CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q")
contain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. Forward-looking statements can also be
identified by words such as "future," "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "predicts," "will," "would," "could," "can,"
"may," and similar terms. Forward-looking statements are not guarantees of
future performance and the Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such differences include, but are not limited to, statements concerning
any potential future impact of the coronavirus disease ("COVID-19") pandemic on
our business and the inflationary environment that has led to market volatility
and rising interest rates, as well as factors discussed in the "Risk Factors"
contained in our Annual Report on   Form 10-K   for the year ended December 31,
2021, which are incorporated herein by reference. The Company assumes no
obligation to revise or update any forward-looking statements for any reason,
except as required by law.

The following discussion should be read in conjunction with the consolidated
financial statements and accompanying notes included in   Part I, Item 1   of
this Form 10-Q. The Company assumes no obligation to revise or update any
forward-looking statements for any reason, except as required by law.

The U.S. Securities and Exchange Commission ("SEC") maintains a website that
contains reports, proxy and information statements, and other information
regarding issuers, including the Company, that file electronically with the SEC.
The public can obtain any documents that the Company files with the SEC at
http://www.sec.gov. We also make available, free of charge, through our Internet
website (http://www.citizensinc.com), our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 Reports filed by
officers and directors, news releases, and, if applicable, amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as soon as reasonably practicable after we electronically
file such reports with, or furnish such reports to, the SEC. We are not
including any of the information contained on our website as part of, or
incorporating it by reference into, this Form 10-Q.

OVERVIEW

For over 45 years, we have been fulfilling the needs of our policyholders and
their families by providing insurance products that offer both living and death
benefits. Citizens conducts insurance related operations through its insurance
subsidiaries, which provide benefits to residents in 31 U.S. states and more
than 70 different countries. We specialize in offering primarily ordinary whole
life insurance, endowment products and final expense insurance in niche markets
where we believe we can optimize our competitive position.

As an insurance provider, we collect premiums on an ongoing basis from our
policyholders and invest the majority of the premiums to pay future benefits,
including claims and surrenders and policyholder dividends. Accordingly, the
Company derives its revenues principally from: (1) life insurance premiums
earned for insurance coverages provided to insureds in our two operating
segments - Life Insurance and Home Service Insurance; and (2) net investment
income. In addition to paying and reserving for insurance benefits that we pay
to our policyholders, our expenses consist primarily of the costs of selling our
insurance products (e.g., commissions, underwriting, marketing expenses),
operating expenses and income taxes.

Objective of our Management's Discussion and Analysis

We refer to our Management's Discussion and Analysis of Financial Condition and
Results of Operations as our "MD&A". The objective of our MD&A is to provide
investors with information in order to assess the material changes in our
financial condition from December 31, 2021 to September 30, 2022 and the
material changes in our results of operations for the three and nine months
ended September 30, 2022 as compared to the same periods in 2021. We

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also discuss in the MD&A any trends that we believe may materially affect our
future operations or financial condition.

The Factors that Drive our Operating Results

We see the following as the primary factors that drive our operating results:

•Sales (i.e., premium revenues)
•Investments
•Death claims and surrenders
•Operating expenses

Premium revenues and investment income are our two primary sources of income and
thus key to our profitability.

Premium revenues consist of both new sales (first year premiums) and "resells"
(i.e., retaining the policy), which lead to renewal premiums.

  [[Image Removed: cia-20220930_g3.jpg]][[Image Removed: cia-20220930_g4.jpg]]
We experienced slight increases, 1.3% and 0.2%, respectively, in premium revenue
in the three and nine months ended September 30, 2022 compared to the prior year
periods. Premium revenues increased in both periods primarily due to higher
property insurance premiums. Higher property insurance premiums were the result
of the lack of hurricanes in Louisiana in the 2022 periods, as property
insurance premiums in 2021 were negatively impacted due to reinstatement
premiums we paid for catastrophic reinsurance as a result of Hurricane Ida.

  [[Image Removed: cia-20220930_g5.jpg]][[Image Removed: cia-20220930_g6.jpg]]
Our net investment income increased during both the three and nine months ended
September 30, 2022 compared to the same prior year periods due primarily to a
growing diversified invested asset base and reinvestment into a higher interest
rate environment.


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Payment of policyholder benefits for death claims and surrenders and operating
expenses are our largest expenses and thus also key to our profitability.

