114"). Statement 114 requires impaired loans to be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Statement 114 is effective for years beginning after December 15, 1994. Implementation did not have a material impact on the Company's financial statements. In March 1995, the FASB issued Statement 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of." Statement 121 established accounting standards for the recognition and measurement of impairment on long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain intangibles to be disposed of. This statement does not apply to long-lived assets such as deferred policy acquisition costs and deferred tax assets. Statement 121 is effective for fiscal years beginning after December 15, 1995. The Statement did not have a material impact on the Company's financial statements. Also in 1993, the FASB issued Statement 115 "Accounting for Certain Investments in Debt and Equity Securities" ("Statement 115"). Statement 115 requires the classification of debt and equity securities as held to maturity, trading or available for sale based on established criteria. Trading securities are bought and held principally for the purpose of resale in the near term. The Company had no investment securities classified as trading at January 1, 1994, December 31, 1996 or December 31, 1995. Held-to-maturity securities are those in which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in earnings. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders' equity until realized. Transfers of securities between categories are recorded at fair value at the date of transfer. Unrealized holding gains and losses are recognized in earnings for transfers into trading securities. Unrealized holding gains or losses associated with transfers of securities from held-to-maturity to available-for- sale are recorded as a separate component of stockholders' equity. The unrealized holding gains or losses included in the separate component of equity for securities transferred from available-for-sale to held-to-maturity are maintained and amortized into earnings over the remaining life of the security as an adjustment to yield in a manner consistent with the amortization or accretion of premium or discount on the associated security. A decline in the market value of any available-for-sale or held- to-maturity security below cost that is deemed other than temporary is charged to earnings resulting in the establishment of a new cost basis for the security. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses for securities classified as available-for-sale and held-to-maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold. The Company adopted Statement 115 at January 1, 1994. PART II. OTHER INFORMATION Item 1. Legal Proceedings None. Item 2 Changes in Securities None, other than disclosed in the Notes to the Financial Statements or Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information The Annual meeting of stockholders will be held on Tuesday, June 3, 1997, at 10:00 a.m. at the Company's executive offices. The record date for the meeting was April 15, 1997. Item 6. Exhibits and Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CITIZENS, INC. By:/s/ Mark A. Oliver_____ Mark A. Oliver, FLMI President Date: May 15, 1995May 13,1997 EX-27 2
7 3-MOS DEC-31-1997 MAR-31-1997 0 5624725 108697000 50155 1566395 939519 139061357 3979597 2680945 36650734 215454432 134616904 0 2993345 1931389 478668 0 0 47623437 23308949 215454432 11510447 2353826 117840 63979 9112601 2765279 2226492 (190656) (68972) (121684) 0 0 0 (121684) (.01) (.01) 0 0 0 0 0 0 0
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