CITIZENS INC, S-4, 1995-10-06

CITIZENS INC
S-4, 1995-10-06
LIFE INSURANCE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1995
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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CITIZENS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
COLORADO 6311 84-0755371
(State or other jurisdiction of (Primary standard industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
</TABLE>

400 EAST ANDERSON LANE
AUSTIN, TEXAS 78752
(512) 837-7100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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HAROLD E. RILEY, CHAIRMAN OF THE BOARD
400 EAST ANDERSON LANE
AUSTIN, TEXAS 78752
(512) 837-7100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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COPIES TO:

REID A. GODBOLT, ESQ. FRANK G. NEWMAN
JONES & KELLER, P.C. NEWMAN & DAVENPORT, P.C.
1625 BROADWAY, SUITE 1600 2050 ALLIANZ FINANCIAL CENTRE LB135
DENVER, COLORADO 80202 2323 BRYAN STREET
(303) 573-1600 DALLAS, TEXAS 75201
(214) 754-0025

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Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this
Registration Statement

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=================================================================================================================
Title of each class of Proposed maximum Proposed Amount of
securities to be Amount to offering price maximum aggregate registration
registered be registered per share offering price fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, 171,391(1) $9.00(2) $1,542,519(2) $532
No Par Value shares
=================================================================================================================
</TABLE>

(1) Represents the maximum number of shares of the Registrant's Class A
Common Stock to be issued in connection with the Merger described
herein.
(2) Estimated pursuant to Rule 457(f)(1) and (2) solely for the purpose of
calculating the registration fee based on the market value of the
securities to be received by the Registrant as determined on October
4, 1995.

================================================================================

The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.

--------------
<PAGE> 2
CITIZENS, INC.

Cross-Reference Sheet
For
Registration Statement on Form S-4 and Prospectus-Proxy Statement

<TABLE>
<CAPTION>
Form S-4
Item No. Item Caption Heading in Prospectus
- --------- ------------ ---------------------
<S> <C> <C>
1 Forepart of Registration Statement Outside Front Cover
and Outside Front Cover Page of
Prospectus

2 Inside Front and Outside Back Cover Inside Front Cover
Pages of Prospectus

3 Risk Factors, Ratio of Earnings to Summary; Risk Factors; Proposed
Fixed Charges and Other Information Merger and Exchange

4 Terms of the Transaction Summary; Proposed Merger and Exchange; Information Concerning
Investors and Central; Comparison of Rights of
Securityholders

5 Pro Forma Financial Information Comparative Per Share Data; Selected Summary Financial
Information - Pro Forma Condensed Consolidated Financial
Statements

6 Material Contacts with the Company Summary; Proposed Merger and
Being Acquired Exchange - Background and Reasons for the Merger and Exchange

7 Additional Information Required for Not applicable
Reoffering by Persons and Parties
Deemed to be Underwriters

8 Interests of Named Experts and Not applicable
Counsel

9 Disclosure of Commission Position Not applicable
on Indemnification for Securities Act
Liabilities

10 Information with Respect to S-3 Incorporation of Certain Documents
Registrants by Reference; Risk Factors
</TABLE>

ii
<PAGE> 3
<TABLE>
<S> <C> <C>
11 Incorporation of Certain Information Incorporation of Certain Documents
by Reference by Reference

12 Information with Respect to S-2 or Not applicable
and S-3 Registrant

13 Incorporation of Certain Information Not applicable
by Reference

14 Information with Respect to Summary; Comparative Per Share
Registrants Other Than S-2 Data; Selected Summary Financial
or S-3 Registrants Information - Pro Forma Condensed Consolidated Financial
Statements; The Special Meetings; Proposed Merger and
Exchange; Information Concerning Investors and Central;
Management's Discussion of Financial Condition and Results of
Operations; Financial Statements

15 Information with Respect to S-3 Not applicable
Companies

16 Information with Respect to S-2 or Not applicable
S-3 Companies

17 Information with Respect to Summary; Comparative Per Share
Companies Other than S-2 or Data; Selected Summary Financial
S-3 Companies Information - Pro Forma Condensed Consolidated Financial
Statements; The Special Meetings; Proposed Merger and
Exchange; Information Concerning Investors and Central;
Management's Discussion of Financial Condition and Results of
Operations; Financial Statements

18 Information if Proxies, Consents Summary; The Special Meetings;
or Authorizations are to be Solicited Information Concerning Directors and Executive Officers

19 Information if Proxies, Consents Not applicable
or Authorizations Are Not To Be
Solicited or in an Exchange Offer
</TABLE>

iii
<PAGE> 4
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF INSURANCE INVESTORS & HOLDING CO.
TO BE HELD ON , 1995
________________________________________

To the Shareholders of Insurance Investors & Holding Co.:

Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Insurance Investors & Holding Co. ("Investors") will be held on
________________, ____________ __, 1995 at __________a.m., Central Time, at
__________________________, Peoria, Illinois, to consider and act upon the
following:

1. To vote upon approval and adoption of a Plan and Agreement of
Merger and Exchange dated November 28, 1994 under which Citizens Acquisition,
Inc., a wholly-owned subsidiary of Citizens, Inc., will merge (the "Merger")
with and into Investors, with Investors being the survivor, and Investors and
Central Investors Life Insurance Company of Illinois will effect a statutory
plan of exchange. In the Merger and Exchange, shareholders of Investors will
receive shares of Citizens, Inc. Class A Common Stock for their Investors Class
A and Class B Common shares as described in the accompanying Proxy
Statement-Prospectus; and

2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.

Only shareholders of record of Investors Class A and Class B Common
Stock as of the close of business on _________, 1995 will be entitled to notice
of and to vote at the Meeting.

Shareholders may, under certain circumstances, dissent from the Merger
and Exchange and obtain payment for shares, as described in the accompanying
Proxy Statement-Prospectus. A copy of Article XI, Sections 5/11.65 and
5/11.70, of the Illinois Business Corporation Act of 1983, which set forth the
rights of dissenters, is attached to the Proxy Statement-Prospectus as Appendix
B.

Shareholders are cordially invited to attend the Meeting. Whether or
not you intend to attend the Meeting, please fill in, date, sign, and return
promptly the enclosed proxy card in the enclosed postage-prepaid envelope so
that your shares may be voted at the Meeting if you are unable to attend in
person. The giving of a proxy will not affect your right to vote in person if
you attend the Meeting.

By Order of the Board of Directors

Robert W. Kreutz, Secretary
Peoria, Illinois
____________, 1995

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<PAGE> 5
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF CENTRAL INVESTORS LIFE INSURANCE COMPANY OF ILLINOIS
TO BE HELD ON , 1995
________________________________________

To the Shareholders of Central Investors Life Insurance Company of Illinois:

Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Central Investors Life Insurance Company of Illinois
("Central") will be held on ________________, ____________ __, 1995 at
__________a.m., Central Time, at __________________________, Peoria, Illinois,
to consider and act upon the following:

1. To vote upon approval and adoption of a Plan and Agreement of
Merger and Exchange dated November 28, 1994 under which Citizens Acquisition,
Inc., a wholly-owned subsidiary of Citizens, Inc., will merge with and into
Insurance Investors & Holding Co. ("Investors"), with Investors being the
survivor, and Investors and Central will effect a statutory plan of exchange
(the "Exchange"), under which shareholders of Central (other than Investors)
will exchange their Central Common Stock for Citizens, Inc. Class A Common
Stock as described in the accompanying Proxy Statement- Prospectus; and

2. To transact such other business as may properly come before the
Meeting or any adjournment thereof.

Only shareholders of record of Central Common Stock as of the close of
business on _________, 1995 will be entitled to notice of and to vote at the
Meeting.

Shareholders may, under certain circumstances, dissent from the
Exchange and obtain payment for shares, as described in the accompanying Proxy
Statement-Prospectus. A copy of Article XI, Sections 5/11.65 and 5/11.70, of
the Illinois Business Corporation Act of 1983, which set forth the rights of
dissenters, is attached to the Proxy Statement- Prospectus as Appendix B.

By Order of the Board of Directors

Robert W. Kreutz, Secretary
Peoria, Illinois
____________, 1995

v
<PAGE> 6
INSURANCE INVESTORS & HOLDING CO.
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ______________, 1995

CENTRAL INVESTORS LIFE INSURANCE COMPANY OF ILLINOIS
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______________, 1995

CITIZENS, INC.
PROSPECTUS
CLASS A COMMON STOCK, NO PAR VALUE
UP TO 171,391 SHARES

This Proxy Statement-Prospectus is furnished in connection with the
solicitation by the Board of Directors of Insurance Investors & Holding Co.
("Investors") of proxies from holders of shares of Investors Class A and Class
B Common Stock, for use at the Special Meeting of Investors Shareholders to be
held on _________________, 1995. This Proxy Statement- Prospectus is also
furnished in connection with the solicitation by the Board of Directors of
Central Investors Life Insurance Company of Illinois ("Central") of proxies
from the holders of shares of Central Common Stock, for use at the Special
Meeting of Central shareholders to be held on ___________, 1995. (Together,
the aforesaid Investors Special Meeting and Central Special Meeting shall
hereafter be referenced as the "Meetings"; individually the Special Meetings
shall hereafter be referenced as the "Meeting.") This Prospectus pertains to
the number of shares of Class A Common Stock of Citizens, Inc. ("Citizens") to
be issued in connection with a Plan and Agreement of Merger and Exchange dated
November 28, 1994 (the "Merger Agreement") by and among Investors, Central,
Citizens and Citizens Acquisition, Inc. ("Acquisition"). The Boards of
Directors of Investors and Central have unanimously recommended that
shareholders approve the Merger Agreement. However if the holders of more than
2.5% of the outstanding shares of Investors or Central choose to exercise
dissenters' rights under Illinois law, then Citizens may, at its option,
decline to proceed with the transactions contemplated hereby. The approval of
the Illinois Department of Insurance, which was required for these transactions
to proceed, was received March 10, 1995. Upon consummation of the
transactions, each eight outstanding shares of Investors Class A Common Stock
and each eight outstanding shares of Investors Class B Common Stock will be
converted into one share of Citizens Class A Common Stock, and each four shares
of Central Common Stock, except for those shares of Central Common Stock held
by Investors, will be converted into one share of Citizens Class A Common
Stock, all as described in this Proxy Statement-Prospectus (the "Merger and
Exchange"). No fractional shares of Citizens Class A Common Stock will be
issued in the Merger and Exchange; rather, share fractions will evidence the
right to receive a cash value per fractional share of Citizens Class A Common
Stock based on a value of $7.00 per Citizens Class A share. All information
contained in the Proxy Statement-Prospectus with respect to Citizens and
Acquisition has been furnished by Citizens, and all information with respect to
Investors and Central has been furnished by Investors. The approximate date of
mailing of this Proxy Statement-Prospectus and the accompanying materials to
shareholders of Investors and Central was _____________, 1995.

________________________

Your proxy in the form enclosed is solicited by the Boards of Directors of
Investors and Central for use at the Meetings. Only shareholders of record at
the close of business on _______, 1995 are

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<PAGE> 7
entitled to notice of and to vote at the Meetings. On October 6, 1995, the
numbers of outstanding shares of Investors Class A and Class B Common Stock
entitled to be voted at the Meeting of Investors shareholders were 807,649 and
472,423, respectively, each share of which (irrespective of its class) is
entitled to one vote, with the aggregate Class A and Class B shares voting
together as a single class. The number of outstanding shares of Central Common
Stock entitled to vote at the Meeting for Central shareholders was 650,000,
each of which is entitled to one vote. However, 604,475 of the 650,000 Central
Common shares are held by Investors, which plans to vote in favor of the Merger
and Exchange; hence, approval by the Central shareholders is virtually assured.
If the accompanying proxy form is signed and returned, the shares represented
thereby will be voted as instructed. In the event no instructions are given,
the shares will be voted for the Merger and Exchange and upon such other
matters as may properly come before the Meeting. If, after sending in your
proxy, you decide to vote in person or decide to revoke your proxy for any
other reason, you may do so by notifying the Secretary in writing prior to the
voting of the proxy.

The expenses of soliciting proxies and the cost of preparing, assembling and
mailing material in connection with the solicitation of proxies will be borne
by Investors. In addition to the use of the mails, certain directors, officers
or regular employees of Investors or its subsidiaries, who receive no
compensation for their services other than their regular salaries or fees, if
any, may solicit proxies personally.

The Directors and management of Investors and Central know of no matters to be
brought before the Meetings other than those mentioned herein. If, however,
any other matters properly come before the Meetings, it is intended that the
proxies will be voted in accordance with the judgment of the person or persons
voting such proxies.
________________________

The Citizens Class A Common Stock is listed on the American Stock Exchange
under the symbol "CIA." On October 4, 1995, the closing price of Citizens
Class A Common Stock was $9.00 per share.
________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR
HAS THE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
________________________

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES SIGNIFICANT RISKS. SEE
"RISK FACTORS."
________________________

No person is authorized to give any information or to make any representation
not contained in this Proxy Statement- Prospectus, and if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement-Prospectus does not constitute an offer to
exchange or sell, or a solicitation of an offer to exchange or purchase, the
securities offered hereby, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is

I-II
<PAGE> 8
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Proxy Statement- Prospectus nor any distribution of the
securities to which this Proxy Statement-Prospectus relates shall, under any
circumstances, create an implication that there has been no change in the
affairs of Citizens, Acquisition, Investors or Central. In the event of a
material change in the terms of the Merger Agreement or in the affairs of
Citizens, Acquisition, Investors or Central, then it will be the responsibility
of Citizens to file any required post-effective amendments and provide for the
resolicitation of proxies, as may be necessary.

This Proxy Statement-Prospectus does not cover any resales of shares of the
securities offered hereby to be received by shareholders of Investors or
Central upon consummation of the Merger Agreement. No person is authorized to
use this Proxy Statement-Prospectus in connection with such resales, although
such securities may be traded without use of this Proxy Statement-Prospectus by
those shareholders of Investors not deemed to be "affiliates" of any of
Investors, Central or Citizens.
________________________

The principal executive offices of Citizens and Acquisition are located at 400
East Anderson Lane, Austin, Texas 78752, telephone (512) 837-7100. The
principal executive offices of Investors and Central are located at 2512 North
Knoxville Avenue, Peoria, Illinois 61604, telephone (309) 685-7661.
________________________

The date of this Proxy Statement-Prospectus is ___________________, 1995.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-VI

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-VII

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-VII

COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-XX

SELECTED SUMMARY FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-XXI

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PROPOSED MERGER AND EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Update for Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

CERTAIN FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

INFORMATION CONCERNING CITIZENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

SOURCE OF CITIZENS SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

RIGHTS OF DISSENTING INVESTORS AND CENTRALSHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES . . . . . . . . . . . . . . . . 38

INFORMATION CONCERNING INVESTORS AND CENTRAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Investors and its Subsidiaries: Central and CI Agency, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 42
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Market for Investors' Common Stock and Related Securityholder Matters . . . . . . . . . . . . . . . . . . . 45

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . 46
</TABLE>

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<TABLE>
<S> <C>
COMPARISON OF RIGHTS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Authorized Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Liability of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Assessment and Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

DEADLINE FOR CITIZENS SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
INSURANCE INVESTORS & HOLDING CO.AND SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 53
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1995 . . . . . . . . . . . . . . . . . . . . 53

APPENDIX A -- PLAN AND AGREEMENT OF MERGER AND EXCHANGE DATED NOVEMBER 28, 1994; AGREEMENT TO AMEND PLAN AND
AGREEMENT OF MERGER AND EXCHANGE DATED SEPTEMBER 15, 1995

APPENDIX B -- ARTICLE XI, SECTIONS 5/11.65 AND 5/11.70, OF THE ILLINOIS BUSINESS CORPORATION ACT GOVERNING RIGHTS OF
DISSENTING INVESTORS AND CENTRAL SHAREHOLDERS
</TABLE>

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AVAILABLE INFORMATION

Both Citizens and Investors are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Those
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC at 13th Floor, 7 World Trade Center, New York, New York
10048, and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such materials can be obtained at prescribed rates
from the Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, such reports, proxy
statements and other information concerning Citizens may be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006- 1881.

Citizens has filed with the SEC a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Citizens Class A Common
Stock to be issued in connection with the transactions described herein. This
Proxy Statement-Prospectus does not contain all the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. For further information with
respect to Citizens and the Citizens Class A Common Stock, reference is made to
the Registration Statement, including the exhibits thereto. Statements
contained herein concerning the provisions of certain documents are not
necessarily complete, and in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC. Each such statement is qualified in its entirety by such
reference.

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<PAGE> 12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by Citizens with the
SEC pursuant to the Exchange Act (File No. 0-16509), are incorporated by
reference into this Proxy Statement-Prospectus and are deemed to be a part
hereof: (a) Citizens' Annual Report on Form 10-K, as amended, filed on
September 29, 1995, for the year ended December 31, 1994; (b) the description
of the Citizens' Class A Common Stock contained in its Registration Statement
on Form 8-A declared effective by the SEC on April 14, 1994; (c) Citizens'
Quarterly Report on Form 10-Q, as amended, filed on or about August 14, 1995,
for the quarter ended June 30, 1995; and (d) Citizens' Current Report on Form
8-K, filed on September 29, 1995. All documents filed by Citizens pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Proxy Statement-Prospectus and prior to the Meetings shall be deemed to be
incorporated by reference into this Proxy Statement-Prospectus and to be part
hereof from the date of the filing of such documents.

Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this Proxy Statement-Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. The foregoing sentence does not apply to Insurance Investors &
Holding Co. or any of its affiliates with respect to documents not incorporated
herein or not deemed to be incorporated herein. Any statement so modified or
superseded shall not be deemed to constitute a part of this Proxy Statement-
Prospectus, except as so modified or superseded.

THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF SUCH DOCUMENTS
(EXCLUDING EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE INCORPORATED BY REFERENCE
INTO SUCH DOCUMENTS) ARE AVAILABLE TO EACH PERSON TO WHOM THIS PROXY
STATEMENT-PROSPECTUS IS SENT (INCLUDING BENEFICIAL OWNERS OF INVESTORS CLASS A
OR CLASS B COMMON STOCK AND OWNERS OF CENTRAL COMMON STOCK), UPON WRITTEN OR
ORAL REQUEST. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO ROBERT W. KREUTZ,
SECRETARY, INSURANCE INVESTORS & HOLDING CO., 2512 NORTH KNOXVILLE AVENUE,
PEORIA, ILLINOIS. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY ___________, 1995.

SUMMARY

The following is a summary of certain information contained elsewhere
in this Proxy Statement-Prospectus. This Summary is not intended to be
complete and is qualified in its entirety by reference to the more detailed
information appearing in this Proxy Statement-Prospectus, including the
Appendices. Shareholders of Investors and Central are urged to read this Proxy
Statement-Prospectus in its entirety.

I-VII
<PAGE> 13
THE PARTIES TO THE MERGER AND EXCHANGE

Citizens Acquisition, Inc. ("Acquisition"), an Illinois corporation,
is a wholly-owned subsidiary of Citizens which was formed solely to effectuate
the Merger and Exchange. Acquisition has the same principal executive office as
Citizens.

Insurance Investors & Holding Co. ("Investors") is an Illinois
corporation which is an insurance holding company. The principal executive
office of Investors is located at 2512 North Knoxville Avenue, Peoria, Illinois
61604. The telephone number at such office is (309) 685-7661. Neither
Investors nor any of its officers or directors are affiliated with Citizens,
nor are any officers or directors of Citizens affiliated with Investors. It is
contemplated that Investors will act as a subsidiary of Citizens after the
Merger and Exchange.

Central Investors Life Insurance Company of Illinois ("Central") is an
Illinois domestic insurance company which is owned 93.0% by Investors. Central
has the same principal executive office as Investors. It is contemplated that
Central will act as a separate indirect subsidiary of Citizens after the Merger
and Exchange.

Following is a comparison between Citizens and Investors of certain
selected financial data:

I-VIII
<PAGE> 14
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------------
Citizens Investors
Citizens Percent Investors Percent Combined
Amount of Total Amount of Total Total
------ -------- ------ -------- --------
(all amounts in 000's except per share amounts)
<S> <C> <C> <C> <C> <C>
Total Assets $ 149,798 98% $2,402 2% $ 152,200
Stockholders' Equity 35,055 97% 934 3% 35,989
Retained Earnings (Deficit) 18,467 103% (478) (3%) 17,989
Net Income (Loss) 4,175 103% (126) (3%) 4,049
Book Value Per Share (a) $ 1.99 $ .73
</TABLE>

<TABLE>
<CAPTION>
June 30, 1995
------------------------------------------------------------------------------
Citizens Investors
Citizens Percent Investors Percent Combined
Amount of Total Amount of Total Total
------ -------- ------ -------- --------
(all amounts in 000's except per share amounts)
<S> <C> <C> <C> <C> <C>
Total Assets $157,349 98% $2,430 2% $ 159,779
Stockholders' Equity 38,572 98% 902 2% 39,474
Retained Earnings (Deficit) 19,757 103% (517) (3%) 19,240
Net Income (Loss) 1,290 103% (39) (3%) 1,251
Book Value Per Share (a) $ 2.19 $ .70
</TABLE>
__________
(a) Book value per share is based on numbers of shares set forth in
Stockholders' Equity on the respective balance sheets -- for the
Citizens calculations, the numbers of Class A and Class B Common
shares were added, and the total number was divided into Total
Stockholders' Equity; for the Investors calculations, the Class A and
Class B Common shares were added, and the total number was divided
into Total Stockholders' Equity.

For an explanation of the manner in which Citizens, Investors and
Central determined the share exchange ratios for accomplishing the Merger and
Exchange, see "Proposed Merger and Exchange -- Background and Reasons for
Merger and Exchange."

Neither class of Investors' Common Stock is listed or actively traded
through security brokerage firms, and there is virtually no over-the-counter
trading activity. There is no market for the Central Common Stock.
Consequently, it is not possible to set forth a market value comparison between
the Citizens' Class A Common Stock and the Investors' Class A and Class B Common
Stock or Central Common Stock.

I-IX
<PAGE> 15

<TABLE>
<S> <C>
INSURANCE INVESTORS & HOLDING CO. AND CENTRAL INVESTORS
LIFE INSURANCE COMPANY OF ILLINOIS SPECIAL MEETINGS OF
SHAREHOLDERS

PERSONS ENTITLED TO VOTE; RECORD DATE Holders of record of shares of Investors Class A Common
Stock, $1.00 par value, and Investors Class B Common Stock,
no par value, at the close of business on
_________________, 1995 ("Record Date"), will be entitled
to notice of and to vote at the Special Meeting of
Shareholders (the "Meeting"). Holders of Investors Class A
and Class B Common Stock have the right to dissent from the
proposed Merger and Exchange described below. See "Rights
of Dissenting Investors and Central Shareholders to Receive
Payment for Shares" and "The Special Meetings -- Voting
Securities."

Holders of record of shares of Central Common Stock, $1.00
par value, at the close of business on _________________,
1995 ("Record Date"), will be entitled to notice of and to
vote at the Special Meeting of Shareholders (the
"Meeting"). Holders of Central Common Stock have the right
to dissent from the proposed Merger and Exchange described
below. See "Rights of Dissenting Investors and Central
Shareholders to Receive Payment for Shares" and "The
Special Meetings -- Voting Securities."

DATE, TIME AND PLACE OF SPECIAL MEETINGS The Meeting of Investors shareholders will be held on
________, _______,1995 at ____a.m., Central Time, at
_______________________, Peoria, Illinois.

The Meeting of Central shareholders will be held on
________, ________, 1995 at ____ a.m., Central Time, at
___________________, Peoria, Illinois.
</TABLE>

I-X
<PAGE> 16
<TABLE>
<S> <C>
BUSINESS TO BE TRANSACTED At both Meetings, shareholders will be asked to consider
and vote upon approval of a Plan and Agreement of Merger
and Exchange ("Merger Agreement") under which Acquisition
will merge with and into Investors, with shareholders of
Investors receiving shares of Citizens Class A Common
Stock. Holders of Central Common Stock (other than
Investors) will exchange their Central Common shares for
shares of Citizens Class A Common Stock (the "Merger and
Exchange").

Pursuant to the Merger Agreement, holders of Investors
Class A and Class B Common Stock will receive one share of
Citizens Class A Common Stock for each eight shares of
Investors Class A or Class B Common Stock owned, and
holders of Central Common Stock (other than Investors) will
receive one share of Citizens Class A Common Stock for each
four shares of Central Common Stock owned.

PROXY REVOCABILITY Proxies are revocable at any time prior to voting at the
Meetings. See "The Special Meetings -- Revocability of
Proxies."
</TABLE>

I-XI
<PAGE> 17
<TABLE>
<S> <C>
REQUIRED VOTE Approval of the Merger Agreement and the transactions
contemplated thereby requires the affirmative vote of
holders of two-thirds of the outstanding Investors Class A
and Class B Common shares, with the aggregate number of
shares of both classes voting together as a single voting
group. Approval of the Merger Agreement and the
transactions contemplated thereby also requires the
affirmative vote of holders of two-thirds of the
outstanding shares of Central Common Stock. However, as a
practical matter, approval by Central shareholders is
assured because Investors, which holds 93.0% of the Central
Common shares, intends to vote in favor of the Merger and
Exchange. See "The Special Meetings -- Voting Securities."
No shareholder vote of Citizens is required by the Merger
Agreement or applicable law. As of the Record Date, there
were 16,980,340 issued and outstanding shares of Citizens
Class A Common Stock plus an insignificant number of shares
issued in an offering presently being conducted outside of
the United States. See "Risk Factors -- Proposed Offering
of 3,500,000 Shares." However, in conjunction with the
acquisition on September 14, 1995 by Citizens of American
Liberty Financial Corporation ("ALFC"), a Louisiana based
life insurance holding company, approximately 2,341,000
additional shares of Citizens Class A Common Stock are
expected to be issued in exchange for shares of ALFC stock.
See "Risk Factors -- Acquisition."
</TABLE>

I-XII
<PAGE> 18
<TABLE>
<S> <C>
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS The Investors Board of Directors has unanimously approved
the Merger Agreement and recommends that the shareholders
vote FOR approval of the Merger and Exchange. This
recommendation is based on factors described under
"Proposed Merger and Exchange -- Background and Reasons for
the Merger and Exchange," that based upon considerations
set forth therein, the exchange ratio in the Merger
Agreement is fair, from a financial point of view, to all
of the shareholders of Investors.