  [[Image Removed: cia-20220930_g7.jpg]][[Image Removed: cia-20220930_g8.jpg]]
In both the three and nine months ending in September 2022, our death claims
decreased compared to the same prior year periods. Death claims in the 2021
periods in both of our segments were negatively impacted by COVID-19 related
deaths, which have decreased in the 2022 periods. While surrenders decreased in
the first nine months of 2022, they slightly increased during the three month
period due to higher surrenders in our Home Service Insurance segment. We
believe the decrease in surrenders in the nine month period was in large part
due to our retention initiatives; however, we believe the impact of inflation
and curtailment of COVID-19 relief government aid in 2022 is negatively
impacting retention in our Home Service Insurance segment.

 [[Image Removed: cia-20220930_g9.jpg]][[Image Removed: cia-20220930_g10.jpg]]
Our general operating expenses for the three months ended September 30, 2022
increased compared to the prior year period due primarily to our international
sales convention in 2022, which was cancelled in the prior year period due to
COVID, as well as severance costs. General operating expenses in the nine months
ended September 30, 2022 decreased compared to the prior year period, as we did
not incur fees in the current year related to the change in control of the
Company nor consulting fees paid to our former CEO as we did in 2021. These
savings were partially offset by higher home office and convention expenses in
the current year.


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FINANCIAL HIGHLIGHTS

 [[Image Removed: cia-20220930_g11.jpg]][[Image Removed: cia-20220930_g12.jpg]]
Due to the impact inflation has had on market volatility and rising interest
rates during the first nine months of 2022, we had net losses of $5.1 million
and $10.0 million, respectively, in the three and nine months ended
September 30, 2022, compared to net losses of $2.8 million and $1.4 million,
respectively, in the prior year periods. As an insurance company, we hold
significant invested assets in order to pay future policy liabilities. Changes
in the fair value of our limited partnership investments drove investment
related losses of $5.0 million and $10.6 million, respectively, in the current
year periods, compared to investment related gains of $2.1 million and $7.3
million in the prior year periods, respectively. We did not sell these
investments during 2022, but as discussed in   Part I, Item 1, Note 5.
Investments  , changes in fair values of our equity securities are reflected as
investment related gains or losses, in addition to executed transactions that
result in a gain or loss. Due to these investment related losses driving our net
loss, loss per share of Class A common stock was $0.20 for the nine months ended
September 30, 2022.

All other revenues (premiums, net investment income and other income)
collectively increased by $1.7 million and $2.5 million, respectively, in the
three and nine months ended September 30, 2022 as compared to the same prior
year periods. Our total benefits and expenses decreased by $3.3 million and $5.8
million, respectively, in the current year periods as compared to the same prior
year periods.

Consolidated Revenue Highlights

Insurance premiums and investment income are our primary sources of revenue and
increased 2.9% in the three months ended September 30, 2022 compared to the same
period in 2021.

•Insurance premiums increased by $0.5 million due primarily to higher first year
premiums in our Life Insurance segment and higher property insurance premiums
due to the negative impact of Hurricane Ida in 2021 described above, partially
offset by a decrease in renewal premiums in both of our segments.
•Net investment income increased by $1.2 million, or 7.4%, from a higher average
portfolio yield in the current year period as well as a growing invested asset
base.

Insurance premiums and investment income collectively increased 1.3% in the nine
months ended September 30, 2022 as compared to the same period in 2021.

•Insurance premiums increased by $0.3 million, or 0.2% as due to the increased
property insurance premiums, partially offset by a decrease in first year
premiums in both of our segments.
•Net investment income increased by $2.0 million, or 4.3% for the same reasons
discussed above.


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Consolidated Benefits and Expenses Highlights

The primary use of our funds is the payment of insurance benefits for claims and
surrenders as well as our general operating expenses. In the three months ended
September 30, 2022 compared to the same period in 2021, total benefits and
expenses decreased by $3.3 million due primarily to:

•a $5.2 million decrease in insurance benefits paid or provided due to:
•$3.8 million lower future policy benefit reserves, which were a result of
higher matured endowments in the quarter, partially offset by increases to the
future policy benefit reserves due to improved first year sales and better
persistency; and
•$1.1 million decrease in claims and surrenders benefits. This decrease was
primarily related to lower death claims in both of our segments as 2021 included
a higher number of reported death claims, including COVID-19 related deaths,
partially offset by an increase in matured endowment benefits;
•both of the above partially offset by a $1.0 million increase in other general
expenses.

In the nine months ended September 30, 2022 compared to the same period in 2021,
total benefits and expenses decreased by $5.8 million due primarily to:

•a $5.4 million decrease in claims and surrender benefits due primarily to a
decrease in COVID-19 related death benefits paid in 2022 and a decrease in
surrender benefits as we have focused efforts on retaining policyholders; and
•a $0.4 million decrease in other general expenses.

