AUSTIN, Texas, Aug. 6, 2012 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported results today for the second quarter and six months ended June 30, 2012.
Rick D. Riley, Vice Chairman and President, said, "We are continuing to experience earnings compression, exacerbated by the sustained low interest rate environment. At the same time, we are continuing to see improved persistency in our life segment, which provides positive long-term encouragement. The current year results reflect a higher level of insurance benefits compared to 2011, with increases in claims and surrender payments, as well as future policyholder benefit reserve additions, largely driven by higher endowment sales and partially by the higher persistency."
Net income for the three and six month periods ended in 2012 was $0.4 million and $1.9 million, or $0.01 and $0.04 per diluted Class A share, respectively, compared to $3.0 million and $4.6 million, or $0.04 and $0.07 per diluted Class A share, respectively, for the same three and six months of 2011.
FOR THE PERIODS ENDED JUNE 30,
(Unaudited, In thousands, except for per share amounts)
Net investment income
Net realized investment gains (losses)
Change in fair value of warrants
Net income applicable to common stock
Net income per diluted share of Class A common stock
Diluted weighted average shares of Class A common stock
Riley added, "Our total revenue increased 2.7% and 3.4% for the three and six months, driven by an increase of 4.3% and 4.6% in total premiums, largely due to continuing growth in renewal premiums. Excluding the change in fair value of warrants, revenues increased 4.4% and 4.6% for the same periods. Investment income increased for the quarter, benefiting from bond mutual funds purchased in the latter part of 2011 and interest received on policyholder loans. Although higher premiums drove an increase in invested assets, the growth was offset by the effect of the low interest rate environment, as our portfolio yield decreased to 3.77% compared with 3.92% at year-end 2011."
"Book value per share of Class A common stock increased 2.8% to $5.11 at June 30, 2012. Book value was up $0.14 from December 31, 2011, due primarily to fluctuations in the market values of bonds in our portfolio," Riley said.
Riley commented, "The change in the fair value of warrants had a positive effect on net income of $37,000 and $73,000 for the three and six months ended June 30, 2012, respectively. The number of outstanding warrants was reduced substantially during 2011. Approximately one-third of the remaining 159,997 warrants were exercised in July, and the remaining two-thirds either will be exercised or expire before year-end, eliminating this consideration from net income going forward."
Reconciliation of Net Income to Operating Income (a non-GAAP measure)
(Unaudited, In thousands)
Items excluded in the calculation of operating income:
Net realized investment (gains) losses
Pre-tax effect of exclusions
Tax effect at 35%
Non-GAAP Financial Measures - The table above reconciles Net Income to Operating Income. Operating Income is a "Non-GAAP" financial measure that is widely used in our industry to evaluate the performance of underwriting operations. Operating Income excludes the Fair Value Changes of Warrants and the after-tax net effects of Net Realized Investment Gains and Losses. We believe it presents a useful view of the performance of our insurance operations. While we believe disclosure of certain Non-GAAP information is appropriate, you should not consider this information without also considering the information we present in accordance with GAAP.
The non-insurance segment reflected a loss in 2012 compared to income in 2011. This segment represents the administrative support entities to the insurance operations whose revenues are primarily intercompany and have been eliminated in consolidation under GAAP. The segment loss reported for the three and six months of 2012 was primarily due to significantly lower gains from the change in fair value of warrants.
INVESTOR CONFERENCE CALL
On Tuesday, August 7, Citizens will host a conference call to discuss operating results at 10 a.m. Central Daylight Time. The conference call will be hosted by Rick D. Riley, Vice Chairman and President, Kay Osbourn, Chief Financial Officer, and other members of the Company's management team. To participate, please dial 888-637-2456 and ask to join the Citizens, Inc. call. We recommend accessing the call three to five minutes before the call is scheduled to begin. A recording of the conference call will be available on Citizens' website at www.citizensinc.com in the Investor Information section under News Release & Publications following the call.
ABOUT CITIZENS, INC.
Citizens, Inc. is a financial services company listed on the New York Stock Exchange under the symbol CIA. The Company utilizes a three-pronged strategy for growth based upon worldwide sales of U.S. Dollar-denominated whole life cash value insurance policies, life insurance product sales in the U.S. and the acquisition of other U.S. based life insurance companies.
Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "may," "will," "expect," "anticipate" or "continue" or comparable words. In addition, all statements other than statements of historical facts that address activities that the Company expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of the Company, particularly its Form 10-K for the fiscal year ended December 31, 2011, its quarterly reports on Form 10-Q and its current reports on Form 8-K, for the meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management. The Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events or changes in the Company's expectations. The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by the investment community.
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
Three Months Ended June 30,
Accident and health insurance
Realized investment gains (losses), net
Decrease in fair value of warrants
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders
Increase in future policy benefit reserves
Total insurance benefits paid or provided
Other general expenses
Capitalization of deferred policy acquisition costs
Amortization of deferred policy acquisition costs
Amortization of cost of customer relationships acquired
Total benefits and expenses
Income before income tax expense
Income tax expense (benefit)
Per Share Amounts:
Basic earnings per share of Class A common stock
Basic earnings per share of Class B common stock
Diluted earnings per share of Class A common stock
Diluted earnings per share of Class B common stock
Other comprehensive income:
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period
Reclassification adjustment for (gains) losses included in net income
Unrealized gains on available-for-sale securities, net
Income tax expense on unrealized gains on available-for-sale securities
Other comprehensive income
*Certain prior period amounts have been restated to reflect the retrospective adoption of revised accounting guidance for accounting for costs associated with deferred acquisition costs.
Six Months Ended June 30,
Realized investment gains, net
Income tax expense
Reclassification adjustment for gains included in net income
Consolidated Statements of Financial Position
Fixed maturities available-for-sale, at fair value
Fixed maturities held-to-maturity, at amortized cost
Equity securities available-for-sale, at fair value
Mortgage loans on real estate
Real estate held for investment
Other long-term investments
Cash and cash equivalents
Accrued investment income
Receivable for securities in process of settlement
Deferred policy acquisition costs
Cost of customer relationships acquired
Other intangible assets
Federal income tax receivable
Property and equipment, net
Due premiums, net
Future policy benefit reserves:
Accident and health
Premiums paid in advance
Policy claims payable
Other policyholders' funds
Total policy liabilities
Deferred federal income taxes
Payable for securities in process of settlement
Class A common stock
Class B common stock
Accumulated other comprehensive income:
Unrealized gains on securities, net of tax
Treasury stock, at cost
Total stockholders' equity
Total liabilities and stockholders' equity
FOR FURTHER INFORMATION CONTACT:Kay OsbournChief Financial Officer(512) 837-7100PR@citizensinc.com
SOURCE Citizens, Inc.