The Central Board of Directors has unanimously approved the
Merger Agreement and recommends that the shareholders vote
FOR approval of the Merger and Exchange. This
recommendation is based on factors described under
"Proposed Merger and Exchange -- Background and Reasons for
the Merger and Exchange," that based upon considerations
set forth therein, the exchange ratio in the Merger
Agreement is fair, from a financial point of view, to all
of the shareholders of Central.
</TABLE>

I-XIII
<PAGE> 19
<TABLE>
<S> <C>
OUTSTANDING SHARES OF INVESTORS As of the Record Date there were outstanding 807,649 shares
of Investors Class A Common Stock and 472,423 shares of
Investors Class B Common Stock, comprising a single voting
group (for purposes of voting upon the Merger Agreement) of
a total of 1,280,072 shares of both classes. As of the
Record Date, Investors' directors, executive officers and
their affiliates held 275,257 shares of Investors Class A
Common Stock or approximately 34.1% of such shares entitled
to vote on the Merger and Exchange and 313,758 shares of
Investors Class B Common stock or 66.4% of such shares
entitled to vote. The total Class A and Class B shares
held by Investors' directors, executive officers, and their
affiliates, was 589,015 shares, comprising 46.0% of the
shares in the combined voting group of both classes of
stock. Citizens has the option of not completing the
Merger and Exchange if the holders of more than 2.5% of
outstanding Investors shares perfect dissenters rights.
See "The Special Meetings -- Voting Securities" and "Rights
of Dissenting Investors and Central Shareholders."

OUTSTANDING SHARES OF CENTRAL As of the Record Date, there were outstanding 650,000
shares of Central Common Stock, its only authorized class
of capital stock. As of the Record Date, Investors
directly held 604,475 shares of Central Common Stock or
93.0% of such outstanding shares. The shares of Central
held by Investors will not be eligible for exchange under
the terms of the Merger Agreement. As of the Record Date,
Central's directors, executive officers, and their
affiliates, excluding Investors, held 35,427 shares of
Central Common Stock, or 5.5% of such outstanding shares.
Citizens has the option of not completing the Merger and
Exchange if the holders of more than 2.5% of outstanding
Central shares of stock perfect dissenters' rights. See
"The Special Meetings -- Voting Securities" and "Rights of
Dissenting Investors and Central Shareholders."
</TABLE>

I-XIV
<PAGE> 20
<TABLE>
<S> <C>
THE PLAN AND AGREEMENT OF MERGER AND EXCHANGE

SUMMARY OF THE TRANSACTION Citizens, Acquisition, Investors and Central have entered
into a Plan and Agreement of Merger and Exchange dated
November 28, 1994 (the "Merger Agreement") in which
Acquisition will merge with and into Investors, and
Investors shareholders will receive shares of Citizens
Class A Common Stock; and Investors and Central will effect
a statutory plan of exchange in which the Central
shareholders (other than Investors) will exchange their
Central Common Stock for Citizens Class A Common Stock.

CONSIDERATION FOR EACH SHARE OF INVESTORS AND CENTRAL Pursuant to the Merger Agreement, holders of Investors
Common Stock will receive one share of Citizens Class A
Common Stock for each eight shares of Investors Common
Stock (Class A or Class B) held as of the Record Date.
Holders of shares of Central Common Stock, other than
Investors, will receive one share of Citizens Class A
Common Stock for each four shares of Central held as of the
Record Date. Fractional shares will not be issued; rather,
such fractional shares shall evidence the right to receive
a cash value per fractional share of Citizens Class A
Common Stock based upon a value of $7.00 per Citizens Class
A share. Any holder of Investors or Central stock who
shall have properly perfected dissenters rights under
Illinois law shall not have the right to receive Citizens
Class A Common Stock, but only cash. See "Proposed Merger
and Exchange -- Receipt of Citizens Shares" and "Rights of
Dissenting Investors and Central Shareholders."
</TABLE>

I-XV
<PAGE> 21
<TABLE>
<S> <C>
CLOSING DATE The Merger Agreement provides that the actions contemplated
thereby will be completed at closing ("Closing") on the
closing date ("Closing Date") which shall be as soon as
possible after all regulatory approvals and shareholder
approvals are obtained in accordance with law. The actions
contemplated by the Merger Agreement will become effective
("Effective Date") on or as soon as possible after the
Closing Date. It is fully anticipated that the Closing
will occur and the Merger and Exchange will become
effective on or shortly after shareholder approval is
obtained, but there can be no assurance that the conditions
to the proposed transactions will be satisfied and that
they will be consummated.

CONDUCT OF BUSINESS OF INVESTORS AND CENTRAL PRIOR TO Investors and Central have agreed that they will not enter
CLOSING into any transactions prior to the Effective Date of the
Merger and Exchange other than in the ordinary course of
business and will not pay stockholder dividends or increase
the compensation of officers and will not enter into any
agreement or transaction which will adversely affect their
respective financial conditions. See "Proposed Merger and
Exchange -- Conduct of Business Pending the Merger and
Exchange; Other Covenants of the Parties."
</TABLE>

I-XVI
<PAGE> 22
<TABLE>
<S> <C>
DISSENTERS RIGHTS Under the Illinois Business Corporation Act of 1983,
shareholders of Investors and Central have the right to
dissent from the Merger and Exchange and demand payment of
the value of their shares in cash. If holders of more than
2.5% of the outstanding shares of either Investors or
Central qualify as dissenters, Citizens may, at its option,
decline to proceed with the proposed transactions. See
"Rights of Dissenting Investors and Central Shareholders,"
"Proposed Merger and Exchange -- Other Conditions to
Consummation of the Merger and Exchange," and Appendix B
which sets forth the relevant Illinois statutes concerning
rights of dissenting shareholders.

CONDITIONS PRECEDENT TO THE MERGER AND EXCHANGE In addition to approval by holders of Investors and Central
Common Stock, the Merger and Exchange is subject to the
satisfaction (or waiver by the party entitled to the
benefit thereof) of a number of conditions including (1)
the performance by each party of its respective
obligations, (2) the absence of any legal proceedings
relating to the transactions contemplated by the Merger
Agreement, (3) the continued material accuracy of
representations made by each party, and (4) the delivery of
certain legal opinions. See "Proposed Merger and Exchange
-- Other Conditions to Consummation of the Merger and
Exchange."
</TABLE>

I-XVII
<PAGE> 23
<TABLE>
<S> <C>
SUMMARY OF FEDERAL INCOME TAX CONSIDERATIONS The Merger and Exchange are intended to be treated as a
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and
that, accordingly, for federal income tax purposes: (i) no
material gain or loss will be recognized by Investors,
Central or Citizens as a result of the Merger and Exchange;
(ii) no gain or loss will generally be recognized by
holders of Investors Class A or Class B Common Stock and
the Central Common Stock on the exchange of their shares of
their stock for Citizens Class A Common Stock pursuant to
the Merger and Exchange; and (iii) the aggregate adjusted
tax basis of the Citizens Class A Common Stock received by
an Investors or Central shareholder in exchange for
Citizens Class A Common Stock will be the same as the basis
of the Investors and Central stock surrendered in exchange
therefor. If the Merger and Exchange were not to so
qualify, the exchange of shares would be taxable. If any
Central shareholders perfect dissenters' rights and receive
cash payment in exchange for their Central Common Stock,
the exchange of Central Common Stock would not qualify as a
reorganization and would be taxable to all Central
shareholders. See "Certain Federal Income Tax
Consequences."

INVESTORS AND CENTRAL SHAREHOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER AND EXCHANGE, AS WELL AS ANY
APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES,
IN LIGHT OF THEIR OWN PARTICULAR TAX SITUATIONS.
</TABLE>

I-XVIII
<PAGE> 24
<TABLE>
<S> <C>
TERMINATION OF THE MERGER AGREEMENT The Merger Agreement may be terminated by either party if
the Effective Date does not occur by November 9, 1995. See
"Proposed Merger and Exchange -- Other Conditions to
Consummation of the Merger and Exchange." The Merger
Agreement may be amended upon the approval of the Board of
Directors of each party provided that the number of shares
of Citizens Class A Common Stock to be issued cannot be
changed without the approval of the shareholders of
Investors and Central. In addition, the Merger Agreement
may be terminated and amended at any time prior to the
Effective Date by unanimous consent of the parties; by any
of the beneficiaries to conditions precedent to the
consummation of the Merger and Exchange if the condition
has not been met unless the condition has been waived; by
any party if any suit, action, or proceedings pending in a
court or governmental agency threatens to prohibit the
transactions contemplated by the Merger and Exchange; or if
any party has discovered any material error in the
representations of the other parties. See "Proposed Merger
and Exchange -- Termination or Amendment of the Merger
Agreement."

OTHER MATTERS The Investors Board and the Central Board know of no other
matters that will come before the Meetings. If any
additional matters come before the Meetings, the proxies
will be voted at the discretion of the proxy holders.
</TABLE>

I-XIX
<PAGE> 25
COMPARATIVE PER SHARE DATA

The following table compares the historical and pro forma per share
data for Citizens, Insurance Investors & Holding Co., Inc. ("Investors" or
"II"), and American Liberty Financial Corporation ("ALFC"), a company that was
acquired by Citizens on September 14, 1995. The ALFC data is included because
of its size and materiality. Citizens management believes that the acquisition
of Investors is probable. Hence, pro forma information is included herein for
both acquisitions. However, there can be no assurances that the Investors
acquisition will occur. The pro forma data reflects the transactions as if
they were accounted for as purchases. The data contained in the table is based
upon the historical and pro forma financial statements appearing elsewhere
herein and should be read in conjunction with the financial statements and the
related notes (all financial statement data is in thousands, except per share
amounts).

<TABLE>
<CAPTION>
CITIZENS CLASS A HISTORICAL ALFC HISTORICAL II EQUIVALENT SHARE
COMMON STOCK COMMON STOCK COMMON STOCK PRO FORMA II COMMON STOCK
------------ ------------ ------------ --------- ---------------
<S> <C> <C> <C> <C> <C>
Income per share
before extraordinary
items $ 0.25 $ (0.20) $ (0.10) $ 0.25 $ 0.03
Year Ended
December 31, 1994

Book value per share
December 31, 1994 $ 1.99 $ 3.82 $ 0.73 $ 2.75 $ 0.34
</TABLE>

Equivalent per share data was computed by dividing the pro forma per
share amounts by the exchange factor of eight Investors shares. No cash
dividends have been paid by Citizens, Investors or ALFC.

I-XX
<PAGE> 26
SELECTED SUMMARY FINANCIAL INFORMATION

CITIZENS, INC.
INTRODUCTION TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated balance
sheet, as of June 30, 1995, reflects the purchases of ALFC and Investors by
Citizens as if they occurred on June 30, 1995. The unaudited pro forma
condensed consolidated income statements, for the year ended December 31, 1994
and the six months ended June 30, 1995, reflect the purchases of ALFC and
Investors as if they had occurred on January 1, 1994. These financial
statements should be read in conjunction with the accompanying notes and the
separate historical financial statements of Citizens incorporated by
reference, and of Investors included elsewhere herein. Discussion of the
Investors data is limited because of its immateriality relative to Citizens and
ALFC.

Management's estimate of the impact of applying purchase accounting,
as if the two acquisitions had occurred as described above is presented below.
The unaudited pro forma financial information is not necessarily indicative
either of the results of operations that would have occurred had the
acquisitions been consummated at the beginning of 1994 or in 1995 or of future
results of operations of the consolidated entities.

Some assumptions used to prepare the following pro forma financial
statements differed as between the historical and pro forma assumptions.
Earned interest for the historical was 6.5% to 7.0%, whereas the pro forma
assumption was 7.0%. For the historical, acquisition expense per life policy
underwritten was $80-$100, and pre-need was $30, and accident and health
("A&H") was $5. The respective pro forma expense assumptions were $92-$96 and
$30-$40, and for A&H, $66 to $80. Maintenance expense for the historical was
assumed to be $0 for both life and A&H, while for pro forma purposes, the life
assumptions were $40 (premium paying) and $20 (paid up), and A&H was $40.
Commission assumptions for historical A&H were actual commission scale less 20%
of premium generally, but not less than 0%. Pro forma A&H commission
assumptions were based on actual commission scale. Servicing commissions for
historical on both life and A&H were 0%, while for pro forma the assumption was
2%. All other assumptions were the same between historical and pro forma.

Pro Forma Management's Discussions and Analyses of Financial Condition
and Results of Operations immediately follow the respective pro forma financial
statements.

I-XXI
<PAGE> 27
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL
CITIZENS HISTORICAL HISTORICAL PURCHASE
AND ALFC AND INSURANCE ADJUSTMENTS AND PRO FORMA
SUBSIDIARIES SUBSIDIARIES INVESTORS ELIMINATIONS CONSOLIDATED
------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:

Premiums $43,861 7,698 53 $51,612
Net investment income 5,296 1,026 108 6,430
Other 55 189 0 244
------- ------ ----- -------
Total revenues 49,212 8,913 161 58,286

Benefits and expenses

Policy benefits 31,301 4,975 93 36,369
Commissions 12,382 513 0 12,895
Capitalization of DAC (13,128) (1,166) 0 586 (a) (13,708)
Amortization of DAC 7,204 1,453 4 (1,385)(a) 7,276
Amortization of cost
of insurance acquired 421 0 0 611 (b) 1,032
Amortization of other intangibles 0 0 0 207 (c) 207
Amortization of excess
of cost over net assets
acquired 186 0 0 438 (d) 624
Other expenses 5,079 3,688 192 8,959
------- ------ ----- ------ -------
Total benefits and
expenses 43,445 9,463 289 457 53,654
------- ------ ----- ------ -------
Income (loss) before taxes 5,767 (550) (128) (457) $ 4,632
======= ====== ===== ====== =======

Net income per share $ 0.24(e)
=======
</TABLE>

I-XXII
<PAGE> 28
EXPLANATION OF PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER
31, 1994:

(a) Amortization and capitalization of deferred policy acquisition
costs are reflected in the accompanying pro forma statement of operations as
follows:

<TABLE>
<CAPTION>
Capitalization Amortization
-------------- ------------
<S> <C> <C>
Historical Citizens $ (13,128) $ 7,204
Historical ALFC and II (1,166) 1,457
--------- -------
Total historical (14,294) 8,661
--------- -------
Reverse historical ALFC and II 1,166 (1,457)
Capitalization of post-purchase (580) 72
--------- -------
Net pro forma adjustment 586 (1,385)
--------- -------

Net $ (13,708) $ 7,276
========= =======
</TABLE>

(b) Amortization of cost of insurance acquired is presented in the
accompanying pro forma statement of operations as follows:

<TABLE>
<S> <C>
Historical Citizens $ 421
-------
Interest accrued at 7% (470)
Amortization of ALFC and II cost of insurance 1,081
-------
Net pro forma adjustment 611
-------
Pro forma amortization $ 1,032
=======
</TABLE>

(c) Identifiable intangible assets include state licenses and
agency force and are being amortized over 10 years. Such amortization amounted
to $207,000 for the 12 months ended December 31, 1994.

(d) The excess of cost over net assets acquired is being amortized
over a 20-year period. Such amortization, reflected in the accompanying pro
forma statement of operations, is $438,000.

(e) Calculated using estimated common shares outstanding of
19,433,080.

I-XXIII
<PAGE> 29
PRO FORMA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1994 (PRO FORMA BASIS)

Net income for the year ended December 31, 1994 was $4,560,000. Revenues
increased to $58,286,000. The merger of ALFC was the primary reason for the
increased revenues during 1995. ALFC has subsidiaries which engage in several
business segments that Citizens has not focused on. Primary among such
subsidiaries is the operation of funeral homes in Louisiana. Citizens intends
to evaluate such operations to determine their viability following the merger;
however, this business is immaterial to Citizens' overall operations.

Premium income for the year ended December 31, 1994 was $51,612,000. The
impact of the ALFC merger increased premiums by $7,698,000 during the period.
During 1995, management expects production of new premiums to reach $12 million
as a result of the new business generated by the Company's agency force, as
well as the field force of ALFC; thus, it is expected that premium income will
continue to increase in future years.

Net investment income for 1994 was $6,430,000. Such income was enhanced by the
$1,026,000 contribution from ALFC during the period. Management expects to
evaluate the portfolio of ALFC; however it has no plan for major dispositions
at this time.

Deferred acquisition costs reflect the capitalization of costs related only to
1994 production for ALFC, along with those historically capitalized for
Citizens. All previously capitalized costs were accounted for as a part of the
merger transaction.

Underwriting, acquisition, insurance and other expenses were $8,959,000 for the
year. These expenses include the expenditures of ALFC and Investors for the
year 1994. Management believes that reductions in such level of overhead are
attainable in future years; however, such reductions cannot be achieved until
such time as ALFC's data processing system is converted to Citizens' data
processing system, which management does not foresee occurring until sometime
in 1996. Even after that time, reductions cannot be realized until management
has made a complete evaluation of the affairs of ALFC following the
transaction. Management has not made an estimate of the amount of overhead
reduction anticipated, but believes overhead can be reduced in future years as
a result of economies of scale being achieved as the various companies'
operations are integrated.

The amortization of the excess of cost over net assets acquired in the ALFC
transaction is based on an amortization of 20 years. The 20 year period is
based upon the expected life of the in-force block of business acquired in the
transaction. Based upon an actuarial evaluation of the business and its
historical runoff, significant portions of the life and accident and health
business remain in-force after 20 years. Management believes the

I-XXIV
<PAGE> 30
amortization period best provides a correlation between the amortization and
the run off of the business. The amortization of the cost of insurance
acquired is based upon the proportion of the profit to the expected lives of
the respective policies. Intangible assets acquired in the transaction which
are primarily the state licenses of ALFC and its agency force, are amortized
over a period of ten years.

ALFC has certain net operating loss carryforwards. Although such
carryforwards are significant, management believes them to be of little value
to the combined entities following the merger as the result of limitations
imposed upon their utilization by the Internal Revenue Code.

I-XXV
<PAGE> 31
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(AMOUNTS IN THOUSANDS)

PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL
CITIZENS INC HISTORICAL HISTORICAL PURCHASE
AND ALFC AND INSURANCE ADJUSTMENTS AND PRO FORMA
ASSETS SUBSIDIARIES SUBSIDIARIES INVESTORS ELIMINATIONS CONSOLIDATED
------ ------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Long term Investments $ 91,111 $15,018 $2,138 $ 64 (a) $108,331
Short term Investments 9,495 942 0 0 10,437
-------- ------- ------ ------- --------
Total Investments 100,606 15,960 2,138 64 118,768

Cash 3,274 709 211 4,194
Other receivables 3,107 438 0 3,545
Accrued investment
income 1,268 316 31 1,615
Deferred policy
acquisition costs 36,165 6,831 49 (6,880) (b) 36,165
Cost of insurance
acquired 2,188 0 0 5,828 (e) 8,016
Excess of cost over net
assets acquired 3,252 0 0 8,078 (c) 11,330
Other intangible assets 0 0 0 1,816 (d) 1,816
Deferred taxes 393 1,839 0 (980) (g) 1,252
Other assets 7,096 786 1 0 7,883
-------- ------- ------ ------- --------
Total Assets $157,349 $26,879 $2,430 $ 7,926 $194,584
======== ======= ====== ======= ========
</TABLE>

I-XXVI
<PAGE> 32
PRO FORMA CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1995
(UNAUDITED)

HISTORICAL
LIABILITIES AND CITIZENS INC HISTORICAL HISTORICAL PURCHASE
---------------- AND ALFC AND INSURANCE ADJUSTMENTS AND PRO FORMA
STOCKHOLDERS EQUITY SUBSIDIARIES SUBSIDIARIES INVESTORS ELIMINATIONS CONSOLIDATED
-------------------- ------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Future policy benefit
reserves $106,715 $14,621 $ 709 $ 559 (f) $122,604
Other policyholder
liabilities 8,483 1,772 359 10,614
Other liabilities 2,785 359 45 3,189
Notes payable 794 0 319 1,113
Deferred tax liability 0 1,825 0 (1,825) (h) 0
Minority interest 0 16 96 (112) (h) 0
-------- ------- ------ ------- --------

Total liabilities 118,777 18,593 1,528 (1,378) 137,520

Class A common stock 21,457 250 819 17,423 (h) 39,949
Class B common stock 283 0 47 (47) (h) 283
Preferred stock 0 263 0 (263) (h) 0
Additional paid-in
capital 0 6,030 576 (6,606) (h) 0
Unrealized loss on
investments (744) 0 (15) 15 (h) (744)
Retained earnings 19,757 1,743 (516) (1,227) (h) 19,757
-------- ------- ------ ------- --------
40,753 8,286 911 9,295 59,245
Treasury stock (2,181) 0 (9) 9 (2,181)
-------- ------- ------ ------- --------
Total stockholders'
equity 38,572 8,286 902 9,304 57,064
-------- ------- ------ ------- --------

Total liabilities and
stockholders' equity $157,349 $26,879 $2,430 $ 7,926 $194,584
======== ======= ====== ======= ========
</TABLE>

I-XXVII
<PAGE> 33
EXPLANATION OF PRO FORMA ADJUSTMENTS AS OF JUNE 30, 1995:

(a) Adjustment necessary to record acquired fixed maturities at
market value.

(b) Deferred policy acquisition costs are reflected in the
accompanying pro forma financial statements as follows:

<TABLE>
<S> <C>
Historical Citizens $36,165
Historical ALFC and II 6,880
-------
Historical DAC 43,045
Reverse historical ALFC and II (6,880)
-------
Net DAC $36,165
=======
</TABLE>

(c) Establish cost of insurance acquired. Cost of insurance
acquired represents the estimated present value of future
profits in the acquired business. This amount was calculated
as the difference between ALFC's and II's historical future
policy benefit reserves and the estimated gross premium
reserve at June 30, 1995. The gross premium reserve was
estimated assuming a level interest yield of 7%. Life
mortality was based on appropriate multiples of the 1965-70
Select and Ultimate and the Ultimate Intercompany Table and
withdrawals based on Linton B and BB tables as deemed
appropriate based on individual life plan experience.
Accident and health morbidity was based on multiples of 1974
Cancer tables, Stroke/Heart Attack Indemnity Table, 1985 NAIC
Cancer Tables and published claim costs and withdrawals based
on Linton C and CC Tables as deemed appropriate based on
individual health plan experience. Cost of insurance acquired
is being amortized in proportion to the profit over the lives
of the respective policies.

Cost of insurance acquired is presented in the accompanying
pro forma financial statements as follows:

<TABLE>
<S> <C>
Historical Citizens $2,188

ALFC and II cost of insurance capitalized
5,828
------
Pro forma cost of insurance acquired $8,016
======
</TABLE>

(d) Allocation of purchase price to identifiable intangible
assets. Identifiable intangible assets include state licenses
and agency force and are being amortized over 10 years.

(e) Excess of cost over net assets acquired was calculated as
follows: (in thousands)

I-XXVIII
<PAGE> 34

<TABLE>
ALFC II TOTAL
<S> <C> <C> <C>
Acquisition of common stock $17,575 929 18,504
Estimated fair value of net
assets acquired (9,436) (990) (10,426)
======= ===== ========
Excess of cost (purchase price)
over net assets acquired $ 8,139 (61) 8,078
</TABLE>

(f) Revaluation of policy benefit reserves to reflect Company
reserve assumptions with regard to interest rates, lapse rates
and surrenders.

(g) Establish deferred taxes for basis differences between book
and tax value of assets and liabilities at June 30, 1995.

(h) Eliminate ALFC and II capital, minority interest, and retained
earnings and record the cost of net assets acquired as
increased capital of the Company due to the issuance of
additional Class A common shares.