Financial Condition at September 30, 2022

•Total assets of $1.5 billion.
•Total investments of $1.3 billion; fixed maturity securities comprised 88.3% of
total investments.
•$4.7 billion of direct insurance in force.
•No debt.

IMPACT OF INFLATION AND RISING INTEREST RATES

The impact of inflation, which has led to market volatility and rising interest
rates, has had a material impact on our results of operations and financial
condition in the three and nine months ended September 30, 2022. In addition to
the market volatility that affected the fair value of our equity securities,
leading to the investment related losses, higher interest rates typically reduce
the market values of fixed income assets, as the interest payments from existing
fixed income assets become less competitive relative to newer higher rate fixed
income instruments. Because the vast majority of our total investments are
invested in fixed maturity securities, we reported a pre-tax net unrealized loss
of $213.7 million on our available-for-sale securities at September 30, 2022.
This compares to net unrealized gains of $126.9 million at December 31, 2021,
with the year-over-year decrease primarily driven by higher interest rates.
These unrealized losses led to stockholders' deficit of $(14.2) million at
September 30, 2022.

In addition, we could experience higher surrenders and lapses and fewer sales in
the coming months as our policyholders conserve cash due to concerns over
inflation and rising costs, particularly in our Home Service Insurance segment,
whose customer base is primarily middle- and lower-income individuals.

COVID-19 PANDEMIC

The overall impact of the COVID-19 pandemic and its related economic conditions
on the Company's financial results continue to be highly uncertain and
unpredictable. While the Company has implemented new strategies and processes to
mitigate this impact, the scope, duration and magnitude of the direct and
indirect effects of COVID-19 are difficult or impossible to anticipate. As a
result, it is not possible to predict its impact on the Company's results in

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2022 or beyond. While we don't believe that the COVID-19 pandemic materially
impacted our results of operations for the three and nine months ended
September 30, 2022, some of the most significant factors related to COVID-19
that could cause our future results to differ significantly from our prior
results or expectations include:

•a higher level of claims due to COVID-19 deaths;
•decreased premium revenue due to disruption to our workforce or distribution
channels resulting from required isolation, travel limitations and business
restrictions;
•higher surrenders and lapses due to cash needs our policyholders may have due
to concerns over COVID-19 economic impacts; and
•volatility in our investment portfolio due to market disruptions caused by
COVID-19 related concerns such as inflation.

We continue to monitor the impact of the COVID-19 pandemic on our operations.

OUR OPERATING SEGMENTS

We manage our business in two operating segments, Life Insurance and Home
Service Insurance.

Our insurance operations are the primary focus of the Company, as these
operations generate most of our income. See the discussion under   Segment
Operations   below for detailed analysis. The amount of insurance, number of
policies, and average face amounts for ordinary life policies issued during the
periods indicated are shown below.

Nine Months Ended September 30,                            2022                                                         2021
                                                                             Average                                                        Average
                                   Amount of             Number of            Policy             Amount of             Number of             Policy
                                   Insurance             Policies          Face Amount           Insurance              Policies          Face Amount
                                     Issued               Issued              Issued               Issued                Issued              Issued
Ordinary Life Policies:
Life Insurance                  $ 253,040,853               3,022          $  83,733          $ 172,645,808              2,873            $  60,093
Home Service Insurance            205,218,816              21,045              9,751            142,678,954             18,533                7,699
Total                           $ 458,259,669              24,067                             $ 315,324,762             21,406



As we have previously disclosed, our strategic initiatives include the
introduction of new products tailored to our specific markets. These new
products helped drive the 45.3% increase in total insurance issued in the nine
months ended September 30, 2022, from $315.3 million in the first nine months of
2021 to $458.3 million in 2022. The growth in insurance issued was a result of
both a greater number of policies issued and higher average policy face amounts
issued in both segments.

The growth in our Life Insurance segment is attributable to strong sales from
our new international whole life product, which accounted for 31% of total
insurance issued in this segment for the nine months ended September 30, 2022.
In our Home Service Insurance segment, the increase in average policy face
amounts issued is attributable to sales campaigns that focused on increasing the
face amount of insurance sold as well as the introduction of our new whole life
product in this segment, which has a higher maximum face value than our legacy
products.


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CONSOLIDATED RESULTS OF OPERATIONS

A discussion of consolidated results is presented below, followed by a
discussion of segment operations and financial results by segment.