I-XXIX
<PAGE> 35
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL PURCHASE
CITIZENS INC AND ALFC AND INSURANCE ADJUSTMENTS AND PRO FORMA
SUBSIDIARIES SUBSIDIARIES INVESTORS ELIMINATIONS CONSOLIDATED
------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:

Premiums $20,611 $3,782 $ 33 $ 24,426
Net investment income 3,124 580 68 3,772
Other (48) 128 0 0 80
------- ------ ----- ---- --------
Total revenues 23,687 4,490 101 0 28,278

Benefits and Expenses

Policy benefits 15,286 1,990 55 17,331
Commissions 5,251 0 0 5,251
Capitalization of DAC (5,498) 0 0 (250) (a) (5,748)
Amortization of DAC 3,871 666 3 (500) (a) 4,040
Amortization of cost
of insurance acquired 177 0 0 278 (b) 455
Amortization of other
intangibles 0 0 0 94 (c) 94
Amortization of excess
of cost over net assets
acquired 93 0 0 198 (d) 291
Other expenses 2,806 1,668 80 0 4,554
------- ------ ----- ---- --------
Total benefits and
expenses 21,986 4,324 138 (180) 26,106
------- ------ ----- ---- --------

Income (loss) before taxes $ 1,701 $ 166 $ (37) $180 $ 2,010
======= ====== ===== ==== ========

Net income per share $0.10(e)
=====
</TABLE>

I-XXX
<PAGE> 36
EXPLANATION OF PRO FORMA STATEMENT OF OPERATIONS FOR THE
SIX-MONTH PERIOD ENDED JUNE 30, 1995:

(a) Amortization and capitalization of deferred policy acquisition
costs are reflected in the accompanying pro forma statement of
operations as follows: (in thousands)

<TABLE>
<CAPTION>
CAPITALIZATION AMORTIZATION
-----------------------------------
<S> <C> <C>
Historical Citizens (5,498) 3,871
Historical ALFC and II 0 669
------ -----
Total Historical (5,498) 4,540
------ -----
Reverse Historical ALFC and II 0 (669)
Capitalization of Post-Purchase (250) 169
------ -----
Net Pro Forma adjustment (250) (500)
------ -----
Net (5,748) 4,040
</TABLE>

(b) Amortization of cost of insurance acquired is presented in the
accompanying pro forma statement of operations as follows: (in
thousands)

<TABLE>
<S> <C>
Historical Citizens $177
----
Interest accrued @ 7% (205)

Amortization of ALFC and II cost of
insurance 483
----
Net Pro Forma adjustment 278
----
Pro forma amortization $455
</TABLE>

Estimated amortization of cost of insurance acquired of ALFC
and II, assuming a purchase date of January 1, 1995, is
$482,000, $433,000, $390,000, $360,000 and $336,000 for each
year, respectively, in the five year period ending December
31, 1999.

(c) Identifiable intangible assets include state licenses and
agency force and are being amortized over 10 years. Such
amortization amounted to $94,000 for the six months ended June
30, 1995.

(d) Excess of cost over net assets acquired is being amortized
over a 20-year period. Such amortization, reflected in the
accompanying pro forma statement of operations is $198,000.

(e) Calculated using estimated common shares outstanding of
19,433,080.

I-XXXI
<PAGE> 37
PRO FORMA MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1995
PRO FORMA BASIS

Net income for the six months ended June 30, 1995 was $2,010,000.
Revenues increased to $28,278,000. The merger of ALFC and II was the primary
reason for the increased revenues during 1995. ALFC has subsidiaries which
engage in several business segments that Citizens has not historically focused
on. Primary among such subsidiaries is the operation of funeral homes in
Louisiana. Citizens intends to evaluate such operations to determine their
viability following the merger; however, this business is immaterial to Citizen
s overall operations.

Premium income for the first half of 1995 was $24,426,000. This
26.6% increase is the result of the impact of the ALFC and II merger which
increased premiums by $3,815,000 during the period. During 1995, Management
expects the production of new premiums to reach $12 million as a result of the
new business generated by the Company s agency force as well as the field force
of ALFC.

Net investment income for the first six months of 1995 was
$3,772,000. Such income was enhanced by the $648,000 contribution from ALFC
and II to earnings during the period. Management expects to evaluate the
portfolio of ALFC and II; however, there are no plans for major dispositions at
this time.

Underwriting, acquisition and insurance expenses were $4,554,000
following the transaction. Management believes that reductions in such level
of overhead are attainable in future years; however, such reductions cannot be
achieved until such time as ALFC's data processing systems are converted to
Citizens data processing system, which Management does not foresee occurring
until sometime in 1996. Even after that time, reductions cannot be realized
until Management has made a complete evaluation of the affairs of ALFC
following the transaction. Management has not made an estimate of the amount
of overhead reduction anticipated, but believes overhead can be reduced in
future years as the result of economies of scale being achieved as the various
companies' operations are integrated.

The amortization of the excess of cost over net assets acquired in
the ALFC transaction and the II transaction is based on a period of 20 years.
The 20 year period is based upon the expected life of the in-force block of
business acquired in the transactions. Based upon an actuarial evaluation of
the business and its historical runoff, significant portions of the life and
accident and health business remain in-force after 20 years. Management
believes the amortization period best provides a correlation between the
amortization and the runoff of the business. The amortization of the cost of
insurance acquired is based upon the proportion of the profit to the expected
lives of the respective

I-XXXII
<PAGE> 38
policies. Intangible assets acquired in the transactions, which are primarily
the state licenses and ALFC's agency force, are amortized over a period of 10
years.

ALFC and II have certain net operating loss carryforwards. Although
such carryforwards are significant, Management believes them to be of little
value to the combined entity following the merger as the result of limitations
imposed upon their utilization by the Internal Revenue Code.

I-XXXIII
<PAGE> 39
RISK FACTORS

The following risk factors, in addition to those discussed elsewhere
in this Proxy Statement-Prospectus, should be considered carefully in
evaluating Citizens and its business.

SIGNIFICANT MARKET OVERHANG. A registration statement of Citizens on
Form S-3 with the Securities and Exchange Commission ("SEC") is in effect
relating to the public offer and sale by certain holders of Citizens Class A
Common Stock, including Harold E. Riley, Chairman of the Board of Citizens.
The registration statement relates to approximately 6,099,657 shares of Class A
Common Stock or approximately 31.6% of the Citizens Class A Common Stock
outstanding, including the shares to be issued in conjunction with the ALFC
acquisition (see "Acquisition" below), but before the Merger and Exchange and
the "Proposed Offering of 3,500,000 Shares" as described below. It may be
assumed that sales of significant amounts of these shares in the public market
could have a depressive effect on the price of the Citizens Class A Common
Stock. Further, the prospect, even without the actual sales, of such
significant amounts of shares being offered into the public market place may
have a depressive effect on the price of the Citizens Class A Common Stock.

RECENT SALE OF SHARES AND EFFECT THEREOF. On October 27, 1994,
Citizens completed an offering of 916,375 shares of its Class A Common Stock
under an exemption from registration under the Securities Act of 1933. The
offering was made under Regulation S, which provides that shares which are
offered outside of the United States to non-United States persons pursuant to
certain specific guidelines may be resold in the United States by persons who
are not an issuer, underwriter or dealer following the expiration of a 40-day
period after the close of the offering period. The offering price per share
was $7.00. Gross proceeds raised were $6,414,625 and net proceeds were
approximately $5,400,000. On December 21, 1994, Citizens contributed
$5,200,000 in capital to its wholly-owned life insurance subsidiary. The
subsequent resale of the Citizens Class A shares sold in this offering into the
public market could adversely affect the price of the Citizens Class A Common
Stock and it may be assumed that overseas investors would have more of an
incentive to sell their Class A common shares because the price they paid for
such stock was $7.00 per share.

PROPOSED OFFERING OF 3,500,000 SHARES OF CITIZENS CLASS A COMMON STOCK
OUTSIDE THE UNITED STATES AND EFFECT THEREOF. In May 1995, Citizens began an
offering of up to 3,500,000 shares of Class A Common Stock outside the United
States pursuant to a safe harbor rule relating to an exemption from
registration under the Securities Act of 1933. Citizens has restricted the
transfer of such shares for a period of three years following the initial
purchase, and a legend to such effect will be placed on each certificate for
such shares. The initial offering price is $7.50 per share, which is a
discount to the current market price of the Citizens Class A Common Stock as
quoted on the American Stock Exchange.

1
<PAGE> 40
Management is unable to determine how successful the offering will be.
In the event all 3,500,000 shares are sold, the Company would realize gross
proceeds that management estimates would be in the range of $25 to $30 million,
based upon the current trading price of the Citizens Class A Common Stock.

Subsequent resale of these shares in the United States could have a
depressive effect upon the price of the Class A common shares, and it may be
assumed that overseas investors would have more of an incentive to sell their
Class A common shares because the price they paid for such stock will probably
be lower than the trading price of the Class A Common Stock.

ACQUISITION. On September 14, 1995, Citizens acquired ALFC, a Baton
Rouge, Louisiana based life insurance holding company. The ALFC agreement
provides that following the acquisition by Citizens, ALFC shareholders will
receive 1.10 shares of Citizens Class A Common Stock for each share of ALFC
Common Stock owned and 2.926 shares of Citizens Class A Common Stock for each
share of ALFC Preferred Stock owned. Citizens expects to issue approximately
2.3 million Class A shares 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 subsequent sale of
shares issued in this transaction could have a depressive effect on the market
price of the Class A shares.

DEPENDENCE ON CITIZENS' CHAIRMAN. Citizens relies heavily on the
active participation of its Chairman of the Board, Harold E. Riley. The loss
of his services would likely create a significant adverse effect on Citizens.
Citizens does not have an employment agreement with Mr. Riley, but does have
"key man" life insurance on Mr. Riley totaling $1.25 million of which Citizens
is the beneficiary. Citizens has no disability insurance regarding Mr. Riley.

CONTROL. The shares of outstanding Class B Common Stock of Citizens,
100% of which is owned indirectly (through the Harold E. Riley Trust) by Harold
E. Riley, Chairman of the Board of Citizens, have the right to elect a simple
majority of the Board of Directors of Citizens. This right may make it more
difficult and time consuming for a third party to acquire control of Citizens
or to change the Board of Directors of Citizens. Additionally, Mr. Riley is
the largest Class A shareholder. As a practical matter, Mr. Riley has veto
power over significant corporate transactions.

CONCENTRATION OF BUSINESS FROM PERSONS RESIDING IN THIRD WORLD
COUNTRIES. For the years ended December 31, 1994 and 1993, approximately 91.8%
and 92.5%, respectively, of Citizens' total insurance premium revenue was
derived from policies issued on the lives of Latin Americans. The policies
issued to such persons are ordinary, whole-life policies with an average face
amount of $60,000 and are marketed by independent marketing firms primarily to
heads of households which are in the top 3%

2
<PAGE> 41
to 5% income bracket of such countries. Virtually all of the new business of
Citizens' present life insurance subsidiary comes from Latin America as well.
There is a risk of loss of a significant portion of sales to Latin Americans
should adverse events occur in the countries from which Citizens receives
applications. To minimize inherent risk, Citizens is not chartered as an
insurance company in any foreign country, maintains no assets or employees in
foreign countries, accepts only applications and premiums remitted directly to
its main office in United States currency drawn on U.S. banks, and includes
various limitations to coverage which are designed to minimize exposure to loss
caused by social, economic and political conditions. Citizens is not aware of
any adverse trends in these countries which would have a material adverse
impact on the Company's business. Furthermore, management believes that
political or economic instability in these countries would likely have a
favorable impact on the Company's business since such instability would
generally strengthen the demand for U.S. dollar-denominated policies.

INABILITY TO ELECT DIRECTORS. The Class A Common Stock of Citizens
being offered hereby represents a minority interest in Citizens. As cumulative
voting of shares is not permitted by the Articles of Incorporation of Citizens,
the minority shareholders of Citizens cannot through their votes alone elect
any of Citizens' directors or otherwise control Citizens. Also, the Class B
Common Stock of Citizens elects a simple majority of the Citizens' Board.
Therefore, as a practical matter, control of Citizens lies outside the Class A
shareholders. See "Comparison of Rights of Security Holders."

NO DIVIDENDS. To date, Citizens has not paid cash dividends and its
current policy is to retain earnings for use in the operations and expansion of
its business. Hence, it is highly unlikely that cash dividends will be paid in
the near future. Also, the Class A Common Stock of Citizens has a right to
twice the cash dividends of the Class B shares. Because the Class B
shareholders control Citizens, there is little economic incentive for the Class
B shareholders to decide that cash dividends should be paid when they will
receive only one-half of the per share cash dividends of the Class A common
shares, except that the beneficiaries and trustee of the Harold E. Riley Trust,
which holds the Class B Common shares, are also the largest holders of Class A
Common shares of Citizens.

PERSISTENCY. Persistency is the extent to which policies sold remain
in-force. Policy lapses over those actuarially anticipated could have an
adverse effect on the financial performance of Citizens. Policy sales costs
are deferred and recognized over the life of a policy. Excess policy lapses,
however, cause the immediate expensing or amortizing of deferred policy sales
costs. As long as Citizens maintains its lapse and surrender rate within its
pricing assumptions for its insurance policies, Citizens believes that its
present lapse and surrender rate should not have a material adverse effect on
its financial results. For the years ended December 31, 1994, 1993 and 1992,
the Citizens' lapse ratio on ordinary business was 5.1%, 6.7% and 6.5%,
respectively. In addition, most of Citizens' ordinary whole life policies are
sold to residents of Latin American countries. Most of the policyholders have
elected, through independent third party trustees, to have their cash dividends
be used to accumulate ownership of the Citizens Class A Common

3
<PAGE> 42
Stock in the open market. Management believes that this arrangement serves to
keep persistency high by industry standards, as demonstrated by a comparison of
Citizens' persistency rates against a commonly-used scale of persistency in the
industry.

COMPETITION. The life insurance business is highly competitive and
consists of a number of companies, many of which have greater financial
resources, longer business histories, and more diversified lines of insurance
coverage than Citizens. Such companies also generally have larger sales
forces. Citizens also faces competition from companies located within foreign
countries that conduct marketing in person and have direct mail sales
campaigns. Citizens may be at a competitive disadvantage in competing with
these entities although management believes the products of Citizens purchased
by its policyholders are competitive in the marketplace. Competition in the
market in which Citizens competes is from three sources. First, Citizens
competes with companies which are formed and operated within a particular
country. These types of companies are subject to risks of currency
fluctuations and generally use mortality tables which are based on the
experience of the local population as a whole. As a result, their prospects of
providing an economic return to policyholders are more uncertain than for U.S.
dollar-based policies, and their statistical cost of insurance is much higher
than Citizens because they use mortality tables that are based on significantly
shorter life spans than those that Citizens uses. The second source of
competition is from companies which are not formed within a given country but
are using local currencies. Again, the use of local-based currencies entails
greater risks of uncertainty, due to fluctuations of local currencies and
perceived instability and weakness of local currencies. Management has
observed that these first two types of companies tend to sell universal life
and annuities versus whole life, which is the predominant type of life
insurance sold by Citizens. Citizens sells primarily whole life policies.
Finally, Citizens faces competition from companies which operate in the same
mode as Citizens. Management believes that Citizens' competitive advantages
include a history of performance, its sales force and its product, which has
consistently paid a cash dividend on the policies issued.

REGULATION. Insurance companies are subject to comprehensive
regulation in the jurisdictions in which they do business under statutes and
regulations administered by state insurance commissioners. Such regulation
relates to, among other things, prior approval of the acquisition of a
controlling interest in an insurance company; standards of solvency which must
be met and maintained; licensing of insurers and their agents; nature of and
limitations on investments; deposits of securities for the benefit of
policyholders; approval of policy forms and premium rates; triennial
examinations of insurance companies; annual and other reports required to be
filed on the financial condition of insurers or for other purposes; and
requirements regarding reserves for unearned premiums, losses and other
matters. Citizens is subject to this type of regulation in any state in which
it is licensed to do business. Such regulation could involve additional costs
and restrict operations.

4
<PAGE> 43
Citizens is currently subject to regulation in Colorado under the
Colorado Insurance Holding Company Act. Intercorporate transfers of assets and
dividend payments from Citizens' life insurance subsidiaries are subject to
prior notice and approval if they are deemed "extraordinary" under these
statutes. Citizens is required under Colorado insurance laws to file detailed
annual reports with the Colorado Division of Insurance and all of the states in
which it is licensed. The business and accounts of life insurance subsidiaries
of Citizens are subject to examination by the Colorado Division of Insurance.
The most recent triennial examination of Citizens' life insurance subsidiary
was for the year ended December 31, 1991.

Citizens is currently not subject to regulation in the various
countries in which its independent agents sell insurance policies, because it
provides persons insurance that is not available in the country in which such
persons reside and does not conduct business in such countries. However, there
can be no assurance that such lack of regulation will continue. Management is
not able to predict the effect of any such regulation of the business of
Citizens.

TRANSACTIONS WITH AFFILIATES. In the past, Citizens has completed a
number of substantial transactions with its affiliates. The largest such
transaction occurred on April 25, 1991 when the Board of Directors of Citizens,
with Harold Riley and Rick Riley abstaining, approved an Asset Transfer
Agreement ("Agreement") whereby Citizens acquired all of the assets and
liabilities of HERMAR Corporation ("HERMAR"), a corporation 100% owned by
Harold E. Riley and members of his family, in exchange for Citizens Class A and
Class B Common Stock. Under the terms of the Agreement, HERMAR transferred to
Citizens all of its assets, principally commercial real estate and Citizens
Class A and B Common Stock, in exchange for 665,162 shares of newly issued
Citizens Class A Common Stock plus the exchange of 7,047,474 Class A and
621,049 Class B Common shares. The consideration was based on the market value
of the net assets transferred compared to the mean of the bid and ask price of
Citizens Class A Common Stock for the period from April 1, 1991 to April 19,
1991. The transaction was consummated in July 1991 with an effective date of
April 1, 1991. Management does not believe that the frequency or magnitude of
these transactions will occur in the future, although as a practical matter,
Citizens and its affiliates are not restricted from entering into additional
business relationships in the future. The transactions entered into with
affiliates have been, in the opinion of management, on terms as favorable to
Citizens as were obtainable from unaffiliated third parties. Citizens requires
that all officers and directors disclose conflicts of interest to the Board of
Directors. Additionally, all material contracts that involve affiliates are
approved by the Board of Directors, and in such approval, affiliates have
abstained from participation in the voting process.

UNINSURED CASH BALANCES. Citizens maintains average cash balances in
two primary depositories that are significantly in excess of Federal Deposit
Insurance Corporation coverage. The two depositories are Texas Commerce Bank,
Austin, Texas and Frost National Bank, Austin, Texas. If these depositories
were to cease business,

5
<PAGE> 44
Citizens would likely lose a substantial amount of its cash. At December 31,
1994, Citizens had approximately $1.69 million in Texas Commerce Bank and
approximately $1.27 million in Frost National Bank. However, management
monitors the solvency of these depositories and does not believe a material
risk of loss exists since both institutions are currently above the federally
mandated levels of capital and liquidity. Management utilizes short-term U.S.
Treasury securities as well as top-rated commercial paper issues as vehicles
for managing temporary excess cash balances, and expects to continue the
practice during 1995.

ECONOMIC STATE OF THE INSURANCE INDUSTRY. The United States life
insurance industry as a whole has, during the past several years, suffered
substantial losses on investments, which has reduced the financial stability of
several insurance companies. Management believes that the main causes of
industry losses have been excessive investment in high yield bonds and real
estate. The life insurance subsidiary of Citizens has minimal holdings in high
yield bonds, and its real estate holdings are primarily limited to relatively
small, seasoned first mortgages on homes. Although the mortgage loans do
create credit risk, management believes the risk exposure to such loss is
relatively minor, since the average size of each mortgage is $28,000.
Management believes that these factors leave Citizens with a small investment
loss risk compared to that to which the industry as a whole is exposed.
However, Citizens and every insurance company are subject to the effects of
fluctuating interest rates and investment spread risks.

INTEREST RATE VOLATILITY: INVESTMENT SPREAD RISKS. Profitability in
the insurance industry is affected by fluctuations in interest rates. Of prime
importance in achieving profitability is an insurance company's ability to
invest premiums at a higher interest rate than the interest rate credited to
existing policies. Rapid decreases or increases in interest rates may affect
an insurance company's ability to maintain a positive spread between the yield
on invested assets and the assumed interest rate credited to policy reserves.
Rapid interest rate changes could cause increased lapses of policies in-force,
although management believes the effect of such rate changes would be minimal
since Citizens does not issue interest sensitive or Universal Life insurance
policies and has only a small block of annuity business.

6
<PAGE> 45
THE SPECIAL MEETINGS

Date, Time and Place of Meetings

A Special Meeting of Shareholders (the "Meeting") of Insurance
Investors & Holding Co. ("Investors") will be held on ______________________,
1995 at _________a.m., Central Time, at _________________________, Peoria,
Illinois.

A Special Meeting of Shareholders (the "Meeting") of Central Investors
Life Insurance Company of Illinois ("Central") will be held on ________________,
1995 at ____ Central Time, at _______________________________, Peoria, Illinois.

BUSINESS TO BE TRANSACTED AT THE SPECIAL MEETINGS

This Proxy Statement-Prospectus, the mailing of which commenced on
____________, 1995, is being furnished to shareholders of Investors and Central
in connection with the solicitation of proxies by the Boards of Directors of
Investors and Central for use at the Meetings and at any adjournments thereof.
At the Meetings, holders of Investors Common Stock and holders of Central
Common Stock will be asked to consider and vote upon approval of a Plan and
Agreement of Merger and Exchange dated November 28, 1994 (the "Merger
Agreement") under which Acquisition, a wholly- owned subsidiary of Citizens
will merge with and into Investors, with the shareholders of Investors
receiving shares of Citizens Class A Common Stock as consideration in the
transaction, and Investors, Citizens and Central will effect a statutory plan
of exchange with Central shareholders other than Investors receiving Citizens
Class A Common Stock as consideration in the transaction. Pursuant to the
Merger Agreement, Investors shareholders will receive in the Merger one share
of Citizens Class A Common Stock for each eight shares of Investors Common
Stock (Class A or Class B) held, and Central shareholders (other than
Investors) will receive in the Exchange one share of Citizens Class A Common
Stock for each four shares of Central Common Stock held (the "Merger and
Exchange").

As of the date of this Proxy Statement-Prospectus, the Boards of
Directors of Investors and Central know of no other business that will come
before their respective Meetings. Should any other matter requiring a vote of
shareholders arise, the proxies named in the enclosed forms of proxy of
Investors and Central will vote the shares in accordance with their discretion
with respect to any such matter.

VOTING SECURITIES

Only shareholders of record of Investors Class A and Class B Common
Stock at the close of business on ____________, 1995 will be entitled to vote
at the Meeting for Investors' shareholders. On that date, there were issued
and outstanding 807,649 shares of Class A Common Stock and 472,423 shares of
Class B Common Stock. Each share

7
<PAGE> 46
of Common Stock (whether Class A or Class B) is entitled to one vote per share
with respect to the Merger and Exchange, and the aggregate number of Class A
and Class B shares will vote together as a single group.

The affirmative vote of two-thirds of outstanding Investors Class A
and B Common Stock is needed to approve the proposal regarding the Merger and
Exchange. Hence, at least two-thirds of the Investors Class A and Class B
Common shares (counted as a single voting group) must be available to be voted
at the Meeting.

The affirmative vote of two-thirds of outstanding Central Common Stock
is needed to approve the proposal regarding the Merger and Exchange. However,
it should be noted that Investors, which owns 93.0% of the outstanding Central
Common shares has indicated that it intends to vote for the proposal.
Accordingly, a sufficient shareholder vote of Central to approve the Merger and
Exchange is assured.

EXECUTIVE COMPENSATION

Current Compensation

The following table sets forth compensation of the President of
Investors and its subsidiaries. No executive officer of Investors or its
subsidiaries received compensation exceeding $100,000 for any of the last three
fiscal years, and hence no other executive officer's annual compensation is
reported. Neither Investors nor any of its subsidiaries have any restricted
stock awards, stock appreciation rights or long-term incentive plans for its
executive officers.

SUMMARY COMPENSATION TABLE

Annual Compensation

<TABLE>
<CAPTION>
==================================================================================================================
(a) (b) (c) (d) (e)
Other
Annual
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank J. Wilkins, 1994 $18,000 -0- $1,044
President (CEO) 1993 18,000 -0- 1,392
1992 18,000 -0- 1,781
==================================================================================================================
</TABLE>

8
<PAGE> 47
Compensation Through Plans and Other Compensation

All employees are covered by a group insurance plan. No option has
been granted to any employee to purchase securities from the Company or any of
its subsidiaries. There are no pension or retirement benefit plans.

Compensation of Directors

Mr. Robert W. McCallum and Mr. Robert D. Wilkins received a $250
yearly director's fee from the Company and each of its two subsidiaries. Mr.
Robert W. Kreutz received a $750 yearly director's fee from the Company's life
subsidiary. Mr. Frank J. Wilkins received no director's fees. See
"Information Concerning Directors and Executive Officers."

INVESTORS VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The following table sets forth, as of October 6, 1995, the shares of
Investors Class A and Class B Common Stock held by each person who is known to
Investors to be the beneficial owner of more than 5% of the Investors Class A
or Class B Common Stock, its only classes of voting securities.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C> <C>
Class A Common Frank J. Wilkins Record & 135,285(b) 16.8%
Stock 6106 Chippewa Ridge Beneficial Shares
Peoria, Illinois 61614

Class B Common Frank J. Wilkins Record & 203,582(b) 43.1%
Stock 6106 Chippewa Ridge Beneficial Shares
Peoria, Illinois 61614

Class A Common Robert W. Kreutz Record & 52,494(c) 6.5%
Stock 5928 North Roxbury Lane Beneficial Shares
Peoria, Illinois 61614

Class B Common Robert W. Kreutz Record & 30,890(c) 6.5%
Stock 5928 North Roxbury Lane Beneficial Shares
Peoria, Illinois 61614

Class A Common Emma Jo Wilkins Record & 82,252 10.2%
Stock 6106 Chippewa Ridge Beneficial Shares
Peoria, Illinois 61614
</TABLE>

9
<PAGE> 48
<TABLE>
<S> <C> <C> <C> <C>
Class B Common Emma Jo Wilkins Record & 68,001 14.4%
Stock 6106 Chippewa Ridge Beneficial Shares
Peoria, Illinois 61614
</TABLE>

The following table sets forth, as of October 6, 1995, the shares of
Investors Class A and Class B Common Stock beneficially owned by each Director
and officer and for all Directors and officers as a group.

<TABLE>
<CAPTION>
Directors Title of Amount and Nature of Percent
and Officers Class Beneficial Ownership of Class
- ------------ ----- -------------------- --------
<S> <C> <C> <C> <C>
Frank J. Wilkins Class A Record & 135,285(b) 16.8%
Common Stock Beneficial Shares

Frank J. Wilkins Class B Record & 203,582(b) 43.1%
Common Stock Beneficial Shares

Robert W. Kreutz Class A Record & 52,494(c) 6.5%
Common Stock Beneficial Shares

Robert W. Kreutz Class B Record & 30,890(c) 6.5%
Common Stock Beneficial Shares

Robert W. Class A Record & 50 (a)%
McCallum Common Stock Beneficial Shares

Robert W. Class B Record & 0 (a)%
McCallum Common Stock Beneficial Shares

Robert D. Wilkins Class A Record & 5,176 (a)%
Common Stock Beneficial Shares

Robert D. Wilkins Class B Record & 11,285 2.4%
Common Stock Beneficial Shares

Directors and Class A Record & 193,005 23.9%
Officers as a Common Stock Beneficial Shares
Group (four persons)

Directors and Class B Record & 245,757 52.0%
Officers as a Common Stock Beneficial Shares
Group (four persons)
- -----
</TABLE>
__________
(a) Less than 1%.

10
<PAGE> 49
(b) Inclusive of 14,000 Class A shares and 82,800 Class B shares held as
co-trustee with the First of America Bank of Peoria, for the benefit
of Frank J. Wilkins' children; and exclusive of 103,428 Class A shares
and 220,886 Class B shares owned by Frank J. Wilkins' wife, Emma Jo
Wilkins, and their children.
(c) Held jointly with wife.

Robert D. Wilkins is the son of Frank J. Wilkins. There are no other
family relationships among the officers and directors of either Investors or
Central.

CENTRAL VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The following table sets forth, as of October 6, 1995, the shares of
Central Common Stock held by each person who is known to Central to be the
beneficial owner of more than 5% of the Central Common Stock, its only class of
voting securities.

<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
<S> <C> <C> <C> <C>
Common Stock Insurance Investors Record & 604,475 93.0%
& Holding Co. Beneficial Shares
2512 North Knoxville Ave.
Peoria, Illinois 61604
</TABLE>

The following table sets forth, as of October 6, 1995, the shares of
Central Common Stock beneficially owned by each Director and officer and for
all Directors and officers as a group.

Robert W. Kreutz Common Stock Record & 5,150 (a)%
Beneficial Shares

Robert W. Common Stock Record & 12 (a)%
McCallum Beneficial Shares

Robert D. Wilkins Common Stock Record & 15 (a)%
Beneficial Shares
</TABLE>

11
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C>
Directors and Common Stock Record & 35,177 5.4%
Officers as a Beneficial Shares
Group (four persons)
</TABLE>
__________
(a) Less than 1%.

REVOCABILITY OF PROXIES

Any Investors or Central shareholder has the power to revoke his or
her proxy before its exercise at the Meetings or any adjournment thereof by (1)
giving written notice of such revocation to the Secretary of Investors, Robert
W. Kreutz, or to the Secretary of Central, who also is Robert W. Kreutz, prior
to the Meetings; (2) giving written notice of such revocation to the Secretary
at the Meetings; or (3) signing and delivering a proxy bearing a later date.
The mere presence at the Meeting of a shareholder who has executed and
delivered a valid proxy will not revoke such proxy. However, being present at
the Meeting allows a shareholder to vote in person and revoke any prior proxy.

PROXY SOLICITATION

The cost of soliciting proxies will be borne by Investors. In
addition to solicitation by mail, officers and employees of Investors and
Central may solicit proxies by telephone and personally, although these persons
will receive no compensation for such solicitation other than their regular
salaries. Investors will reimburse brokers, custodians, nominees and other
fiduciaries for their charges and expenses in forwarding materials to
beneficial owners of Investors and Central shares, which charges are not
estimated to exceed $5,000 plus expenses.

12
<PAGE> 51
PROPOSED MERGER AND EXCHANGE

BACKGROUND AND REASONS FOR THE MERGER AND EXCHANGE

Investors' principal business is life insurance and its life insurance
subsidiary, Central, needs adequate capital and surplus to conduct its
business. Beginning in 1990 Central was required to maintain a minimum level
of capital and surplus of $1.2 million. On December 31, 1995, this minimum
will increase to $1.5 million.

Unable to generate the necessary excess profits to increase capital
and surplus to the $1.5 million level, and with such capital and surplus near
the $1.2 million floor, management of Investors began to explore various
options for the recapitalization of Investors in 1991. Among options
considered were a capital contribution by an outside source, a co-insurance
agreement, the sale of all or part of the in-force business, an acquisition to
increase capitalization or a possible sale or merger.

During 1991 management met with a number of parties to discuss the
various options. In June, 1992, Citizens and Investors began discussions
regarding the possible sale of Investors. Following discussions between the
management of Citizens and Investors, Citizens made an offer to acquire
Investors for shares of its stock in September 1992. Management of Investors
considered the offer, and had a number of discussions with Citizens during the
balance of 1992 and into 1993.

In late 1993, Investors and Citizens began to prepare draft documents
to achieve a combination of the two businesses for shares of Citizens Class A
stock. Also during 1993, Central's financial condition continued to
deteriorate to the point that it was near the $1.2 million floor and was
staying above such levels only through loans made by Mr. Frank J. Wilkins,
President of Investors. A review of draft documents continued into 1994, and
the Investors Board considered other options as well. After extended
discussions to attempt to move the transaction forward, while considering
Citizens' growth and Investors' financial deterioration, the parties withdrew
from negotiations in September 1994. Approximately one month later Mr. Wilkins
contacted Citizens. Citizens returned the contact, reviewed the matter and
agreed to reopen discussions. Following negotiations, the proposed Plan and
Agreement of Merger and Exchange was approved by the Investors Board of
Directors in a November 1994 meeting. The executed, definitive Plan and
Agreement of Merger and Exchange was dated November 28, 1994.

In connection with the proposed transactions, Citizens is obligated to
pay a finder's fee of $30,000 to a nonaffiliated person upon the closing of the
transactions.

The valuation of the companies to the proposed transaction centered on
a share exchange ratio. Management of Citizens and Investors reviewed
carefully the assets and liabilities of each company, and decided that
determination of the exchange ratio should begin with a book value basis of
each company, adjusted to a substantial degree to reflect

13
<PAGE> 52
values which are standard within the life insurance industry. The management
of Citizens and Investors reviewed the capital and surplus of their respective
insurance subsidiaries, along with annual life insurance premium revenue valued
at multiple factors depending upon the profitability of the product and paid-up
policy reserves. In addition, state licenses, agency force, and nonadmitted
capital and surplus assets of life insurance subsidiaries were reviewed. These
values are summarized in the table below, which was included in the December
20, 1994 application to the Illinois Department of Insurance for approval of
the Merger and Exchange.

<TABLE>
<CAPTION>
CITIZENS
AND INVESTORS
SUBSIDIARIES AND SUBSIDIARIES
------------ ----------------
<S> <C> <C>
Capital and surplus of subsidiaries, along with
a securities valuation reserve and investment reserves
$ 10,612,000 $ 1,239,000
Life insurance in-force as a multiple of annual premium
revenue 90,990,000 60,000

Paid-up policy reserves and other reserves 1,673,000 61,000

State licenses 600,000 200,000

Agency force 12,000,000 0

Nonadmitted capital and surplus assets of subsidiaries and
other miscellaneous values 10,000,000 65,000

(Less outstanding obligations) (799,000)(a) (470,000)(b)
------------ ----------

Total adjusted book value $125,076,000 $1,155,000
============ ==========
</TABLE>
__________
(a) Includes notes payable to banks.

(b) Includes amounts owed at that time to Frank J. Wilkins of $270,000 and
other costs related to the transaction.

Non-admitted capital and surplus assets of Citizens were comprised of
common stock market values in excess of permitted admissible values and the
excess of market value over book value of real estate holdings. For Investors,
such amounts represented the value of subsidiaries of Investors.

14
<PAGE> 53
The adjusted book value per share of Citizens was calculated by
dividing the adjusted book value ($125,076,000) by the number of equivalent
shares outstanding (17,400,000) for a result of $7.19 per share. For
Investors, the adjusted book value per share was determined by dividing the
Investors adjusted book value of $1,155,000 by the number of common shares
issued and outstanding (1,280,072) for a result of $.90 per share.

The resulting values were reviewed carefully by each party. Also
discussed at length were how payment would be made to Investors and Central
shareholders, and the tax consequences of the proposed transactions.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors of Investors and the Board of Directors of
Central believe that the Merger and Exchange should be effectuated because the
Boards believe a fair exchange ratio will result to the shareholders of
Investors and Central. The Boards believe the exchange ratio is fair to the
shareholders of Investors and Central because the valuations were performed by
the parties on a consistent basis. In other words, the parties agreed that
their respective companies would be valued using procedures which the
management of Investors, Central and Citizens determined to be reasonable.
Accordingly, the Board of Directors of Central and Investors believe the
exchange ratio and, hence the price to be received for the Investors and
Central shares in the Merger and Exchange, is fair.

Investors and Central believe that Citizens goal to build a
profitable, expanding life insurance holding company is consistent with the
goals of Investors and Central. The Board of Directors and management of
Investors and Central, after careful study and evaluation of the economic,
financial, legal and market factors, believe that the Merger and Exchange will
provide Citizens with increased opportunity for profitable expansion of its
business, which in turn should benefit Investors and Central shareholders who
become shareholders of Citizens.

Another advantage of becoming affiliated with Citizens is that
significant savings in overhead are expected to be realized by Central through
a Service Agreement between Citizens and Central, which was entered several
months ago. Under the Service Agreement, Citizens will use its facilities and
computer systems to provide certain services to Central, including insurance
administration, data processing, accounting, daily operating, policy
administration, marketing and management consulting. The Service Agreement is
for a term of five years and may be renewed thereafter on a month-to-month
basis. Citizens receives a fee equal to 12.5% of the actual cost of providing
the services. Central has reduced its overhead expenses through the Service
Agreement during the time it has been in effect.

15
<PAGE> 54
The terms of the Merger Agreement were the result of arm s length
negotiations between representatives of Investors and Central, on one hand, and
Citizens on the other. Among the positive factors considered by the Boards of
Directors of Investors and Central in deciding to approve and recommend the
Merger and Exchange were:

1. The terms and conditions of the Merger Agreement, which the
management of Investors and Central believe is a fair price for the shares of
Investors and Central;

2. The financial condition, business assets and liabilities and
management of Citizens;

3. The financial and business prospects of Citizens as a result of
being a larger company.

4. An active market exists in the Citizens Class A Common Stock,
something that is totally lacking for the Investors Common Stock, and the
Central Common Stock has no market;

5. Economies of scale will be achieved by the companies, particularly
given that fewer regulatory filings will be required as a result of
consolidation of operations;

6. Investors' and Central's Directors' familiarity with and review of
the business, operations, financial condition, earnings and prospects;

7. The Directors' belief that the exchange ratio is fair to Investors
and Central shareholders, particularly given the capital needs of Central;

8. The expectation that the Merger and Exchange will generally be a
tax-free transaction to Investors and Central and to the Investors and Central
shareholders (see "Certain Federal Income Tax Considerations");

9. The growth and liquidity potential to holders of Citizens Class A
Common Stock compared to the historical growth and liquidity of the Investors
Common Stock and Central Common Stock;

10. The demographics of Investors' and Central's shareholder base and
their expressed concerns regarding estate settlement, and, in that connection,
desire for liquidity; the Citizens Class A Common stock can be sold for cash to
satisfy obligations of a decedent's estate, whereas it might be difficult to
sell the Investors or Central stock, which has virtually no market;

11. The review by the Boards of Investors and Central of the
business, operations, earnings and financial condition of Citizens on a
historical, prospective and pro forma

16
<PAGE> 55
basis, and the enhanced opportunities for growth that the Merger and Exchange
makes possible;

12. The current and prospective economic environment and competitive
constraints facing small insurance companies, including Central;

13. The Investors and Central Boards' evaluation of the risks to
consummation of the Merger and Exchange, including the risk associated with
obtaining all necessary regulatory approvals;

14. a. The increased liquidity that the Merger and Exchange would
provide to current Investors and Central shareholders; and

15. The review of the possible alternatives to the Merger and
Exchange, the range of possible values to the Investors and Central
shareholders of such alternatives and the timing and likelihood of actually
receiving, and risks and rewards associated with seeking to obtain, those
values.

The Investors Board and the Central Board did not assign any specific
or relative weight to these factors in its consideration. All of the above
factors contributed in determining the consideration received.

The Board of Directors of Investors and the Board of Directors of
Central consider the Merger and Exchange particularly advantageous to Investors
and Central shareholders in that shareholders will receive a security which, in
the opinion of the Investors and Central Boards, has the potential to achieve a
greater growth and market value and which now has significantly greater market
liquidity than the Investors Common Stock and Central Common Stock. The
exchange of Investors and Central shares solely for Citizens shares is also
intended to be a tax-free exchange, thereby giving Investors and Central
shareholders the equity participation in Citizens without initially incurring
taxes. See "Certain Federal Income Tax Consequences."

A conceivable detriment to the shareholders of Investors and Central
of the Merger and Exchange is the fact that the percentages for extraordinary
growth in company size may be less for Citizens than for Investors and Central,
because it may be considered easier to expand the size of a small company
versus a company several times its size. However, based upon Citizens recent
growth record, Investors and Central management believe Citizens, under present
circumstances, has better growth prospects than Investors and Central.
Management is unable to articulate any other possible detriments of the Merger
and Exchange to Investors and Central shareholders. Citizens has indicated
that in connection with future operations of Central, Citizens intends to
maintain capital and surplus of Central above the required minimums under
Illinois law.

17
<PAGE> 56
The Boards of Directors of Investors and Central made this
determination without the assistance of a financial adviser, or a so-called
"fairness opinion." The Boards believe that its members spent a sufficient
amount of time assessing the respective conditions of Investors, Central and
Citizens and the terms of the Merger Agreement, and believe that the Boards are
in a better position to determine the fairness of the Merger and Exchange than
would be an outside party.

RECOMMENDATION OF BOARDS OF DIRECTORS

THE INVESTORS BOARD OF DIRECTORS AND THE CENTRAL BOARD OF DIRECTORS
HAVE CONCLUDED THAT THE MERGER AND EXCHANGE IS IN THE BEST INTERESTS OF
INVESTORS, CENTRAL, THEIR RESPECTIVE SHAREHOLDERS AND THEIR INSURANCE
POLICYHOLDERS, AND THE BOARDS RECOMMEND UNANIMOUSLY THAT INVESTORS AND CENTRAL
SHAREHOLDERS APPROVE THE MERGER AGREEMENT AT THE MEETINGS.

REGULATORY REQUIREMENTS

A condition to consummation of the Merger and Exchange is the approval
of the Illinois Department of Insurance, which was received March 10, 1995.
The parties do not believe the Merger and Exchange is subject to any other
insurance regulatory approval.

Neither Citizens nor Investors is aware of any other governmental or
regulatory approvals required for consummation of the Merger and Exchange.

TERMS OF THE MERGER AGREEMENT

The discussion below contains a summary of the Merger Agreement
attached hereto as Appendix A, which is incorporated by reference herein.
Shareholders desiring to obtain a copy of the Merger Agreement may obtain it by
contacting Investors at its office. The Merger Agreement is also on file with
the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and is available during normal business hours for inspection at
such offices.

The Merger Agreement provides that the Citizens Class A Common Stock
will be delivered to be distributed at a closing ("Closing") on a closing date
("Closing Date") which shall be as soon as possible after all regulatory
approvals and shareholder approvals are obtained in accordance with the law of
Illinois. In order for the Merger and Exchange to be consummated, the Merger
Agreement must be approved by the holders of Investors Class A and Class B
Common Stock, and by the holders of Central Common Stock. The Merger between
Acquisition and Investors will become effective ("Effective Date") on or as
soon after the Closing Date as possible. The related Plan of Share Exchange
between Investors and Central shall be completed at the same time. It is
presently anticipated that the Effective Date will occur on or before November
9, 1995, but there can be no assurance

18
<PAGE> 57
that the conditions to the Merger and Exchange will be satisfied and that the
Merger and Exchange will be consummated on that date or any other date. The
parties to the Merger Agreement have agreed to work diligently to consummate
the proposed transactions.

RECEIPT OF CITIZENS SHARES

If the Merger Agreement is approved at the Meetings of Investors and
Central, Investors and Central shareholders who do not perfect dissenters
rights will be notified prior to the Closing Date of the approvals and of the
anticipated Closing Date. Shareholders will also be furnished with a "Letter of
Transmittal" to an exchange agent ("Exchange Agent") that will be identified in
the Letter of Transmittal. DO NOT SUBMIT YOUR INVESTORS OR CENTRAL SHARES AT
THIS TIME. IF THE MERGER AND EXCHANGE IS CONSUMMATED YOU WILL BE SENT A LETTER
OF TRANSMITTAL AND YOU MAY SUBMIT YOUR SHARES WITH THE LETTER. As soon as
administratively feasible after the Effective Date and after receiving a
properly completed Letter of Transmittal and the associated certificates from
the shareholders of Investors or Central as the case may be, the Exchange Agent
will distribute the Citizens Class A Common Stock to the shareholders of
Investors and Central in the ratio contemplated in the attached Merger
Agreement. Presently, Investors (which, pursuant to the Merger Agreement, is
charged with this responsibility) plans to appoint Citizens' current stock
transfer agent, American Stock Transfer and Trust Company, New York, New York,
as Exchange Agent and may appoint one or more forwarding agents to accept
delivery of the Investors or the Central shares for forwarding to the Exchange
Agent. The instructions accompanying the Letter of Transmittal will provide
details with respect to the surrender of certificates for Investors and Central
shares and the procedure for obtaining certificates for Citizens Class A Common
Stock, including instructions for obtaining certificates for Citizens Class A
Common Stock for lost or destroyed certificates of Investors and Central
shares.

The Exchange Agent will not be entitled to vote or exercise any rights
of ownership with respect to Investors and Central shares held by it from time
to time prior to the issuance of Citizens Class A Common Stock to former
holders of such shares, except that it will receive any distributions paid or
distributed with respect to the shares of Investors and Central for the account
of the persons exchanging such shares. It is not contemplated that any
distributions will be made in respect of the Citizens Class A Common Stock.

After the Effective Date, there will be no transfers on the stock
transfer books of either Investors or Central on shares which were issued and
outstanding immediately prior to the Effective Date. If after the Effective
Date certificates representing Investors or Central shares are properly
presented to the aforementioned Exchange Agent or directly to Investors,
Central or Citizens, they will be canceled and exchanged for certificates
representing Citizens Class A Common Stock in the ratio set forth in the
attached Merger Agreement.

19
<PAGE> 58
Authorization of the Exchange Agent may be terminated by Citizens at
any time after 30 days following the Effective Date. Upon termination of such
authorization, any shares of Investors or Central and any funds held by the
Exchange Agent will be transferred to Citizens or its designee, who shall
thereafter perform the obligations of the Exchange Agent. If outstanding
certificates for Investors or Central shares are not surrendered or the payment
for them not claimed, they may be turned over to a governmental authority in
accordance with the respective abandoned property laws of the various
jurisdictions. In Colorado, the state in which Citizens is incorporated, if an
owner of stock cannot be located and does not come forward for a period of five
years, and if the last known address of the shareholder is in Colorado, then
the stock must be turned over to the state treasurer. If the last known
address of the shareholder is in another state, then the stock must be turned
over to the other state if that state's laws so provide, otherwise the stock
must be turned over to the state of Colorado. Abandoned property laws vary
from state to state, and further discussion herein is not warranted. However,
to the extent it might be permitted by abandoned property and other applicable
law, such unclaimed items shall become the property of Citizens with regard to
the Investors Merger and of Investors with regard to the Central Exchange (and
to the extent not in its possession shall be paid over to them) free and clear
of all claims or interest of any persons previously entitled to such items.
Notwithstanding the foregoing, neither the Exchange Agent nor any party to the
Merger Agreement will be liable to any holder of Investors or Central shares
for any amount paid to any governmental authority having jurisdiction of such
unclaimed item pursuant to the abandoned property or other applicable law of
such jurisdiction.

FRACTIONAL SHARES

No fractional shares of Citizens stock shall be issued as a result of
the Merger Agreement; rather, such shares shall evidence the right to receive a
cash value per fractional share of Citizens Class A Common Stock based upon a
value per share of Citizens Class A stock fixed at $7.00.

ACCOUNTING

It is anticipated that both the Merger and Exchange will be accounted
for as a purchase in accordance with Generally Accepted Accounting Principles.
For accounting purposes, the Effective Date of the transaction shall be the
last day of the month preceding the otherwise determined Effective Date.

OTHER CONDITIONS TO CONSUMMATION OF THE MERGER AND EXCHANGE

In addition to approval of the Merger Agreement by the holders of the
Investors Class A and Class B Common Stock and Central Common Stock at the
Meetings, the obligations of Citizens, Investors, and Central to consummate the
Merger and Exchange are subject to the satisfaction of (or waiver by the party
entitled to benefit thereof) of a number of conditions, including:

20
<PAGE> 59
1. The performance by each party to the Merger Agreement of its
respective obligations;

2. Approval of the Illinois Department of Insurance in accordance
with the laws of Illinois, which approval was obtained March
10, 1995;

3. The absence of any proceedings instituted or threatened to
restrain or prohibit the transactions contemplated by the
Merger Agreement;

4. The continued accuracy in all material respects of the
representations and warranties made by each party in the
Merger Agreement;

5. The delivery of certain legal opinions and closing
certificates;

6. Citizens may, at its option, decline to proceed with the
Merger and Exchange if dissenters rights are perfected by the
holders of more than 2.5% of the outstanding shares of stock
of either Investors or Central (this percentage includes, for
the purpose of the Investors shareholder percentage
calculation, the total number of shares of the issued and
outstanding Class A plus Class B Common Stock); or

7. Any party to the Merger Agreement may decline to proceed with
the Merger and Exchange if the Effective Date does not occur
by November 9, 1995.

Either party may waive any conditions to its obligations to complete
the Merger and Exchange, except those which are required by law (such as
shareholder and regulatory approval).

TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT

The Merger Agreement may be amended upon approval of the Board of
Directors of each party provided that the number of shares of Citizens Class A
Common Stock issuable cannot be amended without approval of the shareholders
Investors and Central.

The Merger Agreement may be terminated and abandoned at any time
(whether before or after the approval and adoption by the shareholders of
Investors and Central) prior to the Effective Date by unanimous consent of
Citizens, Investors and Central; by any of the parties who are beneficiaries of
an unsatisfied condition precedent to the consummation of the Merger and
Exchange unless the matter has been waived; by any party if any suit, action,
or other proceeding is pending or threatened before any court or governmental
agency in which it is sought to restrain, prohibit or otherwise affect the
consummation of the transactions contemplated by the Merger Agreement; by any
party if there is discovered any material error, misstatement or omission in
the representations

21
<PAGE> 60
and warranties of any other party; by Citizens if dissenters rights are
perfected in accordance with Illinois law for more than 2.5% of the outstanding
shares of either Investors or Central; or by any party if the Merger Agreement
Effective Date does not occur by November 9, 1995.

Any of the terms or conditions of the Merger Agreement, except those
required by law, may be waived at any time by the party which is entitled to
the benefit thereof by action taken by its Board of Directors.

EXPENSES AND LIABILITY FOR TERMINATION

Each of the parties to the Merger Agreement will pay its own fees and
expenses incurred in connection with the transaction contemplated by the Merger
Agreement, including costs incurred in connection with the termination of the
Merger Agreement.

STATUS REGARDING POSSIBLE WAIVER, MODIFICATION, OR TERMINATION OF AGREEMENT

As of the date of this Proxy Statement-Prospectus, to the best of the
knowledge of the parties to the Merger Agreement, there are no conditions
precedent which must be waived by any party in order for the Merger and
Exchange to be consummated, nor does any party intend to seek to modify or
terminate the Merger Agreement based on existing circumstances.

CONDUCT OF BUSINESS PENDING THE MERGER AND EXCHANGE; OTHER COVENANTS OF THE
PARTIES

Investors and Central have agreed that they will not enter into any
transactions prior to the Effective Date other than in the ordinary course of
business and will pay no dividends nor increase the compensation of any officer
or directors, nor enter into any transaction which would adversely affect their
respective financial conditions. Each party has agreed to provide the other
with information as to any significant corporate developments during the term
of the Merger Agreement and will promptly notify the other parties if it
discovers that any of its representations, warranties or covenants contained in
the Merger Agreement or any document delivered in connection therewith was not
true and correct in all material respects or became untrue or incorrect in any
material respect. All of the parties to the Merger Agreement have agreed to
take all such actions as may be reasonably necessary and appropriate in order
to consummate the transactions contemplated by the Merger Agreement.

The Board of Directors of Investors, subject to its fiduciary
obligations to its shareholders, has agreed to use its best efforts to obtain
the requisite approval of Investors shareholders for the Merger Agreement and
the transactions contemplated thereby. Additionally, the Board of Directors of
Central, subject to its fiduciary obligations to its shareholders, has agreed
to use its best efforts to obtain the requisite approval of Central

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<PAGE> 61
shareholders for the Merger Agreement and the transactions contemplated
thereby. However, as a practical matter, the approval of the Central
shareholders is virtually assured because Investors, which owns 93.0% of the
Central Common shares, intends to approve the Merger Agreement.

STOCK TRANSFER RESTRICTIONS APPLICABLE TO "AFFILIATES" OF INVESTORS AND CENTRAL

The Merger Agreement provides that any Investors or Central
shareholder who is an "affiliate" of either Investors or Central, as defined in
the rules adopted under the Securities Act of 1933, will enter into an
agreement to not dispose of any Citizens shares received by him or her in
violation of certain transfer restrictions under SEC Rules 144 and 145. The
Merger Agreement also provides that Citizens will satisfy the public
information requirements of SEC Rules 144 and 145.

INTERESTS OF CERTAIN PERSONS IN THE MERGER AND EXCHANGE

Prior to the proposed Merger and Exchange, there was no affiliation
between Citizens (including its directors, officers and affiliates) and
Investors or Central or the directors, officers and affiliates of either
Investors or Central.

MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

On November 28, 1994, Investors and its life subsidiary, Central,
signed the Merger Agreement with Citizens for the acquisition of the stock of
Investors by Citizens and the acquisition of the stock of Central by Investors
and Citizens. The Merger Agreement provides that shareholders of Investors
will receive one share of Citizens Class A Common Stock for each eight shares
of Investors Class A or B Common Stock owned. Shareholders of Central other
than Investors will receive one share of Citizens Class A Common Stock for each
four shares of Central Common Stock owned. The companies will continue to
operate in their respective locations under a combined management team with
consolidation of computer data processing on Citizens' system. The agreement
is subject to the approval of regulatory authorities and stockholders of
Investors and Central. On March 10, 1995, the Illinois Department of Insurance
indicated that the companies could proceed with the Merger and Exchange and
Citizens' acquisition of control of Central.

CONSOLIDATED RESULTS OF OPERATIONS

Investors' consolidated loss for 1994 was $125,831 compared to losses
of $79,465 in 1993 and $103,151 in 1992. A significant part of the changes
occurring between each of the years was due to fluctuations in death claims and
realized investment gains along with declining premium and investment income.
Premium income in 1994 decreased by $16,050 compared to decreases of $3,156 in
1993 and $4,788 in 1992. The premium

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<PAGE> 62
decline in 1993 was reduced by an unusual number of Modified Whole Life
policyholders electing to pay a one time re- entry fee and continue their
policies another ten years. Policy lapses and no new sales were the cause of
decreasing premium income. Investors' policy lapse ratios were 4.9% in 1994, a
significant improvement from 18.4% in 1993, and 17.3% in 1992.

Investment income was down $16,566 in 1994 compared to decreases of
$24,564 in 1993 and $18,363 in 1992. The 1994 and 1993 decreases in investment
income were the result of falling interest rates during the past three years,
which lead to Investors experiencing almost all of its bonds with over 7% yield
being called in for redemption. Investment income was further affected by a
1993 change in the Illinois statutory deposit law requiring Investors to
maintain a trust deposit of U. S. Government obligations with a market value of
$1,200,000. This change required Investors to increase its U. S. Government
investments by $900,000 in late 1993, a time of very low interest yields which
negatively affected investment income by approximately $25,000 to $30,000 from
late 1993 to late 1994. The market value requirement and Investors' small
asset base made it necessary to choose short term U. S. Governments to insure
less market price volatility, further penalizing yields.

The realized investment gains of $1,081 in 1994, and $24,350 in 1993
and $20,208 in 1992 were the result of early calls plus adjustments in stock
and U. S. Treasury Note holdings. Investors' bond investments have always been
limited to investment grade bonds, but two bonds have been reduced by Moody s
Investment Service to a rating of Ba1 or lower. These two bonds represent less
than 1.2% of total assets and were current with interest payments at the end of
the year. Investors has no direct investments in mortgages or real estate.

The Financial Accounting Standards Board ("FASB") has issued a
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." In 1994, this required
Investors to classify its debt and marketable equity securities in one of three
categories: trading, held-to-maturity, or available-for-sale. Securities
which qualify for the held-to-maturity category are to be stated at amortized
cost. Since Investors' practice has been to purchase U. S. Treasuries and
other bonds with the intent to hold-to-maturity, there was no significant
change in the stated value of these investments.

In 1994, death claim expenses were $30,020, compared to $29,548 in
1993 and $76,617 in 1992. The death claim expense in 1992 was the highest in
Investors' history and developed from Modified Whole Life ("MWL") policies
written in the early 80 s. During 1993, the lapsing of these policies
accelerated as a large block of 1983 MWL policies were subject to a premium
increase and deposit refund on their tenth anniversary date. The amount of cash
surrenders decreased by $25,719 in 1994 compared to an increase of $15,474 in
1993 and a decrease of $8,235 in 1992. Since Investors is not selling policies
with annual endowments or dividends, these policy benefits will also decrease
from time

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<PAGE> 63
to time at a rate determined by cash surrenders. As a result of decreased
lapses and cash surrenders in 1994, expenses for future life policy benefits
and deferred premium increased while amortization of deferred acquisition cost
decreased. The recovery of $1,309 in uncollectible agents balances was a
result of contractual changes in MWL policies which continued into their
eleventh year. Recovery of uncollectible agents balances decreased
significantly in 1994, as expected, and will remain low in 1995.

General insurance expenses in 1994 decreased by $13,733 compared to a
decrease of $8,792 in 1993 and a decrease of $10,527 in 1992. The 1994 change
resulted from decreases in expenses for legal fees, group insurance and
printing. Actuarial fees rose as regulatory certification requirements
increased in 1994. Between 1993 and 1992, the decrease in expenses resulted
from lower expenditures for salaries, group insurance, printing, equipment
repair and computer programs. Loan expense increased $5,489 from additional
loans made in 1994 and 1993. Investors continues to have difficulty developing
sales programs and computer programs, because of the growing work load and
expense involved in maintaining separate accounting and reporting processes for
federal and state regulators. Although the rate of inflation has eased over
the past few years, Investors was still adversely affected by modest declines
in the purchasing power of the dollar since it cannot increase the premiums on
present in-force policies. Taxes, licenses and fees decreased in 1994 as
assessment by state guarantee funds were lower.

Later in 1993, Investors increased its borrowings by $58,000 as income
declined and expense reductions failed to keep pace. Investors borrowed
$87,400 additional in 1994. On November 28, 1994, Investors and Central signed
a definitive written agreement with Citizens for the acquisition of the stock
of Investors and Central by Citizens. The agreement provides that shareholders
of Investors will receive one share of Citizens Class A common stock for each
eight shares of Investors Class A or B stock owned. Shareholders of Central,
other than Investors, will receive one share of Citizens Class A Common Stock
for each four shares of Central stock owned. The companies will continue to
operate in their respective locations under a combined management team with
consolidation of computer data processing on Citizens' system. The agreement
is subject to the approval of regulatory authorities and stockholders of
Investors and Central. On March 10, 1995, the Illinois Department of Insurance
indicated that the companies could proceed with the Merger and Citizens'
acquisition of control of Central.

LIQUIDITY AND CAPITAL RESOURCES

Funds from premium income, interest income, bond maturities and
redemptions, and a loan increase of $87,400 were used to meet 1994 liquidity
and capital requirements. Investors' total assets and liabilities decreased
between 1994 and 1993 as a result of decreased investment income and premium
income. Although Investors has a substantial amount of liquidity in interest
earning cash accounts and short term investments totaling $207,500 and
anticipates the maturing of $1,038,000 of bonds in 1995, the requirement to
maintain $1,200,000 of capital and surplus in the life subsidiary and to
maintain two

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<PAGE> 64
complex accounting systems for different regulatory layers of government has
imposed severe limits on the use of these funds. None of the funds can be
applied toward loan repayments due in 1995. Investors will need to secure an
extension of its loans or a new loan, an effort which will not be enhanced by
Investors' record or previous earnings trends unless regulatory and stockholder
approval is secured implementing the previously described definitive written
agreement between Citizens and Investors. Progress on product development
continues to be postponed by concern for the rising cost of supporting the
regulatory reporting system, claim experience and maintaining the current
capital and surplus requirements for the life insurance subsidiary.

During the early part of 1993, Investors sought approval from the
Illinois Insurance Department for a reinsurance contract designed to reduce
Investors' exposure to claims while injecting additional capital and permitting
Investors to earn a fee servicing the business reinsured. In a letter dated
March 25, 1993, the Department requested the contract be withdrawn. Once the
computer system, which has been adjusted to service the reinsured business, was
readjusted, the decision developed reasonably well for Investors. Death claim
expense for 1993 and 1994 returned to near average levels, policy terminations
in the block of policies generating claims reduced potential claim expense and,
in 1994, the lapse rate dropped to 4.9% from 18.4% in 1993 and 17.3% in 1992.

Investors, directly and through its life subsidiary, continued to
investigate options for raising additional capital and surplus. Options
available, as a result of changing regulatory requirements, have become more
restricted by the cost of studies, legal fees, actuarial services and audit
certifications required to satisfy various regulators. Among options which
have been investigated were the redomestication of the life subsidiary, the
sale of premium paying policies to reduce exposure to death claims, surplus
debentures and sale or merger of Investors or its life subsidiary. A sale of
stock by Investors or its life subsidiary was also considered. Toward the end
of 1994, the previously described definitive written agreement was included in
a Form A filing with the Illinois Insurance Department regarding a change of
control of a life insurance company. On March 10, 1995, the Illinois Insurance
Department indicated the companies could proceed to secure approval from other
regulatory agencies and stockholders.

The National Association of Insurance Commissioners established new
minimum capital requirements in the form of Risk Based Capital. 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 insurance regulators
begins. At December 31, 1994, Investors' life subsidiary s ratio was 8,346.7%.
This unusual ratio was a result of a high percentage of investments in U.S.
Government securities and a low ratio of liabilities to capital and surplus.

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At the end of 1994 the life subsidiary had $1,202,323 of statutory
capital and surplus. This was a decrease of $11,924 compared to an increase of
$4,628 in 1993 and an decrease of $24,799 in 1992. The Illinois Legislature
established $1,200,000 as the minimum statutory capital and surplus for an
Illinois domiciled life insurance company after December 31, 1990. On December
31, 1995, the requirement changes to $1,500,000 capital and surplus. The
normal "grandfather" provision was not allowed, and life insurance companies
which were in existence before the changes were established are required to
meet the new minimums as they come into effect.

The cost of maintaining and reporting under two complex standards of
accounting, GAAP for Federal regulators and statutory accounting for State
regulators, continues to drain resources from more productive efforts. In
1994, GAAP accounting was estimated to have cost $34,150 or 21.2% of 1994 GAAP
general insurance expenses.

UPDATE FOR SIX MONTHS ENDED JUNE 30, 1995

The net loss for the first six months of 1995 was $38,693, compared to
a loss of $75,998 in the previous year. Decreases in operating expenses and
increased investment income were the primary reasons for the improvement.

Premium income for the first six months of 1995 was $33,575 compared
to $29,172 for the same period in 1994. The increase is due primarily to a
reduction in the amount of deferred premium seen in previous periods. The
Company has not written new policies for the past several years.. Currently,
there are no products qualified for sale under the revised life insurance
reserve law that was effective for years beginning after January 1, 1989.
Increases in requirements for statutory capital and surplus of the Company s
life insurance subsidiary, coupled with the relatively high cost of regulatory
compliance for a company the size of Insurance Investors, have severely limited
the resources available in recent years that are necessary for the development
and sale of new products. As a result, the Company s in-force block of
business is in a "run-off" state.

Net investment income grew substantially during 1995 to $62,618
compared to $51,543 for the same period in 1994. The increase results from
higher yields that are available upon reinvestment of matured securities that
bore lower interest rates.

Policy benefits increased to $63,363 during 1995 from $51,647 during
the first half of 1994. Death benefits increased substantially during the
first half of 1995 to $30,060, compared to $18,153 for the same period in 1994.
Management does not believe the increase in such benefits to be indicative of
an adverse trend, but rather normal fluctuations which occur over time.
Surrender expense decreased to $13,762 from $17,082 in the previous year.
Other benefits amounted to $19,541 compared to $16,412 in 1994.

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Future policy benefit reserves reflected a decrease of $8,640 compared
to an increase of $308 for the first half of 1995. The decrease in policy
reserves is partially explained by the increased death claim activity since as
claims are paid, the policy reserves that have historically been established
are released. Deferred premium reserves increased by $902 in 1995 compared to
$91 for 1994. The increase reflects the aging of the policies in-force.

General expenses were lower as a result of decreases in salaries,
office expenses and the timing of audit and actuarial expenses. As Management
works toward consummation of the sale of the Company to Citizens, Inc. as
discussed in the "Notes to Financial Statements" the overhead of the Company
has been trimmed due to the execution of a Service Agreement with Citizens.
See "Proposed Merger and Exchange -- Background and Reasons for the Merger and
Exchange."

Interest expense was higher in the first six months of 1995 reaching
$12,694 from $8,209 in the previous year. The increase was due to additional
loans made by the Company s President, Mr. Frank J. Wilkins, to provide
adequate liquidity and capital. The loans are due upon the closing of the
Citizens acquisition.

THREE-MONTHS ENDED JUNE 30, 1995 AND 1994

The net loss for the quarter ended June 30, 1995 was $7,692 compared
to $31,830 in the prior year. Increased investment income, coupled with lower
operating expenses and higher premium receipts narrowed the operating loss.

Premium income for the quarter was $19,196 in 1995 compared to $13,950
in the previous year. Reductions in deferred premiums contributed to the
increase.

Investment income grew to $33,117 from $26,341, primarily as the
result of higher yields available in the bond market as matured funds were
reinvested.

Policy benefits increased to $30,973 through June 30, 1995, compared
to $13,275 in the previous year. An increase in death claims during the
quarter was the primary reason for the increase.

Policy reserves declined $8,206 for the quarter, compared to an
increase of $5,124 in the prior year. The increased claims contributed to the
lower reserves as was discussed above.

General expenses declined to $32,406 from $44,540 primarily as the
result of the reductions in overhead discussed previously.

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LIQUIDITY AND CAPITAL RESOURCES

Stockholders equity as of June 30, 1995 totaled $901,848, compared to
$933,641 at December 31, 1994. The loss from operations is the primary reason
for the decline in equity since year end.

A majority of the Companys invested assets are in bonds guaranteed by
the U.S. Government. As a result, the bond portfolio offers better than
average liquidity to meet the demands of the outstanding obligations. The
Company has no investments in mortgage loans or real estate and minimal policy
loans.

The Illinois legislature established $1,200,000 as the minimum
statutory capital and surplus for an Illinois- domiciled life insurance company
after December 31, 1990. On December 31, 1995, the requirement increases to
$1,500,000. The traditional "grandfathering" of existing companies was not
permitted in the new legislation, meaning that the Company s subsidiary must
increase its Capital and Surplus to the $1,500,000 level. At the end of June,
1995, the subsidiary reported capital and surplus of $1,222,856. The sale of
the Company to Citizens, Inc. will afford the Company the strength to comply
with the requirements of the new law.

The Company s ability to allocate funds to product development has
been extremely limited. The burden of maintaining two accounting systems
(Statutory and GAAP) as well as maintaining the capital and surplus of the life
insurance subsidiary have been the leading constraints.

FINANCIAL ACCOUNTING STANDARDS

In February 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Statement 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and liability method
of accounting for income taxes. Under the asset and liability method of
Statement 109, deferred tax asset and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company adopted Statement 109. The implementation had no impact on operations
or stockholders equity.

In December 1990, the FASB issued Statement 106, "Employers
Accounting for Post Retirement Benefits Other than Pensions", ("Statement
106"). Statement 106 establishes accounting standards for employers
accounting for, primarily, post retirement

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health care benefits. The statement was effective for fiscal years beginning
after December 15, 1992. Since the Company currently pays no such benefits,
implementation had no impact on the results of operations of the Company.

In December 1992, the FASB issued Statement 113 "Accounting and
Reporting for Reinsurance of Short-Duration and Long-Duration Contracts"
("Statement 113"). Statement 113 eliminated the net reporting of reinsurance
amounts in the balance sheet previously required by Statement 60 "Accounting by
Insurance Enterprises." Statement 113 also provides accounting guidance for
ceding enterprises as well as disclosure requirements and guidance on assessing
transfer of risk in reinsurance contracts. Furthermore, it precludes immediate
recognition of gains related to reinsurance contracts unless the ceding
enterprises liability to its policyholders is extinguished.

The Company adopted Statement 113 in the first quarter of 1993. There
was no impact on the consolidated financial statements due to implementation of
the risk transfer provisions.

In May 1993, the FASB issued Statement 114, "Accounting by Creditors
for Impairment of a Loan" ("Statement 114"). Statement 114 requires impaired
loans 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 Statement 114 does 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 selling them in
the near term. The Company had no investment securities classified as trading
or available for sale at January 1, 1994, December 31, 1994 or June 30, 1995.
Held-to-maturity securities are those in which the Company has the ability and
intent to hold the security until maturity.

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

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<PAGE> 69
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 accredited 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. The impact on the consolidated
stockholders equity due to the implementation was $0.

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CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion summarizes all material federal income tax
considerations relevant to the exchange of shares of Investors Class A and
Class B Common Stock ("Investors Common Stock") for Citizens Class A Common
Stock ("Citizens Class A Common Stock") pursuant to the Merger and Exchange,
that are generally applicable to holders of Investors Common Stock. The
following discussion also summarizes all material federal income tax
considerations relevant to the exchange of shares of Central Common Stock for
Citizens Class A Common Stock pursuant to the statutory plan of exchange
("Exchange"), that are generally applicable to holders of Central Common Stock.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury
Regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to Citizens, Investors, Central
or Investors' or Central's shareholders as described herein. There can be no
assurance that such changes will not occur.

Investors and Central shareholders should be aware that this
discussion does not deal with all federal income tax considerations that may be
relevant to particular Investors and Central shareholders in light of their
particular circumstances, such as shareholders who are dealers in securities,
who are financial institutions, who are subject to the alternative minimum tax
provisions of the Code, who are foreign persons, who do not hold their
Investors and Central Common Stock as capital assets, or who acquired their
shares in connection with stock option or stock purchase plans or in other
compensatory transactions. In addition, the following discussion does not
address the tax consequences of the Merger or the Exchange under foreign, state
or local tax laws, the tax consequences of transactions effectuated prior or
subsequent to or concurrently with, the Merger (whether or not any such
transactions are undertaken in connection with the Merger) or the Exchange
(whether or not any such transactions are undertaken in connection with the
Exchange), including without limitation any transaction in which shares of
Investors and Central Common Stock are acquired or shares of Citizens Class A
Common Stock are disposed of. Accordingly, INVESTORS AND CENTRAL SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER AND EXCHANGE, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER OR THE EXCHANGE.

The Merger and the Exchange are intended to constitute
"reorganizations" within the meaning of Section 368(a) of the Code (a
"Reorganization"). As a Reorganization, subject to the limitations and
qualifications referred to herein, the Merger and the Exchange will result in
the following federal income tax consequences:

(a) No gain or loss will be recognized by holders of Investors or
Central Common Stock solely upon their receipt in the Merger or the Exchange of
Citizens Class A Common

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<PAGE> 71
Stock in exchange therefor (except to the extent of cash received in lieu of a
fractional share of Citizens Class A Common Stock).

(b) The aggregate tax basis of the Citizens Class A Common Stock
received by Investors and Central shareholders in the Merger and the Exchange
(including any fractional share of Citizens Class A Common Stock not actually
received) will be the same as the aggregate tax basis of the Investors and
Central Common Stock surrendered in exchange therefor.

(c) The holding period of the Citizens Class A Common Stock
received by each Investors and Central shareholder in the Merger and Exchange
will include the period for which the Investors and Central Common Stock
surrendered in exchange therefor was considered to be held, provided that the
Investors and Central Common Stock so surrendered is held as a capital asset at
the time of the Merger and Exchange.

(d) Cash payments received by holders of Investors and Central
Common Stock in lieu of a fractional share will be treated as if such
fractional share of Citizens Class A Common Stock had been issued in the Merger
and Exchange and then redeemed by Citizens. An Investors or Central
shareholder receiving such cash will recognize gain or loss, upon such payment,
measured by the difference (if any) between the amount of cash received and the
basis in such fractional share. Provided the fractional share was held as a
capital asset at the time of the redemption, such gain or loss will constitute
capital gain or loss, and such gain or loss will be long term capital gain or
loss if the holding period for such share (taking into account the holding
period of the Investors and Central stock surrendered) was greater than one
year. It is possible the distribution of cash may be treated as a dividend
taxable as ordinary income if the Internal Revenue Service (the "IRS")
determines that the distribution in redemption is essentially equivalent to a
dividend. See IRC Sections 356, 302.

(e) Cash received by the Investors shareholders who properly
exercise their dissenters' rights will be treated as having been received in
redemption of the shares so cashed out, and may result in taxable gain or loss,
measured by the difference (if any) between the amount of cash received and
such shareholder's basis in the Investors Common Stock. Provided the shares
were held as a capital asset at the time of the redemption, such gain or loss
will constitute capital gain or loss, and such gain or loss will be long term
capital gain or loss if the holding period for such shares was greater than one
year. It is possible that for some shareholders, the distribution of cash may
be treated as a dividend taxable as ordinary income. See IRC Section 302. If
any Central shareholders exercise their dissenters' rights, the exchange of
Citizens Class A Common Stock for Central Common Stock will not qualify as a
reorganization which would cause Central shareholders to recognize gain or loss
on the Exchange of their Central Common Stock for Citizens Class A Common Stock
or cash.

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(f) Neither Citizens, Citizens Acquisition, Inc., Investors nor
Central will recognize material amounts of gain solely as a result of the
Merger or Exchange. After the Merger and Exchange, utilization of Investors
and Central net operating losses or built-in losses, if any, will be subject to
certain limitations contained in Section 382 of the Code. IRC Section 383 will
similarly limit the utilization of excess credits, net capital losses, and
foreign tax credits, if any. In addition, IRC Section 384 will limit the use
of preacquisition losses to offset built-in gains, if any. Proposed
regulations under Sections 382 and 1502 of the Code implement the above
restrictions.

Investors and Central shareholders should also be aware that the IRS
may examine transactions taking place before, contemporaneously with, or after
a reorganization to determine whether reorganization treatment is appropriate,
or in some cases to determine whether shareholders will be taxed on other
economic benefits that are included as part of the overall transaction. Thus,
loan transactions between parties, compensation arrangements, noncompete
agreements, consulting arrangements and other transactions could be reviewed by
the IRS and determined to constitute taxable income to specific parties to the
Merger or Exchange. Gain could also have to be recognized to the extent that
an Investors or Central shareholder was treated as receiving (directly or
indirectly) consideration other than Citizens Class A Common Stock in exchange
for the shareholder's Common Stock of Investors or Central. Any such
transaction or such additional consideration to Central shareholders, or any
payment to a Central shareholder who perfects dissenters' rights, would cause
the Exchange to fail to qualify as a reorganization, causing all Central
shareholders to recognize gain or loss on the exchange of their Central Common
Stock for Citizens Class A Common Stock. For the Exchange to qualify as a
reorganization, all Central Common Stock must be exchanged solely for Citizens
Class A Common Stock (except for cash received in lieu of fractional shares).
Furthermore, if the IRS were to establish as to some Investors shareholders
that part of the Citizens Class A Common Stock received in the Merger and
Exchange is severable from the Merger and Exchange, resulting in a
proportionally increased equity interest being received in the merger by other
Investors shareholders, the Investors shareholders whose equity interests were
deemed to be constructively increased by the Merger and Exchange may be treated
as having received a taxable stock dividend. Thus, Investors and Central
shareholders should consult with their tax advisors as to the tax consequences
to them of the Merger and Exchange.

Under Section 3406 of the Code, Investors and Central shareholders may
be subject to "backup withholding" at the rate of 31% on "reportable payments",
if any, to be received by them if they fail to furnish their correct taxpayer
identification numbers to Citizens or for certain other reasons. Citizens will
report to these persons and to the IRS for each calendar year the amount of any
reportable payments during that year and the amount of tax withheld, if any,
with respect to those reportable payments.

The parties are not requesting and will not request a ruling from the
IRS in connection with the Merger or the Exchange. Citizens and Investors,
however, will receive

34
<PAGE> 73
an opinion from counsel for Citizens to the effect that the Merger and Exchange
constitute Reorganizations (the "Tax Opinion"). Investors and Central
shareholders should be aware that the Tax Opinion does not bind the IRS or the
courts. The IRS is not precluded from successfully asserting a contrary
position. The Tax Opinion will not address the consequences of the Merger or
the Exchange on the Investors and Central shareholders under applicable
foreign, state or local income tax laws. The Tax Opinion is subject to certain
assumptions and qualifications, including but not limited to the truth and
accuracy of certain representations made by Citizens, Investors and Central,
including representations in certain certificates to be delivered to counsel by
the respective managements of Citizens, Investors and Central. Of particular
importance are certain representations relating to the Code's "continuity of
interest" requirement. One of the requirements for tax-free reorganization
treatment is that shareholders of the acquired corporation acquire a
substantial and continuing interest in the acquiring corporation, i.e., have
"continuity of interest."

To satisfy the continuity of interest requirement, Investors
shareholders must not, pursuant to a plan or intent existing at or prior to the
Merger and Exchange, dispose of or transfer so much of either (i) their
Investors Common Stock in anticipation of the Merger and Exchange or (ii) the
Citizens Class A Common Stock to be received in the Merger and Exchange
(collectively, "Planned Dispositions"), such that Investors shareholders, as a
group, would no longer have a significant equity interest in the Investors
business being conducted after the Merger and Exchange. Investors shareholders
will generally be regarded as having a significant equity interest as long as
the number of shares of Citizens Class A Common Stock received in the Merger
and Exchange less the number of shares subject to Planned Dispositions (if any)
represents, in the aggregate, a substantial portion of the entire consideration
received by the Investors shareholders in the Merger and Exchange. The Tax
Opinion will be based on the assumption that the Investors shareholders have no
plan or intention at the time of the Merger and Exchange to engage in Planned
Dispositions that would reduce their aggregate ownership of Citizens Class A
Common Stock to a number of shares having in the aggregate a value at the time
of the Merger and Exchange of less than 50% of the total value of the Investors
Common Stock outstanding immediately prior to the Merger and Exchange. For
purposes of such determination, shares of Investors Common Stock that are
exchanged for cash or other property, or surrendered by dissenters will be
treated as outstanding shares of Investors Common Stock immediately prior to
the Merger and Exchange. No assurance can be made that the "continuity of
interest" requirement will be satisfied, and if such requirement is not
satisfied, the Merger and Exchange would not be treated as a Reorganization.

Although literal compliance with Code Section 368 is a prerequisite to
nonrecognition of gain or loss, such compliance does not guarantee the desired
result. Regulation Section 1.368-1 describes the purpose of the reorganization
provisions as being to exempt from the general rule of taxation, specifically
described exchanges incident to such readjustments of corporate structures made
in one of the particular ways specified

35
<PAGE> 74
in the Code, as are required by business exigencies and which effect only a
readjustment of continuing interest in property under modified corporate forms.

A plan of reorganization having no business or corporate purpose will
not constitute a qualified reorganization plan. The reasons for the
reorganization set forth in "Proposed Merger--Background of and Reasons for the
Merger and Exchange" contained in this Proxy Statement-Prospectus provide
several corporate business purposes. Based upon the disclosure contained in
this Proxy Statement-Prospectus and on other considerations, Investors, Central
and Citizens management believe that valid business purposes exist for both the
transactions.

Considered in conjunction with the business purpose test is the
"continuity of business enterprise" requirement. Regulation Section
1.368-1(d)(2) provides the general rule that continuity of business enterprise
requires the acquiring corporation to either (i) continue the acquired
corporation's historic business or (ii) use a significant portion of acquired
corporation's historic business assets in a business. The application of this
general rule to certain transactions, such as mergers of holding companies,
will depend on all facts and circumstances. The policy underlying the general
rule, which is to ensure that reorganizations are limited to adjustments of
continuing interests in property under modified corporate form, provides the
guidance necessary to make these facts and circumstances determinations.

The historic business of a holding company generally comprises the
business operations of its subsidiary. Revenue Ruling 85-197, 1985-2 C.B. 120,
states that the continuity of business enterprise requirement is satisfied when
a holding company is merged into its wholly owned operating subsidiary, because
the historic business of the holding company is the business of its operating
subsidiary. Revenue Ruling 81-247, 1981-2 C.B. 87, holds that where a
significant portion of an acquired corporation's historical business assets,
received by the acquiring corporation, remain with the acquiring corporation,
or corporations directly controlled by the acquiring corporation, the
continuity of business enterprise rules of Regulation Section 1.368-1(d) will
be satisfied. These rulings indicate that the historic business of Investors
is the business operated by its subsidiary Central. Although subject to
challenge by the IRS, the continuity of business enterprise requirement should
be satisfied because after the merger, the historic business of Investors will
be continued by Central as a second tier subsidiary of Citizens.

Pursuant to Section 1.368-3(b) of the Regulations, the shareholders of
Investors and Central must file with their income tax returns for the year in
which the transaction is consummated, a statement which provides details
pertinent to the nonrecognition of gain or loss on the exchange, including the
cost or other basis of stock transferred in the exchange, the amount of stock
received and liabilities, if any, assumed in the exchange.

A successful IRS challenge to the reorganization status of the Merger
and Exchange or the Exchange (as a result of a failure of the "continuity of
interest" requirement or

36
<PAGE> 75
otherwise) would result in Investors and Central shareholders recognizing
taxable gain or loss with respect to each share of Common Stock of Investors or
Central surrendered equal to the difference between the shareholder's basis in
such share and the fair market value, as of the Effective Time of the Merger or
the Exchange, of the Citizens Class A Common Stock received in exchange
therefor. In such event, a shareholder's aggregate basis in the Citizens Class
A Common Stock so received would equal its fair market value, and the
shareholder's holding period for such stock would begin the day after the
Merger or the Exchange.

37
<PAGE> 76
INFORMATION CONCERNING CITIZENS

Citizens, Inc. ("Citizens") is a Colorado corporation which is an
insurance holding company. The principal executive office of Citizens is
located at 400 East Anderson Lane, Austin, Texas 78752, and the telephone
number at such office is (512) 837-7100. Specific information on Citizens is
contained in its Annual Report on Form 10-K for the Year Ended December 31,
1994, as amended, which is incorporated herein by reference.

SOURCE OF CITIZENS SHARES

The Citizens Class A Common Stock which will be issuable in the Merger
and Exchange will be newly issued from authorized but unissued shares.
Citizens has 50,000,000 Class A Common shares authorized, of which 16,980,340
shares were outstanding as of October 6, 1995 plus an insignificant number of
shares issued in conjunction with an offering of the shares which is presently
being conducted outside the United States. In addition, approximately
2,341,000 shares are expected to be issued in conjunction with the acquisition
on September 14, 1995 by Citizens of ALFC. Citizens is obligated to reserve
sufficient shares of its Class A Common Stock to enable it to perform its
obligations under the Merger Agreement. The Citizens shares, when delivered
pursuant to the Merger Agreement, will be duly authorized and validly issued,
fully paid and non-assessable.

RIGHTS OF DISSENTING INVESTORS AND CENTRAL
SHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES

The following summary of dissenters' rights available to shareholders
of either Central or Investors identifies and discusses all of the material
information necessary to perfect dissenters' rights. However, this summary is
not intended to be a complete statement of applicable Illinois law and is
qualified in its entirety by reference to Article XI, Sections 5/11.65 and
5/11.70, of the Illinois Business Corporation Act of 1983 (the "Act"), set
forth in their entirety as Appendix B.

CITIZENS HAS CONDITIONED THE MERGER AND EXCHANGE ON, SUBJECT TO ITS
RIGHT TO WAIVE, AND HAS RESERVED THE RIGHT TO ABANDON THE MERGER AGREEMENT IN
THE EVENT THAT HOLDERS OF GREATER THAN 2.5% OF THE OUTSTANDING SHARES OF
INVESTORS OR CENTRAL DISSENT FROM THE MERGER AND EXCHANGE AND SEEK PAYMENT FOR
THEIR SHARES IN ACCORDANCE WITH THE ACT.

RIGHT TO DISSENT. Shareholders of Central and Investors are entitled
to dissent and obtain payment of the fair value of their shares. A shareholder
entitled to dissent and obtain payment for his or her shares under Article XI
of the Act may not challenge the corporate action creating his or her
entitlement unless the action is fraudulent with respect to the shareholder or
the corporation or constitutes a breach of a fiduciary duty owed to the
shareholder.

38
<PAGE> 77
Under Section 5/11.65(c) of the Act a record owner of shares may
assert dissenters' rights as to fewer than all the shares recorded in such
person's name only if such person dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf the record owner asserts
dissenters' rights. The rights of a partial dissenter are determined as if the
shares as to which dissent is made and the other shares are recorded in the
names of different shareholders. A beneficial owner of shares who is not the
record owner may assert dissenters' rights as to shares held on such person's
behalf only if the beneficial owner submits to the corporation the record
owner's written consent to the dissent before or at the same time the
beneficial owner asserts dissenters' rights.

PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS. In order for a
shareholder to exercise dissenters' rights and receive payment for such
shareholder's shares, the shareholder must comply exactly with the requirements
explained below and in Part XI, Sections 5/11.65 and 5/11.70 of the Act. To
briefly summarize, subject to certain other requirements, the shareholder must,
before the vote is taken at the Meeting, demand in writing payment for the
shares and must not vote in favor of the Merger and Exchange. If the corporate
action is approved, the corporation must within a certain time notify the
shareholder in writing of its estimate of the fair value, and must provide
other materials as well. The shareholder then has 30 days to demand, in
writing, the shareholder's estimate of the fair value and interest due. Upon
consummation of the Merger and Exchange, the respective corporation must pay
each dissenter its estimate of the fair value and interest due. If the
corporation and shareholder cannot agree upon a fair value, the corporation
must, within a specified time, either pay the difference between its estimate
of fair value and the shareholder's demand, plus interest, or file suit for a
court determination of fair value. The shareholder may also bring suit as
permitted by law. FULL AND EXACT COMPLIANCE WITH THE STATUTORY REQUIREMENTS IS
ESSENTIAL FOR A SHAREHOLDER TO SUCCESSFULLY EXERCISE DISSENTERS' RIGHTS.
SHAREHOLDERS ARE URGED TO READ AND UNDERSTAND THE DISCUSSION BELOW AND THE
STATUTORY PROVISIONS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS.

The Notices accompanying this Proxy Statement-Prospectus state that
shareholders of Investors and Central are entitled to assert Dissenters' Rights
under Article XI, Sections 5/11.65 and 5/11.70, of the Act. A shareholder may
assert Dissenters' Rights only if the shareholder delivers to the corporation
before the vote is taken a written demand for payment for his or her shares and
the shareholder does not vote in favor of the Merger Agreement.

A SHAREHOLDER WHO DOES NOT SATISFY THE FOREGOING REQUIREMENTS SHALL
NOT BE ENTITLED TO DEMAND PAYMENT OF HIS OR HER SHARES UNDER ARTICLE XI,
SECTIONS 5/11.65 AND 5/11.70, OF THE ACT.

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<PAGE> 78
Under Section 5/11.70 of the Act, within 10 days after the date the
corporate action giving rise to the dissent becomes effective or 30 days after
the shareholder delivers to Investors or Central the written demand for
payment, whichever is later, Investors or Central, as the case may be, shall
send each shareholder who has delivered a written demand for payment a
statement setting forth the opinion of Investors or Central, respectively, as
to the estimated fair value of the shares, the corporation's latest balance
sheet as of the last fiscal year, together with statements of income for that
year and the latest available interim financial statements, and a commitment to
pay for the shares of the dissenting shareholder at the estimated fair value
thereof upon transmittal to Central or Investors of the certificates for the
shares.

A shareholder who makes written demand for payment under this Section
retains all of the rights of a shareholder until those rights are canceled or
modified by consummation of the Merger and Exchange. Upon consummation of the
Merger and Exchange, Investors or Central, as the case may be, shall pay to
each dissenter who transmits to the corporation the certificates for the shares
the amount Investors or Central estimates to be the fair value of the shares,
plus accrued interest, accompanied by a written explanation of how the interest
was calculated.

If the dissenting shareholder does not agree with the opinion of
Investors or Central as to the estimated fair value of the shares or the amount
of interest due, the shareholder must notify the corporation in writing, within
30 days from the delivery of the statement of value, the shareholder's
estimated fair value and amount of interest due and demand payment for the
difference between the shareholder's estimate of fair value and interest and
the amount of payment by the Corporation. A DISSENTER WAIVES THE RIGHT TO
DEMAND PAYMENT UNDER THIS PARAGRAPH UNLESS HE OR SHE CAUSES CENTRAL OR
INVESTORS, WHICHEVER IS APPLICABLE, TO RECEIVE THE NOTICE REQUIRED WITHIN 30
DAYS AFTER CENTRAL OR INVESTORS MADE OR OFFERED PAYMENT FOR THE SHARES OF THE
DISSENTERS

JUDICIAL APPRAISAL OF SHARES. If, within 60 days from delivery to
Central or Investors of the shareholder notification of estimated fair value of
the shares and interest due, Investors or Central and the dissenting
shareholder have not agreed in writing upon the fair value of the shares and
interest due, Investors or Central shall either pay the difference in value
demanded by the shareholder with interest, or file a petition in the circuit
court of Peoria County (the county in which either the registered office and
the principal office of both Investors and Central is located), requesting the
court to determine the fair value of the shares and interest due. Investors
and Central shall make all dissenters, whether or not residents of Illinois,
whose demands remain unsettled, parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of Central or Investors to commence an action
pursuant to this section shall not limit or affect the right of the dissenting
shareholders to otherwise commence an action as permitted by law.

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<PAGE> 79
The jurisdiction of the court in which the proceeding is commenced
under this section is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on a question
of fair value. The appraisers shall have the power described in the order
appointing them.

Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or
her shares, plus interest, exceeds the amount paid by Investors or Central, as
the case may be.

The court shall determine all costs of the proceeding, including the
reasonable compensation and expenses of the appraisers, if any, appointed by
the court but shall exclude the fees and expenses of counsel and experts for
the respective parties. If the fair value of the shares as determined by the
court materially exceeds the amount which Central or Investors estimated to be
the fair value of the shares, then all or any part of the costs may be assessed
against Central or Investors. If the amount which any dissenter estimates to
be the fair value of the shares materially exceeds the fair value of the shares
as determined by the court, then all or any part of the costs may be assessed
against the dissenter. The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the court finds
equitable, as follows:

1. Against Investors or Central and in favor of any and all
dissenters if the court finds that Investors or Central did not substantially
comply with the requirements of Section 5/11.70 of the Act.

2. Against either Investors or Central or a dissenter and in
favor of any other party if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by Section 5/11.70 of the Act.

If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against Investors or Central, the
court may award to that counsel reasonable fees to be paid out of the amount
awarded to the dissenters who are benefitted. Except as otherwise provided in
this Section 5/11.70 of the Act, the practice, procedure, judgment and costs
are governed by the Illinois Code of Civil Procedure.

"Fair value" is defined as the value of the shares immediately before
the consummation of the Merger and Exchange, excluding any appreciation or
depreciation in anticipation of the proposed transactions, unless exclusion
would be inequitable.

"Interest" means interest from the Effective Date of the Merger and
Exchange until the date of payment, at the average rate currently paid by
Investors or Central on their principal bank loans, or if none, at a rate that
is fair and equitable under all circumstances.

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<PAGE> 80
INFORMATION CONCERNING INVESTORS AND CENTRAL

INVESTORS AND ITS SUBSIDIARIES: CENTRAL AND CI AGENCY, INC.

Investors, incorporated in 1963, is a holding company managing and
operating Central, which is a life insurance company, and a general insurance
agency, CI Agency, Inc. ("CI"). Substantially all business is conducted
through Investors' two subsidiaries and these two subsidiaries represent the
major assets of Investors as follows:

<TABLE>
<CAPTION>
Original No. of % of Voting
Description Invested Cost Shares Securities Owned
- ----------- ------------- ------ ----------------
<S> <C> <C> <C>
Central Investors Life
Insurance Company of
Illinois: Common Stock $ 1,386,338 604,475 93.0%

CI Agency, Inc.:
Common Stock 50,000 50,000 100.0%
</TABLE>

Other than interest and dividend income from general investments,
Investors has no source of revenue or income independent from its subsidiaries;
therefore, it must rely primarily upon its operating subsidiaries for
dividends. CI has paid to Investors seven dividends totaling $90,000 since
1973. Central has not paid dividends to stockholders to date.

Investors and its subsidiaries as of December 31, 1994 had in their
employment one computer programmer, two data processing and accounting
personnel, one part-time officer and one full-time salaried officer. In
addition, four commissioned agents were licensed for life insurance sales.
These agents serviced existing business, but were restricted from writing new
business in 1994, because of Central's lack of approved policies and a
coinsurance or reinsurance contract for new business. Central continued to be
licensed in Illinois, Indiana, Oklahoma and Arizona during the year.

The Illinois Legislature passed new Statutory Standard Nonforfeiture
and Standard Valuation Laws which took effect January 1, 1989. Since that
date, Central has lacked the funds to file any policy revisions with Illinois
and does not have any policies currently approved for sale. Between 1974 and
1987, Central's yearly volume of new business primarily came from two policy
plans, Modified Whole Life ("MWL") and Decreasing Term Life to Age 100 ("DTL").
Each individual risk insured under either of these two plans was regularly in
excess of Central's own risk retention. The excess retention was coinsured
with Life Reassurance Corporation (then General Reassurance Co.). Life
Reassurance notified Central that it would not coinsure new risks on these
plans after February 28, 1987. To date, the efforts to secure another
satisfactory coinsurance or reinsurance contract for

42
<PAGE> 81
these two plans have been delayed by Central's inability to finance the
completion of the required policy revisions.

Central's inquiries into a new contract were further hampered by a
decline in sales of MWL and DTL plans which had started before the cancellation
of the contract. Market conditions were changing and independent agents who
had been selling these plans were increasingly shifting their business to
interest sensitive plans offered by the large brokerage companies. In
inquiries with different coinsurance and reinsurance companies, problems arose
over commission allowances, which would have made the plans less attractive to
agents, and expenses involved in additional revisions to allow male or female,
smoker or non-smoker classifications. The expense of these policy revisions
was compounded because two different sets of numerical factors must be
actuarially developed for each plan in order to meet the differences in federal
and state reporting requirements.

The development of interest sensitive plans was considered, but so far
Central has found sales proposals and administrative programs required for
interest sensitive plans to be in a price range which would not allow Central a
reasonable expectation of profit on projected sales. Recent declines in
interest rates on investment grade securities have increased the pricing
problem. Initial indications of the cost of interest sensitive plans in 1987
resulted in abandoning a decision to discontinue the MWL and DTL plans. During
1988, $11,000 was spent with an actuarial firm for the first set of numerical
factors. In 1989, there was limited programming done on Central's computer to
enable it to print revised DTL policy forms, but increased death claim expenses
and general expenses in 1988 and 1989 reduced funds available for revision
expenditures. Death claim expenses and general expenses were lower in 1990 and
1991, but during these years concern about the possibility of high death claim
expenses and the increased regulatory capital and surplus requirements
precluded expenditures for further policy revisions. In 1992, a record high
amount of death claim expenses did occur and again no funds were available for
policy revisions. Death claims were lower in 1993 and 1994, but declining
premium and investment income plus increased regulatory requirements did not
permit expenditures for policy or market development.

A 1993 change in the Illinois statutory deposit law requires Central
to maintain a trust deposit of U.S. Government obligations with a market value
of $1,200,000. This change required Central to increase its U.S. Government
investments by $900,000 in late 1993, a time of very low interest yields which
negatively affected investment income approximately $25,000 to $30,000 from
late 1993 to late 1994. The market value requirement and Central's small asset
base made it necessary to choose short term U.S. Governments to insure less
market price volatility, further penalizing yields.

The following tables in this section reflect information as to the
life insurance business of Central. The presentation of Investors'
consolidated operations and admitted assets is according to generally accepted
accounting principles.

43
<PAGE> 82
<TABLE>
<CAPTION>
As of December 31: 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
New business (face
amount) paid:
Ordinary-whole life $ - $ - $ - $ - $ -
Ordinary-term life - - - - -
--- --- --- --- ---

Total $ - $ - $ - $ - $ -
=== === === === ===

Life insurance in-force:
Ordinary-whole life $3,154,472 $3,346,971 $4,276,205 $5,348,561 $ 6,102,650
Ordinary-term life 2,861,870 3,038,751 3,468,531 4,032,557 4,309,426
---------- ---------- ---------- ---------- -----------
Total $6,016,342 $6,385,722 $7,744,736 $9,381,118 $10,412,076
========== ========== ========== ========== ===========

Policy lapse
(termination) ratio 4.9% 18.4% 17.3% 9.9% 19.6%
========== ========== ========== ========== ===========

Premium income:
First year $ - $ - $ - $ - $ 215
Single 6,801 9,734 7,260 6,486 7,381
Renewal 46,780 59,897 65,527 71,089 80,581
---------- ---------- ---------- ---------- -----------
Total $ 53,581 $ 69,631 $ 72,787 $ 77,575 $ 88,177
========== ========== ========== ========== ===========

Net loss $ (125,831) $ (79,465) $ (103,151) $ (46,554) $ (11,957)
========== ========== ========== ========== ===========

Total assets $2,402,385 $2,461,948 $2,512,310 $2,609,977 $ 2,629,253
========== ========== ========== ========== ===========
</TABLE>

Substantially all business of Investors is conducted through its two
subsidiaries, Central and CI. CI has a non-exclusive Agency Contract with
Central to secure, train, and supervise life insurance agents to sell policies
of Central. CI's efforts to recruit agents were curtailed in 1987 as a result
of Central ceasing to issue Modified Whole Life and Decreasing Term Life to Age
100 policy plans. CI has no salaried personnel, but reimburses Central for use
of Central's personnel. CI owns IBM, Gateway 2000 and Data General computer
equipment. Time on this equipment is leased to Investors and Central.
Central's personnel operate the equipment. CI also leases other office
equipment to Central.

PROPERTIES

Investors and its two subsidiaries share a common office located at
2512 North Knoxville Avenue, Peoria, Illinois. The lease for this office is in
the name of Central, and the total monthly rental is $800 for approximately
2,900 square feet of space. During 1994, CI reimbursed Central $1,200 for its
share of space occupied.

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<PAGE> 83
Investors' general business equipment has been fully amortized.
During the year, Investors received $400 a month from Central for use of the
equipment.

CI owns miscellaneous data processing equipment and office equipment
with a year-end net book value of $921 and $527 respectively. During the year
CI received $6,000 from Central for use of the equipment.

LEGAL PROCEEDINGS

Investors is unaware of any pending litigation to which it or any of
its subsidiaries are parties or to which any of their property is subject.

MARKET FOR INVESTORS' COMMON STOCK AND RELATED SECURITYHOLDER MATTERS

Neither class of the Investors' Common Stock is listed or actively
traded through security brokerage firms, and there is virtually no
over-the-counter trading activity.

There have been no dividends paid since the inception of Investors.

Approximate Number of Equity Securityholders

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Class A, Common Stock, $1.00 par value 1,688

Class B, Common Stock, no par value,
stated value $.10 per share 38
</TABLE>

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<PAGE> 84
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

Investors has had no disagreements with its certified public
accountants regarding accounting and financial matters required to be disclosed
herein.

COMPARISON OF RIGHTS OF SECURITYHOLDERS

Upon consummation of the Merger and Exchange, the holders of issued
and outstanding Investors Class A and Class B Common Stock and of Central
Common Stock will receive Citizens Class A Common Stock. The rights of the
holders of Citizens shares are governed by Citizens Articles of Incorporation,
its bylaws and Colorado law, while the rights of holders of Investors shares
and Central shares are governed by the companies' respective Articles of
Incorporation, their bylaws and Illinois law. In most respects, the rights of
holders of Citizens Class A shares and holders of Investors and Central Common
shares are similar. The following is a brief comparison of the rights of the
holders of Investors Class A and Class B Common Stock, Central Common Stock,
and Citizens Class A Common Stock.

AUTHORIZED SHARES

The aggregate number of shares which Citizens is authorized to issue
is 50,000,000 shares of Class A Common Stock with no par value and 1,000,000
shares of Class B Common Stock with no par value; of which 16,980,340 shares of
such Class A Common Stock and 621,049 shares of Class B Common Stock are issued
and outstanding, fully paid and non- assessable. In addition to the foregoing
numbers of Citizens Class A Common Stock, approximately 2,341,000 shares are
expected to be issued in conjunction with the September 14, 1995 acquisition by
Citizens of ALFC, and an insignificant number of shares have been issued in
conjunction with an offering of the shares presently being conducted outside of
the United States.

The aggregate number of shares which Investors is authorized to issue
is 1,500,000 shares of Class A Common Stock with par value of $1.00 per share
and 500,000 shares of Class B Common Stock with no par value, of which 807,649
shares of such Investors Class A Common Stock and 472,423 shares of Investors
Class B Common Stock are issued and outstanding, fully paid and non-assessable.
The aggregate number of shares which Central is authorized to issue is
1,000,000 shares of Common Stock with par value of $1.00 per share, of which
650,000 shares of such Central Common Stock are issued and outstanding, fully
paid and non-assessable.

The foregoing numbers do not include treasury shares.

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<PAGE> 85
DIVIDEND RIGHTS

The cash dividends paid upon each share of Citizens Class A Common
Stock is twice the cash dividends paid on each share of Citizens Class B Common
Stock.

The Investors Class B Common shareholders are not entitled to any cash
dividends out of earnings in any year unless and until the Investors Class A
Common shareholders have received a dividend of $.12 per share in that year.
In that event, the Investors Class B shareholders are then entitled to a
dividend of up to $.12 per share. After both the Class A and Class B Common
shareholders have received a dividend of $.12 per share during such year, the
Investors Class A and Class B Common shareholders share equally and ratably on
a share-for-share basis in any further dividends.

VOTING RIGHTS

Those who hold Investors Class A and Class B Common Stock and Central
Common Stock on the date of the Merger and Exchange becomes effective will be
entitled as a group to hold approximately 171,391 shares of Citizens Class A
Common Stock or approximately .9% of Citizens Class A shares that Citizens
anticipates will then be outstanding.

The voting rights of Citizens Class A Common Stock and Class B Common
Stock are equal in all respects except that the holders of Class B Common Stock
have the exclusive right to elect a simple majority of the members of Citizens'
Board of Directors, and the holders of the Class A Common Stock have the
exclusive right to elect the remaining directors. The holders of Citizens
Common Stock do not have cumulative voting rights in the election of directors.

Each outstanding share of Investors Common Stock, regardless of class,
is entitled to one vote upon each matter submitted to a vote of the
shareholders. The Investors Class A and Class B Common shareholders, as well
as holders of Central Common Stock, have cumulative voting rights in the
election of directors.

The Articles of Incorporation of Citizens provide that when, with
respect to any action to be taken by Citizens shareholders the Colorado
Corporation Code (now superseded by the Colorado Business Corporation Act)
requires the affirmative vote of the holders of two-thirds of the outstanding
shares entitled to vote thereon, or of any class or series, such action may be
taken by the affirmative vote of the holders of a majority of the outstanding
shares entitled to vote on such action. The power to amend the Articles of
Incorporation, approve mergers and approve extraordinary asset transfers are
all subject to this requirement. The respective Articles of Incorporation and
bylaws of Investors and Central do not address the vote to be required for such
extraordinary corporate actions, and thus Illinois law controls as to the vote
required for these types of actions. With respect to the Merger and Exchange,
the approval of two-thirds of the shares entitled to vote of both Investors and
Central is required. Each share of Investors Class A and Class

47
<PAGE> 86
B Common Stock is entitled to one vote, as if the two classes were a single
class, with respect to the Merger and Exchange.

The bylaws of both Investors and Central provide that the power to
alter, amend, or repeal the respective companies' bylaws or to adopt new bylaws
is vested in the respective Boards of Directors. Further, Central's Articles
of Incorporation state that the power to amend the bylaws and repeal and adopt
new bylaws belongs solely to the Board of Directors. However, under Illinois
law, the shareholders, as well as the Board of Directors, have power to alter,
amend or repeal the bylaws. Citizens' Articles of Incorporation provide that
Citizens' Board of directors has the power to enact, alter, amend and repeal
citizens' bylaws not inconsistent with the laws of Colorado or Citizens'
Articles of Incorporation, as the Board of Directors deems best for the
management of Citizens; however, Colorado statutes give shareholders the right
to amend and repeal bylaws even if not so provided for in the bylaws
themselves.

Special meetings of Investors shareholders may be called by Investors'
President, its Board of Directors, or by the holders of not less than one-fifth
of all outstanding shares of stock. Special meetings of Central shareholders
may be called by Central's President, the Chairman of the Board, the Board of
Directors, or by the holders of not less than one-fifth of all outstanding
shares of stock. Special meetings of Citizens' shareholders may be called by
the Chairman of the Board, by the Board of Directors, or by holders of 10% or
more of all the Citizens' shares entitled to vote.

A majority of the shares of stock entitled to vote constitutes a
quorum under the bylaws of both Investors and Central. The bylaws of Citizens
provide that one-third of the votes entitled to be cast on a matter by a voting
group shall constitute a quorum of that voting group.

The bylaws of both Citizens and Central provide that the shareholders
may take action without a meeting provided that all the shareholders of the
respective corporations entitled to vote have consented to the action in
writing. The bylaws of Investors contain no such provision.

PREEMPTIVE RIGHTS

Authorized Investors, Central and Citizens shares may be issued at any
time, and from time to time, in such amounts and for such consideration as may
be fixed by the Boards of Directors of the respective corporations. No holder
of Citizens, Investors or Central shares has any preemptive or preferential
right to purchase or to subscribe for any shares of capital stock or other
securities which may be issued by Citizens, Investors or Central.

48
<PAGE> 87
LIABILITY OF DIRECTORS

As authorized by Colorado law, Citizens' Articles of Incorporation
contain a provision to the effect that no director of Citizens shall be
personally liable to Citizens or any of its shareholders for damages for any
breach of duty as a director except to the extent this provision is limited by
law. There is no such provision in the Articles of Incorporation of either
Investors or Central.

LIQUIDATION RIGHTS

In the event of any liquidation, dissolution, or winding up of
Citizens, whether voluntary or involuntary, the holders of Citizens shares are
entitled to share, on a share-for-share basis, any of the assets or funds of
Citizens which are distributable to its shareholders upon such liquidation,
dissolution, or winding up.

In the event of any voluntary or involuntary liquidation of Investors,
the holders of Class B Common shareholders are not entitled to distributions of
assets until the Class A shareholders have received a distribution of assets
with a market value of $2.00 per Class A share. After the Class A shareholders
receive a distribution of $2.00 per share, the Class B Common shareholders are
entitled to distributions of assets with a market value of $.10 per Class B
share, and thereafter both classes are entitled to share equally and ratably on
a share-for-share basis in all further distributions of assets.

The holders of Central Common Stock are entitled, upon liquidation,
whether voluntary or involuntary, to receive distributions on a share-for-share
basis.

ASSESSMENT AND REDEMPTION

Citizens shares to be issued upon consummation of the Merger and
Exchange will be fully paid and non assessable. Investors and Central shares,
for which full consideration has been paid, are deemed to be fully paid and non
assessable.

As set out in Investors' Articles of Incorporation, Class B Common
Stock is, and at all times has been, convertible into Class A shares if, for a
period of not less than 36 months nor more than 60 consecutive months,
Investors has average annual net earnings equal to 6% of the amount determined
by multiplying the total number of Class A shares plus the total number of
Class B shares by $2.00 per share. Although such conversion is to be
automatic, Investors has never realized net earnings sufficient for such
conversion to take place.

TRANSFER AGENT

The transfer agent for Investors and Central shares is the Company.
The transfer agent for Citizens shares is American Stock Transfer and Trust
Company, New York, New York.

49
<PAGE> 88
EXPERTS

The consolidated financial statements included in this Proxy
Statement-Prospectus of Investors as of December 31, 1994 and 1993 and for each
of the years in the three-year period ended December 31, 1994, have been
audited by KPMG Peat Marwick LLP, independent public accountants, as stated in
their report appearing herein and have been so included in reliance upon such
report given upon the authority of that firm as experts in accounting and
auditing.

The consolidated financial statements of Citizens, Inc. and
subsidiaries as of December 31, 1994 and 1993, and for each of the years in the
three year period ended December 31, 1994, included herein have been included
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of such firm as experts in accounting and auditing.

LEGAL MATTERS

The legal status of the Citizens Class A Common Stock to be issued
pursuant to the Merger and Exchange will be passed upon by Jones & Keller,
P.C., 1625 Broadway, Suite 1600, Denver, Colorado 80202.

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

The following information is furnished with respect to each director
and executive officer.

<TABLE>
<CAPTION>
Year First
elected as director
of Investors Positions with Investors and
Name of director Age and Central Central (date elected)(1)
- ---------------- --- ------------------- -----------------------------
<S> <C> <C> <C>
Frank J. Wilkins (2) 63 1964 President of Investors since 1971 and
Treasurer since 1990; President of Central
since 1971 and Treasurer since 1990

Robert W. Kreutz(2)(3) 69 1965 Vice President of Investors since 1975 and
Secretary since 1990; Vice President of
Central since 1975 and Secretary since 1990
</TABLE>

50
<PAGE> 89
<TABLE>
<S> <C> <C> <C>
Robert D. Wilkins(4) 29 1990 Administrative Assistant of Central from
1989 to 1994

Robert W. McCallum(2)(5) 66 1990 No position other than director

</TABLE>
__________
(1) Except as otherwise noted in a footnote here, the principal occupation
of each individual for at least the last five years has been in the
positions noted below with Investors and Central.
(2) Member of Executive and Investment Committees
(3) In addition to Mr. Kreutz's positions with Investors and Central in
the preceding five-year period, until 1993, he was a distributor of
car wash equipment.
(4) In addition to Mr. Wilkins' former position with Central, he has
worked as an accountant for Franklin Templeton Funds since 1994.
(5) For the preceding five years and presently, Mr. McCallum's principal
occupation has been President of ROMAC Associates, a manufacturer of
agricultural tank cleaning chemicals and hand rehabilitation devices.

Full Board of Directors serve as the Audit Committee.

All directors and officers are elected for a term of one year or until
their successors have been duly elected and qualified.

Frank J. Wilkins, Director, is the father of Robert D. Wilkins,
Director. There are no other family relationships among the officers listed,
and there are no arrangements or understandings pursuant to which any of them
were elected as officers.

There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any director or executive officer during the past five
years.

OTHER MATTERS

Both the Investors Board and the Central Board do not intend to bring
any matters before the Meetings other than those specifically set forth in the
notices of the Meetings accompanying this Proxy Statement-Prospectus and do not
know of any matters to be brought before the Meetings by others. If any other
matters properly come before the Meetings, it is the intention of the persons
named in the accompanying proxies to vote such proxies in accordance with the
judgment of the Boards.

In the event that the Merger and Exchange is not approved by the
Investors and Central shareholders, any such shareholder who wishes to present
a proposal for consideration at the respective 1996 annual meetings of the
shareholders, which, for Central is anticipated to be held on May 8, 1996, and
for Investors, is anticipated to be held

51
<PAGE> 90
on July 17, 1996, must submit such proposal in accordance with the rules
promulgated by the SEC. In order for a proposal to be included in Investors or
Central proxy materials relating to the 1996 annual meetings, the shareholder
must have submitted such proposal in writing to Investors or Central not later
than _______, 199__. Such proposals should be addressed to: Office of the
Secretary, Robert W. Kreutz (who is secretary to both Investors and Central),
2512 North Knoxville Avenue, Peoria, Illinois 81604-3622.

DEADLINE FOR CITIZENS SHAREHOLDER PROPOSALS

Any Citizens shareholder who wishes to present a proposal for action
at the 1996 Annual Meeting of the Citizens shareholders must submit his or her
proposal in writing by Certified Mail -- Return Receipt Requested, to Citizens,
Inc., 400 East Anderson Lane, Austin, Texas 78752 by December 15, 1995.

52
<PAGE> 91
FINANCIAL STATEMENTS

INSURANCE INVESTORS & HOLDING CO.
AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-1

Consolidated Balance Sheets - December 31, 1994 and 1993 F-2

Consolidated Statements of Operations - Years ended December 31, 1994, 1993, and 1992 F-4

Consolidated Statements of Changes in Stockholders Equity - Years ended
December 31, 1994, 1993 and 1992 F-5

Consolidated Statements of Cash Flows - Years ended December 31, 1994, 1993, and 1992 F-6

Notes to Consolidated Financial Statements December 31, 1994, 1993 and 1992 F-7

Schedule
- --------

II Condensed Financial Information of Registrant F-19

III Supplementary Insurance Information F-23

IV Reinsurance F-24

FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1995

Unaudited Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Unaudited Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
Unaudited Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31
</TABLE>

53
<PAGE> 92
[KPMG PEAT MARWICK LLP LETTERHEAD]

INDEPENDENT AUDITORS REPORT

The Board of Directors and Stockholders
Insurance Investors & Holding Co.:

We have audited the consolidated financial statements of Insurance Investors &
Holding Co. and subsidiaries. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedules as listed in the accompanying index. These consolidated financial
statements and financial statement schedules are the responsibility of the
Company s management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Insurance Investors
& Holding Co. and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.

KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP

Dallas, Texas
June 6, 1995

F-1
<PAGE> 93
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1994 and 1993

<TABLE>
<CAPTION>
Assets 1994 1993
------ ---- ----
<S> <C> <C>
Investments (note 2):
U. S. Treasury bills, at amortized cost (market value
$512,491 in 1993). $ - 512,491
Bonds, at amortized cost (market value $1,902,194 in
1994; $1,497,262 in 1993) 1,955,882 1,482,278
Preferred stocks, at market (cost $81,473 in
1994 and 1993, respectively) 57,957 71,013
Policy loans 101,749 110,871
------------ ---------- ----------

Total Investments 2,115,588 2,176,653

Cash 207,506 203,106

Accrued investment income 26,581 22,017

Deferred acquisition costs (note 3) 51,262 57,806

Furniture and equipment, at cost less accumulated
depreciation of $108,713 in 1994 and $107,795 in 1993. 1,448 2,366
---------- ----------

TOTAL ASSETS $2,402,385 $2,461,948
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE> 94
<TABLE>
<CAPTION>
Liabilities and Stockholders Equity 1994 1993
------------------------------------ ---- ----
<S> <C> <C>
Liabilities:
Policy liabilities:
Future life policy benefits (notes 3 and 11) $ 717,441 $ 712,464
Deferred premium reserve 67,443 67,537
Policyholders' funds:
Supplemental contracts 9,407 11,768
Dividends and endowments payable (note 8) 11,345 11,444
Dividend accumulations 136,502 138,589
Endowment accumulations 135,188 147,679
Premiums received in advance 277 177
---------------------------- ---------- ----------

1,077,603 1,089,658

Accounts payable and accrued expenses 26,424 19,214
Minority interest (note 9) 93,268 95,996
Other liabilities 3,549 4,967
Notes payable (note 4) 267,900 180,500
---------- ----------

Total liabilities 1,468,744 1,390,335
----------------- ---------- ----------

Stockholders' equity (notes 5 and 6):
Class A common stock of $1 par value. Authorized
1,500,000 shares; issued 819,249 shares 819,249 819,249
Class B common stock of $.10 stated value.
Authorized 500,000 shares; issued and outstanding
472,423 shares 47,242 47,242
Paid-in capital 576,347 576,347
Net unrealized depreciation on investments (note 2) (21,869) (9,728)
Retained deficit (477,903) (352,072)
---------------- ---------- ----------

943,066 1,081,038

Less cost of Class A shares in treasury - 11,600 shares 9,425 9,425
---------- ----------

Total stockholders' equity 933,641 1,071,613

Commitments and contingent liabilities (note 11)
---------- ----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,402,385 $2,461,948
------------------------------------------ ========== ==========
</TABLE>

F-3
<PAGE> 95
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue:
Life insurance premiums $ 53,581 69,631 72,787
Net investment income (note 2) 106,508 123,074 147,638
Realized investment gains (note 2) 1,081 24,350 20,208
---------------------------------- --------- --------- ----------

Total revenue 161,170 217,055 240,633
------------- --------- --------- ----------

Benefits and expenses:
Policy benefits:
Death and other policy benefits 61,462 86,732 118,916
Endowments to policyholders 12,049 13,323 14,362
Dividends to policyholders (note 8) 13,996 15,135 18,422
Change in future life policy benefits 4,977 (25,719) (14,195)
Amortization of deferred acquisition costs (note 3) 3,648 9,833 10,370
Provision for deferred premium (94) (814) (1,378)
Recovery of uncollectible agents' balances (1,309) (5,150) (4,375)
General insurance expenses 161,096 174,829 183,621
Interest expense 19,762 14,273 7,991
Taxes, licenses and fees 13,227 13,957 2,685
------------------------ --------- --------- ----------

Total benefits and expenses 288,814 296,399 346,419
--------------------------- --------- --------- ----------

Loss from operations before income taxes
and minority interest (127,644) (79,344) (105,786)

Income taxes (note 7) -- -- --
- --------------------- --------- --------- ----------

Loss before minority interest (127,644) (79,344) (105,786)

Minority interest in (earnings) loss of subsidiary 1,813 (121) 2,635
- -------------------------------------------------- --------- --------- ----------

Net loss $(125,831) (79,465) (103,151)
-------- --------- --------- ----------

Net loss per share $ (0.10) (0.06) (0.08)
- ------------------ --------- --------- ----------

Weighted average number of common shares
outstanding 1,280,072 1,280,072 1,280,072
----------- --------- --------- ----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 96
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders Equity

Years ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Class A common stock $819,249 819,249 819,249
- -------------------- -------- --------- ---------

Class B common stock 47,242 47,242 47,242
- -------------------- -------- --------- ---------

Paid-in-capital 576,347 576,347 576,347
- --------------- -------- --------- ---------

Net unrealized depreciation on investments, beginning
of year (9,728) (29,668) (29,463)
Change in unrealized appreciation (depreciation) on
investments (12,141) 19,940 (205)
-------- --------- ---------
Unrealized depreciation on investments, end of year (21,869) (9,728) (29,668)
- --------------------------------------------------- -------- --------- ---------

Retained deficit, beginning of year (352,072) (272,607) (169,456)
Net loss (125,831) (79,465) (103,151)
- -------- -------- --------- ---------

Retained deficit, end of year (477,903) (352,072) (272,607)
- ----------------------------- -------- --------- ---------

Treasury stock (9,425) (9,425) (9,425)
- -------------- -------- --------- ---------

TOTAL STOCKHOLDERS' EQUITY $933,641 1,071,613 1,131,138
-------------------------- -------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 97
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(125,831) (79,465) (103,151)
-------- --------- -------- ---------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation 918 1,667 2,781
Change in:
Accrued investment income (4,564 5,102 (11,339)
Deferred acquisition costs 6,544 5,585 8,435
Other assets -- 357 7,524
Future life policy benefits 4,977 (25,719) (14,195)
Deferred premium reserve (94) (814) (1,378)
Supplemental contracts (2,361) (2,292) (2,225)
Dividends and endowments payable (99) (2,697) (859)
Dividend accumulations (2,087) (9,968) (7,273)
Endowment accumulations (12,491) (17,822) (13,516)
Premiums received in advance 100 -- (424)
Accounts payable and accrued expenses 7,210 11,158 2,204
Minority interest (1,813) 121 (2,635)
Other liabilities (1,418) (1,421) (453)
----------------- --------- -------- ---------

Total adjustments (5,178) (36,743) (10,675)
----------------- --------- -------- ---------

Net cash used by operating activities (131,009) (116,208) (113,826)
------------------------------------- --------- -------- ---------
Cash flows from investing activities:
Proceeds from sale and maturity of investments 716,012 820,870 717,338
Purchase of investments (668,003) (974,682) (335,138)
Purchase of furniture and equipment -- -- --
--------- -------- ---------
Net cash provided (used) by investing
activities 48,009 (153,812) 382,200
---------- --------- -------- ---------
Cash flows from financing activities:
Proceeds from bank borrowing -- 100,000 --
Principal payments on bank borrowing -- (150,000) --
Proceeds from other borrowing 87,400 108,000 47,500
----------------------------- --------- -------- ---------
Net cash from financing activities 87,400 58,000 47,500
---------------------------------- --------- -------- ---------
Net increase (decrease) in cash 4,400 (212,020) 315,874
Cash at beginning of year 203,106 415,126 99,252
- ------------------------- --------- -------- ---------
CASH AT END OF YEAR $ 207,506 203,106 415,126
- ------------------- --------- -------- ---------
Supplemental disclosure of cash flow information:
CASH PAID DURING THE YEAR FOR INTEREST $ 2,136 6,693 7,506
-------------------------------------- --------- -------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 98
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1994, 1993 and 1992

(1) BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, C I Agency, Inc. and its 93.0% owned subsidiary,
Central Investors Life Insurance Company of Illinois. All significant
intercompany balances and transactions have been eliminated in consolidation.
The significant accounting policies are as follows:

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles prescribed for stock
life companies for all years presented.

(a) Premiums

Gross premium received in excess of the net premium on
limited-payment contracts is deferred and recognized in income
over the expected life of the business. Other premium income is
recognized as revenue ratably over the terms of the respective
policies calculated on the monthly pro rata basis and are stated
after deduction for reinsurance with other insurers.

(b) Deferred Policy Acquisition Costs

Policy acquisition costs such as commissions (net of
reinsurance), premium taxes, and certain other underwriting and
agency expenses which vary with and are directly related to the
production of business have been deferred. Such deferred policy
acquisition costs are being amortized as premium revenue is
recognized. The method followed in computing deferred policy
acquisition costs limits the amount of such deferred costs to
their estimated realizable value, which gives effect to the
premium to be earned, related investment income, losses and loss
settlement expenses, and certain other costs expected to be
incurred as the premium is earned.

Liabilities for future life policy benefits and expenses have
been computed by a net level premium method based upon estimated
future investment yield, mortality and withdrawals.

(d) Depreciation

Furniture and equipment are depreciated over estimated useful
lives of 5 to 10 years. Provision for depreciation is computed
using the straight-line and accelerated methods.

(e) Federal Income Taxes

F-7
<PAGE> 99
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
(temporary differences) and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

The cumulative effect of the change in accounting for income
taxes was $-0- and has therefore not been separately stated in
the 1993 consolidated Statement of Operations.

Prior to January 1, 1993, in accordance with Accounting
Principles Board Opinion No. 11 (APB 11), amounts provided for
income tax expense by the Company were based on income reported
for financial statement purposes rather than amounts currently
payable under tax laws. Deferred taxes, which arose from timing
differences between the period in which certain income and
expenses were recognized for financial accounting purposes and
the period in which they affected taxable income, were included
in the amounts provided for income taxes.

(f) Earnings Per Share

Earnings per share have been computed using weighted average
number of shares of common stock outstanding during each period.

(g) Accounting Pronouncements

In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
115). SFAS 115, requires the classification of debt and equity
securities in one of three categories: trading, held-to-
maturity, or available-for-sale, based on established criteria.

Held-to-maturity securities are stated at amortized cost which
represents actual cost adjusted for amortization of premium and
accretion of discount using methods that generally approximate
the effective interest method. Trading and available-for-sale
securities are stated at fair value. Unrealized holding gains
and losses, net of related taxes, on available-for-sale
securities are excluded from earnings and reported as a separate
component of stockholders equity until realized, while
unrealized gains and losses for trading securities are included
in earnings. 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.

F-8
<PAGE> 100
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

The Company adopted SFAS 115 effective January 1, 1994 on a
prospective basis. There was no impact of adoption of SFAS 115
to the consolidated financial statements as all the debt
securities of the Company are classified as held to maturity.

(2) INVESTMENTS

(a) Bonds and U.S. Treasury bills are included in the consolidated
financial statements at amortized cost, as the Company intends to
hold all bonds until maturity. The non-redeemable preferred
stocks are carried at market.

(b) Adjustments reflecting the revaluation of stocks at each
statement date on the basis described in paragraph (a) above, are
carried to the consolidated statements of stockholders' equity as
unrealized appreciation (depreciation) on investments.

The amortized cost and estimated fair values of investments in debt securities
are as follows:

<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -------
<S> <C> <C> <C> <C>
Corporate bonds 1,943,378 187 53,875 1,889,690
GNMA mortgage-backed
securities 12,504 -- -- 12,504
---------- ---------- --- ------ ---------

Total: $1,955,882 187 53,875 1,902,194
---------- --- ------ ---------
</TABLE>

<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
---- ----- ------ -------
<S> <C> <C> <C> <C>
U. S. Treasury securities $1,287,524 2,249 532 1,289,241
Corporate bonds 691,113 16,748 3,481 704,380
GNMA mortgage-backed
securities 16,132 -- -- 16,132
---------- ---------- ------ ----- ---------

Total: $1,994,769 18,997 4,013 2,009,753
------ ---------- ------ ----- ---------
</TABLE>

F-9
<PAGE> 101
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

The amortized cost and estimated market value of debt securities at December
31, 1994 by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
Estimated
Amortized market
cost value
---- -----
<S> <C> <C>
Due in one year or less $1,038,231 633,391
Due after one year through five years 603,713 917,450
Due after five years through ten years 261,248 161,280
Due after ten years 40,186 36,400
------------------- ---------- ---------

1,943,378 1,889,690

Mortgage-backed securities 12,504 12,504
-------------------------- ---------- ---------
Total: $1,955,882 1,902,194
------ ---------- ---------
</TABLE>

The following information summarizes the components of investment income and
changes in realized and unrealized gains (losses):

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
Investment income 1994 1993 1992
----------------- ---- ---- ----
<S> <C> <C> <C>
Interest on bonds $ 84,325 88,172 119,494
Dividends on common stocks -- -- 66
Dividends on preferred stocks 4,983 12,405 15,943
Interest on policy loans 6,172 6,355 5,744
Interest on invested cash 15,926 21,215 12,148
------------------------- -------- ------- -------

Total investment income 111,406 128,147 153,395

Less allocated investment expenses 4,898 5,073 5,757
---------------------------------- -------- ------- -------

Net investment income $106,508 123,074 147,638
--------------------- -------- ------- -------
</TABLE>

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
Realized investments gains 1994 1993 1992
-------------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed maturities - bonds $ 1,081 17,430 15,806
Equity securities:
Preferred stocks -- 6,920 --
Common stocks -- -- 4,402
------------- -------- ------ ------

TOTAL: $ 1,081 24,350 20,208
------ -------- ------ ------
</TABLE>

F-10
<PAGE> 102
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
Changes in unrealized investment gains (losses) 1994 1993 1992
----------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Fixed maturities (38,704) 4,709 27,469
---------------- ------- ------ ------

Equity securities:
Common stocks -- -- (3,937)
Preferred stocks (12,141) 19,940 3,732
---------------- ------- ------ ------

Total: (12,141) 19,940 (205)
------ ------- ------ ------
</TABLE>

Gross unrealized gains and gross unrealized losses at December 31
were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Unrealized gains -- 1,000 4,761
Unrealized losses (23,516) (11,461) (35,779)
----------------- ------- ------- -------

(23,516) (10,461) (31,018)
Less minority interest 1,647 733 1,350
---------------------- ------- ------- -------

Total: (21,869) (9,728) (29,668)
------ ------- ------- -------
</TABLE>

Proceeds from sales of fixed maturity investments were $304,438
in 1993. Gross gains and losses realized on those sales were
$25,131 and $781 for 1993. There were no sales of fixed
maturities in 1994.

(d) At December 31, 1994 and 1993, the market value of investments on
deposit with government authorities in excess of the legal
requirements were $1,245,250 and $1,287,524, respectively.

F-11
<PAGE> 103
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

(3) ACTUARIAL ASSUMPTIONS - DEFERRED ACQUISITION
COSTS AND FUTURE LIFE POLICY BENEFITS

INTEREST:

Policy reserves for most ordinary policies in-force are computed on the
basis of interest rates for the first year of 6% graded over 20 years to
4%. Other policies use 4%.

MORTALITY:

Mortality rates assumed in the computation of most policy reserves are
based on the 1955-60 Select and Ultimate Mortality Tables.

EXPENSES:

Capitalized expenses include commissions, underwriting and policy issue
expenses, but exclude expenses which do not vary with the sales of new
business, such as developmental, advertising and sales promotion
expenses. Amortization of expenses is accomplished principally by using
actuarial techniques incorporating assumptions for interest, mortality
and withdrawals.

WITHDRAWALS:

Withdrawal rates for most policies in-force are based upon Company
experience. Other policies use the Linton A Table.

(4) NOTES PAYABLE

Notes payable at December 31, 1994 and 1993 are as follows:

<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
8% note payable to bank, due April 15, 1994, interest payable
quarterly, secured by 30,000 shares of Central Investors Life
Insurance Company of Illinois -- 25,000
9% note payable to United Republic Life Insurance Company,
due April 27, 1994, interest payable quarterly, secured by
18,750 shares of Central Investors Life Insurance Company
of Illinois -- 25,000
9% notes payable to shareholder, due May 11, 1995 through
September 30, 1995, secured by 200,925 and
79,125 shares of Central Investors Life Insurance Company
of Illinois in 1994 and 1993, respectively 267,900 105,500
</TABLE>

F-12
<PAGE> 104
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
8% notes payable to shareholder, due October 18, 1993, secured
by 18,750 shares of Central Investors Life Insurance Company
of Illinois -- 25,000
--------- ---------

TOTAL: $ 267,000 $180,500
</TABLE>

5) STOCKHOLDERS' EQUITY

The holders of each class of common stock are entitled to one vote for
each share held, with the right of cumulative voting for directors. In
the event of liquidation, Class A common stockholders shall first be
paid $2 a share; next, Class B common stockholders shall be paid $.10 a
share; thereafter, any remaining distribution would be on a
share-for-share basis.

Class B stockholders are not entitled to a cash dividend in any year
until Class A stockholders have been paid $.12 a share. In that event,
Class B stockholders are entitled to a dividend up to $.12 a share in
that year. Thereafter, any remaining distribution during that year is
on a share-for-share basis.

The Class B common shares are automatically convertible into Class A
common shares if, and when, the Company has had average net earnings of
$.12 a share per year (on the total number of Class A and Class B
common shares outstanding at time of conversion) for a period of not
less than 36, nor more than 60, consecutive months. Such conversion is
to be made on a share-for-share basis.

The payment of cash dividends by the Company is principally dependent
upon the amount of its insurance subsidiary s statutory surplus
available for dividend distribution.

Under the Illinois Insurance Code, dividends may be paid only from
unassigned surplus, as restricted by the provisions of the Code. As
defined by the Illinois Insurance Code provisions, no dividends or other
distributions can be paid by the insurance subsidiary because
unassigned surplus reflects a statutory deficit at December 31, 1994,
1993 and 1992 (see note 7).

F-13
<PAGE> 105
(6) RECONCILIATION BETWEEN GAAP AND STATUTORY FINANCIAL STATEMENTS FOR NET
EARNINGS (LOSS) AND RETAINED DEFICIT

The following reconciles net earnings (loss) and retained earnings (deficit)
determined in accordance with statutory accounting practices prescribed or
permitted by the Insurance Department of the State of Illinois with such
amounts determined in conformity with generally accepted accounting principles:

<TABLE>
<CAPTION>
NET EARNINGS (LOSS) RETAINED EARNINGS (DEFICIT)
YEARS ENDED DECEMBER 31, DECEMBER 31,
---------------------------------- -----------------------------------
1994 1993 1992 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INSURANCE SUBSIDIARY ON A
STATUTORY BASIS (13,337) (12,520) (32,456) (297,677) (285,753) (290,381)
ADJUSTMENTS FOR GAAP REPORTING
DEFERRED ACQUISITION COSTS (6,544) (5,585) (14,020) 51,262 57,806 63,391
FUTURE LIFE POLICY BENEFITS (2,221) 598 (8,632) 135,112 137,333 136,735
DEFERRED AND UNCOLLECTED
PREMIUMS (217) 4,509 1,916 (12,558) (12,341) (16,850)
PROVISION FOR DEFERRED
PREMIUMS 94 814 1,378 (67,443) (67,537) (68,351)
ASSET VALUATION RESERVE -- -- -- 13,108 14,521 31,669
INTEREST MAINTENANCE
RESERVE (2,207) 14,956 10,278 23,027 25,234 10,278
OTHER (1,454) (1,036) (3,904) 6,885 11,817 12,853
- -----------------------------------------------------------------------------------------------------------------

INSURANCE SUBSIDIARY REPORTED
ON A GAAP BASIS (25,886) 1,736 (37,632) (148,284) (118,920) (120,656)
MINORITY INTEREST IN (EARNINGS)
LOSS OF INSURANCE SUBSIDIARY 1,813 (121) 2,635 19,602 17,789 17,910
ALL NONINSURANCE COMPANIES (101,758) (81,080) (68,154) (349,221) (250,941) (169,861)
- -----------------------------------------------------------------------------------------------------------------

BALANCES AS REPORTED IN THE
CONSOLIDATED FINANCIAL
STATEMENTS (125,831) (79,465) (103,151) (477,903) (352,072) (272,607)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

(7) INCOME TAXES

The Company and C I Agency, Inc. file a consolidated federal income tax
return, while Central Investors Life Insurance Company of Illinois files
a separate federal income tax return.

As discussed in note 1, the Company adopted Statement 109 as of January
1, 1993. The cumulative effect of this change in accounting for income
taxes was $-0- as of January 1, 1993 and therefore is not reported
separately in the consolidated statement of operations for the year
ended December 31, 1993. Prior years financial statements have not
been restated to apply the provisions of Statement 109.

F-14
<PAGE> 106
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

Total income tax benefit is less than the amount computed by applying
the applicable federal income tax rate to losses from operations before
income taxes for the following reasons:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed tax benefit $(33,034) (15,242) (24,507)
Life insurance company additions (deductions) -- 34 367
Dividends received deduction (341) (216) (1,096)
Tax effect of loss for which credits are not available 33,375 15,242 24,507
Other, net -- 182 729
-------- ------- -------
$ -- -- --
-------- ------- -------
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1994
and 1993 are presented below:

<TABLE>
<CAPTION>
1994 1993
-----------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards 128,925 95,550
Investment tax credit carryforward 312 338
------- ------

Total deferred tax assets 129,237 95,888
------- ------

Less valuation allowance 129,237 95,888
------- ------

NET DEFERRED TAX ASSETS -- --
------- ------
</TABLE>

The change in the valuation allowance for deferred taxes for the year
ended December 31, 1994 and 1993 was an increase of $33,349 and $15,150,
respectively.

F-15
<PAGE> 107
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

Subsequently recognized tax benefits relating to the valuation allowance
for deferred tax assets as of December 31, 1994 will be allocated to
income tax benefit that would be reported in the consolidated statement
of operations.

In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax
planning strategies in making this assessment. In order to fully
realize the deferred tax asset, the Company will need to generate future
taxable income of approximately $637,000 in future years.

For federal income tax purposes, the Company s life insurance subsidiary
at December 31, 1994 had net operating loss carryforwards of
approximately $305,000 available to offset future taxable income. These
carryforwards expire as follows: $28,000 in 1995, $3,000 in 1996,
$38,000 in 1997, $63,000 in 1998, $19,000 in 1999, $9,000 in 2002,
$51,000 in 2003, $23,000 in 2004, $5,000 in 2006, $39,000 in 2007,
$24,000 in 2008 and $6000 in 2009.

For federal income tax purposes, the Company and C I Agency at December
31, 1994 had net operating loss carryforwards of approximately $343,000
available to offset future taxable income. These carryforwards expire
as follows: $9,500 in 2003, $56,300 in 2004, $48,600 in 2005, $45,000
in 2006, $73,600 in 2007, $77,000 in 2008 and $33,000 in 2009.

(8) DIVIDENDS TO POLICYHOLDERS

In 1994, 1993, and 1992, the Company provided for policyholder dividends
of $13,996, $15,135 and $18,422, respectively.

F-16
<PAGE> 108
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

Certain of the life policies written by the Company are "participating
policies". Dividends on participating policies generally are payable in
the second and subsequent years on the basis of 90% of the earnings
applicable to the sale of such policies. During 1994 and prior years,
based on the allocations of income and expenses to the various lines of
business, the participating policies have produced losses.
Consequently, the accompanying consolidated financial statements reflect
no provision for additional dividends.

(9) MINORITY INTEREST

Minority interest in the equity of the consolidated subsidiary, Central
Investors Life Insurance Company of Illinois, is comprised of the
following:

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Capital stock $ 45,525 45,525 45,525
Paid-in-capital 59,613 59,613 59,613
Retained earnings (deficit) (10,223) (8,409) (8,530)
Net unrealized depreciation on investments (1,647) (733) (1,350)
------------------------------------------ -------- ------- -------

$ 93,268 95,996 95,258
-------- ------- -------
</TABLE>

(10) SEGMENT INFORMATION

The Company operates primarily through its subsidiaries, Central
Investors Life Insurance Company of Illinois and C I Agency, Inc. The
life insurance is primarily personal lines sold by agents under contract
by C I Agency, Inc. Separate financial statements are not shown in this
report for Central Investors Life Insurance Company of Illinois and C I
Agency, Inc. since their financial position and results of operations
are indicative of the consolidated financial position and results of
operations. The following table presents certain information concerning
Central Investors Life Insurance Company of Illinois, (in 000 s):

<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Total assets $ 2,400,000 2,300,000
Total liabilities $ 2,500,000 2,400,000
Retained deficit $ 100,000 100,000
</TABLE>

Net income (loss) for each of the years in the three years ended December 31,
1994 was $(25,886), $1,736, and $(37,632), respectively.

F-17
<PAGE> 109
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
________________________________________________________________________________

(11) COMMITMENTS AND CONTINGENT LIABILITIES

The Company does not retain more than a $20,000 liability on any one
life. To the extent that any reinsuring companies are unable to meet
their obligations under the reinsurance agreements, the Company would
remain liable.

The amounts related to reinsurance ceded are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Ceded reinsurance in-force $ 2,522,000 2,603,000 3,131,000
-------------------------- ------------ --------- ---------

Ceded reinsurance premiums $ 18,444 21,638 21,450
-------------------------- ------------ --------- ---------

Ceded reinsurance reserves $ 9,178 35,412 38,882
-------------------------- ------------ --------- ---------
</TABLE>

F-18
<PAGE> 110
Schedule II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

INSURANCE INVESTORS & HOLDING CO.

Condensed Balance Sheets

December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
Assets 1994 1993 1992
------ ---- ---- ----
<S> <C> <C> <C>
Cash $ 711 2,605 5,492
Accrued investment income 1 19 4
Investments in subsidiaries 1,226,207 1,261,851 1,248,842
- --------------------------- ---------- ---------- ---------

1,226,919 $1,264,475 1,254,338
---------- ---------- ---------

Liabilities and Stockholders Equity
------------------------------------

Liabilities:
Accounts payable and accrued expenses 25,378 12,362 700
Notes payable 267,900 180,500 122,500
------------- ---------- ---------- ---------

Total liabilities 293,278 192,862 123,200
----------------- ---------- ---------- ---------

Stockholders equity:
Common stock 866,491 866,491 866,491
Paid-in capital 576,347 576,347 576,347
Net unrealized depreciation on investments (21,869) (9,728) (29,668)
Retained earnings (deficit) (477,903) (352,072) (272,607)
--------------------------- ---------- ---------- ---------

943,066 1,081,038 1,140,563

Less cost of common stock in treasury 9,425 9,425 9,425
------------------------------------- ---------- ---------- ---------

Total stockholders equity 933,641 1,071,613 1,131,138
-------------------------- ---------- ---------- ---------

Total liabilities and stockholders equity $1,226,919 1,264,475 1,254,338
----------------------------------------- ---------- ---------- ---------
</TABLE>

See accompanying note to condensed financial information of Registrant.

F-19
<PAGE> 111
Schedule II Continued

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

INSURANCE INVESTORS & HOLDING CO.

Condensed Statements of Operations

Years ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue:
Investment income $ 13 122 215
Rentals from subsidiary 4,800 4,800 4,800
----------------------- --------- ---------- ---------

Total revenue 4,813 4,922 5,015

Expenses 107,105 77,458 64,260
- -------- --------- ---------- ---------

Loss before income taxes and equity in
undistributed loss of subsidiaries (102,292) (72,536) (59,245)

Income taxes -- -- --
- ------------ --------- ---------- ---------

Loss before equity in undistributed loss
of subsidiaries (102,292) (72,536) (59,245)

Equity in undistributed loss of subsidiaries (23,539) (6,929) (43,906)
- -------------------------------------------- --------- ---------- ---------

Net loss $(125,831) (79,465) (103,151)
-------- --------- ---------- ---------
</TABLE>

See accompanying note to condensed financial information of Registrant.

F-20
<PAGE> 112
Scheduled II Continued

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

INSURANCE INVESTORS & HOLDING CO.

Condensed Statements of Cash Flows

Years ended December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(125,831) (79,465) (103,151)
-------- --------- -------- --------

Adjustment to reconcile net loss to cash used by
operating activities:
Change in:
Prepaid expenses -- -- (170)
Accrued investment income (18) (15) 14
Equity in undistributed loss of subsidiaries 23,539 6,929 43,906
Accounts payable and accrued expenses 13,016 11,664 487
------------------------------------- --------- -------- --------

Total adjustments 36,537 18,578 44,577
----------------- --------- -------- --------

Net cash used in operating activities (89,294) (60,887) (58,574)
-------------------------------------- --------- -------- --------

Cash flows from investing activities:
Purchase of subsidiary stock -- -- (314)
---------------------------- --------- -------- --------

Net cash used by investing activities -- -- (314)
------------------------------------- --------- -------- --------

Cash flows from financing activities:
Proceeds from issuance of debt 87,400 208,000 47,500
Payments of debt -- (150,000) --
---------------- --------- -------- --------

Net cash provided by financing activities 87,400 58,000 47,500
----------------------------------------- --------- -------- --------
Net increase (decrease) in cash (1,894) (2,877) (11,388)

Cash at beginning of year 2,605 5,492 16,880
- ------------------------- --------- -------- --------

CASH AT END OF YEAR $ 711 2,605 5,492
- ------------------- --------- -------- --------
Supplemental schedule of cash flow information:

CASH PAID DURING THE YEAR FOR INTEREST $ 2,136 6,693 7,506
-------------------------------------- --------- -------- --------
</TABLE>

See accompanying note to condensed financial information of Registrant.

F-21
<PAGE> 113
Schedule II Continued

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

INSURANCE INVESTORS & HOLDING CO.

Note to Condensed Financial Information of Registrant
________________________________________________________________________________

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company normally prepares consolidated financial statements with its
subsidiaries. The Condensed Financial Information of the Registrant
(parent only) has been prepared to conform with the requirements of the
Securities and Exchange Commission. This information should be read in
conjunction with the consolidated financial statements and notes
contained elsewhere herein.

(A) INVESTMENT IN SUBSIDIARIES

The investment in common stock of subsidiaries is reflected at cost,
adjusted for equity in operations.

(B) INCOME TAXES

No Federal income tax expense was incurred in 1994, 1993 and 1992 due to
operating losses.

Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes. Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases (temporary differences) and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

The cumulative effect of the change in accounting for income taxes was
$-0- and has therefore not been separately stated in the 1993 Condensed
Statement of Operations.

Prior to January 1, 1993, in accordance with Accounting Principles Board
Opinion No. 11 (APB 11), amounts provided for income tax expense by the
Company were based on income reported for financial statement purposes
rather than amounts currently payable under tax laws. Deferred taxes,
which arose from timing differences between the period in which certain
income and expenses were recognized for financial accounting purposes
and the period in which they affected taxable income, were included in
the amounts provided for income taxes.

F-22
<PAGE> 114
Schedule III

INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Supplementary Insurance Information

December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Future life
Deferred policy benefits, Other policy
policy losses, claims claims and
Ordinary life acquisition and loss Unearned benefits
insurance cost expenses premiums payable
--------- --------------- ----------------- -------- ------------
<S> <C> <C> <C> <C>
Year ended:
December 31, 1994 $ 51,262 717,441 * --

Year ended:
December 31, 1993 $ 57,806 712,464 * --

Year ended:
December 31, 1992 $ 63,391 738,183 * --
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Not applicable

<TABLE>
<CAPTION>
Column F Column G Column H Column I Column J Column K
-------- -------- -------- -------- -------- --------
Benefits, Amortization
claims, of deferred
Net losses and policy Other
Premium investment settlement acquisition operating Premiums
revenue income expenses costs expenses written
-------- ---------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
53,581 106,508 73,871 3,648 161,096 *

69,631 123,074 100,055 9,833 171,376 *

72,787 147,638 133,548 10,370 184,349 *
- ------------------------------------------------------------------------------------------------------------
</TABLE>

F-23
<PAGE> 115
Schedule IV
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

Reinsurance

December 31, 1994, 1993 and 1992

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Percentage
Ceded to Assumed of amount
Ordinary life Gross other from other Net assumed to
insurance amount companies companies amount net
------------- --------- --------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Year ended:
December 31, 1994

In-force $ 6,016,000 2,522,000 -- 3,494,000 *
Premiums 72,025 18,444 -- 53,581

Year ended:
December 31, 1993

In-force $ 6,386,000 2,603,000 -- 3,783,000 *
Premiums 91,269 21,638 -- 69,631 *

Year ended:
December 31, 1992

In-force 7,745,000 3,131,000 -- 4,614,000 *
Premiums 94,237 21,450 -- 72,787 *
- -------------------------------------------------------------------------------------------------
</TABLE>

* Not applicable

F-24
<PAGE> 116
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994

<TABLE>
<CAPTION>
(UNAUDITED
JUNE 30, DECEMBER 31,
1995 1994
---- ----
<S> <C> <C>
ASSETS
- ------

Investments:
Fixed maturities held for investment, at
amortized cost (market $1,964,961
in 1995 and $1,902,194 in 1994) $1,967,747 $1,955,882
Equity securities, at market (cost $81,473 in 1995 and
1994) 65,376 57,957
Policy loans 105,177 101,749
---------- ----------
Total investments 2,138,300 2,115,588

Cash 210,777 207,506
Accrued investment income 30,698 26,581
Deferred policy acquisition costs 48,671 51,262
Property, plant and equipment (at cost, less accumulated
depreciation of $108,880 in 1995 and $108,713 in
1994) 1,281 1,448
---------- ---------

Total assets $2,429,727 $2,402,385
========== ==========
</TABLE>

(Continued)

F-25
<PAGE> 117
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994

<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1995 1994
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:

Future policy benefit reserves $ 708,801 $ 717,441
Deferred premium reserve 68,345 67,443
Other policyholders' funds 290,216 292,719
---------- ----------

Total policy liabilities 1,067,362 1,077,603

Accounts payable and accrued expenses 39,707 26,424
Minority interest 95,670 93,268
Notes payable 319,400 267,900
Other liabilities 5,740 3,549
---------- ----------
Total liabilities 1,527,879 1,468,744

STOCKHOLDERS' EQUITY:
Common stock:
Class A, $1 par value, 1,500,000 shares authorized,
819,249 shares issued in 1995 and 1994,
including shares in treasury of 11,600 in 1995
and 1994 819,249 819,249
Class B, $.10 stated value, 500,000 shares
authorized, 472,423 shares issued and
outstanding in 1995 and 1994 47,242 47,242
Paid-in capital 576,347 576,347
Unrealized loss on investments (14,969) (21,869)
Retained deficit (516,596) (477,903)
---------- ----------
911,273 943,066
Treasury stock, at cost (9,425) (9,425)
---------- ----------
Total stockholders equity 901,848 933,641
---------- ----------

COMMITMENTS AND CONTINGENCIES

Total liabilities and stockholders equity $2,429,727 $2,402,385
========== ==========
</TABLE>

F-26
<PAGE> 118
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX-MONTHS ENDED JUNE 30, 1995 AND 1994

(UNAUDITED)

<TABLE>
<CAPTION>
SIX-MONTHS ENDED JUNE 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Premiums $ 33,575 $ 29,172
Net investment income 62,618 51,543
Realized investment gains 4,805 1,081
-------- --------
100,998 81,796

BENEFITS AND EXPENSES:
Policy benefits:
Death and other policy benefits 52,766 37,664
Endowments 2,869 6,103
Policyholder dividends 7,728 7,880
-------- --------
63,363 51,647
Increase (decrease) in future policy benefit reserves (8,640) 308
Amortization of deferred policy acquisition costs 2,591 2,401
Provision for deferred premium 902 91
General insurance expenses 62,597 87,076
Taxes licenses and fees 4,301 6,686
Interest expense 12,694 8,209
-------- --------
137,808 156,418

Income (loss) before federal income tax and minority
interest $(36,810) $(74,622)

Federal income tax expense 0 0
-------- --------

Income (loss) before minority interest $(36,810) $(74,622)

Minority interest in gain (loss) of subsidiary (1,883) (1,376)
-------- --------

NET INCOME (LOSS) $(38,693) $(75,998)
======== ========

PER SHARE AMOUNTS:
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $ (0.03) $ (0.06)
======== ========
</TABLE>

F-27
<PAGE> 119
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE-MONTHS ENDED JUNE 30, 1995 AND 1994

(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTHS ENDED JUNE 30,
---------------------------
1995 1994
---- ----
REVENUES:
<S> <C> <C>
Premiums $ 19,196 $ 13,950
Net investment income 33,117 26,341
Realized investment gains 4,805 155
-------- --------
57,118 40,446

BENEFITS AND EXPENSES:
Policy benefits:
Death and other policy benefits 26,953 6,066
Endowments 105 3,143
Policyholder dividends 3,915 4,066
-------- --------
30,973 13,275

Increase (decrease) in future policy benefit reserves (8,206) 5,124
Amortization of deferred policy acquisition costs (73) 210
Provision for deferred premium 106 531
General insurance expenses 32,406 44,540
Taxes licenses and fees 1,055 4,237
Interest expense 6,666 4,342
-------- --------
62,927 72,259

Income (loss) before federal income tax and minority
interest $(5,809) $(31,813)

Federal income tax expense 0 0
-------- --------

Income (loss) before minority interest $(5,809) $(31,813)

Minority interest in gain (loss) of subsidiary (1,883) (17)
-------- --------

NET INCOME (LOSS) $(7,692) $(31,830)
======= ========

PER SHARE AMOUNTS:
NET INCOME(LOSS) PER SHARE OF COMMON STOCK $ (0.01) $ (0.03)
======= ========
</TABLE>

F-28
<PAGE> 120
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX-MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
SIX-MONTHS ENDED JUNE 30,
-------------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain (loss) $ (38,693) $ (73,246)
Adjustments to reconcile net gain to net cash provided
by operating activities:
Accrued investment income (4,117) (6,604)
Deferred policy acquisition costs 2,591 4,480
Property, plant and equipment 167 460
Future policy benefit reserves (8,640) 308
Deferred premium reserve 902 91
Other policy liabilities (2,503) (14,637)
Accounts payable and accrued expenses 13,283 15,439
Minority interest 2,402 (1,376)
Other, net (1,187) 0
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (35,795) (75,085)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of fixed maturities 290,648 277,851
Sale of fixed maturities available for sale 0 0
Purchase of fixed maturities available for sale (299,654) (223,636)
Increase in policy loans (net) (3,428) 0
--------- ---------

NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (12,434) 54,215
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowed funds 51,500 35,500
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 51,500 35,500
--------- ---------

NET INCREASE (DECREASE) IN
CASH AND SHORT-
TERM INVESTMENTS 3,271 14,630
Cash and short term
investments at beginning
of period 207,506 203,106
--------- ---------

Cash and short term investments at end of
period $ 210,777 $ 217,736
========= =========
</TABLE>

F-29
<PAGE> 121
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
THREE-MONTHS ENDED JUNE 30,
---------------------------
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net gain (loss) $ (7,692) $ (31,795)
Adjustments to reconcile net gain to net cash provided
by operating activities:
Accrued investment income 2,711 2,166
Deferred policy acquisition costs 721 1,307
Property, plant and equipment 6 231
Future policy benefit reserves (8,206) (10,303)
Deferred premium reserve 106 531
Other policy liabilities (4,394) 3,160
Accounts payable and accrued expenses 9,767 11,507
Minority interest 2,522 (18)
Other, net (1,653) 0
-------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (6,112) (23,214)
-------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of fixed maturities 61,842 169,305
Sale of fixed maturities available for sale 0 0
Purchase of fixed maturities available for sale 0 (148,855)
Increase in policy loans (net) (144) 0
-------- ---------

NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 61,698 20,450
-------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowed funds 23,000 20,500
-------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES
23,000 20,500
------- --------
NET INCREASE (DECREASE) IN CASH AND SHORT-
TERM INVESTMENTS 78,586 17,736

Cash and short term investments at beginning
of period 132,191 200,000
-------- ---------
Cash and short term investments at end of period
$210,777 $ 217,736
======== =========
</TABLE>

F-30
<PAGE> 122
INSURANCE INVESTORS & HOLDING CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995

(UNAUDITED)

(1) FINANCIAL STATEMENTS

The balance sheet for June 30, 1995, the statements of operations for
the three- and six-month periods ended June 30, 1995 and 1994, and the
statements of cash flows for the three- and six-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 June 30, 1995, 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,
1994 annual 10-K report filed with the Securities and Exchange
Commission. The results of operations for the period ended June 30,
1995 are not necessarily indicative of the operating results for the
full year.

Earnings per common share are computed on the basis of the weighted
average numbers of common "A" and "B" shares outstanding during each
period. For the three- and six-month periods ended June 30, 1995 and
1994, the weighted average number of such shares outstanding was
1,280,072.

(2) PENDING ACQUISITION AND MERGER

On December 9, 1994, the Company announced that it had signed a
definitive written agreement to be acquired by Citizens, Inc., an
Austin, Texas based life insurance holding company.

The agreement provides that following the acquisition by Citizens,
Investors' shareholders will receive one share of Citizens Class A
Common Stock for each eight shares of Investors Common Stock owned.
Additionally, Citizens will acquire all shares of Central Investors
Life Insurance Company, a subsidiary of the Company, not wholly-owned
by Insurance Investors, based upon an exchange ratio of one share of
Citizens Class A common stock for each four shares of Central
Investors owned. The transaction will involve issuance of
approximately 170,000 of Citizens Class A shares and will also be
accounted for as a purchase. The agreement is subject to approval by

F-31
<PAGE> 123
the Company s shareholders. The Illinois Department of Insurance
approved the transaction on March 10, 1995.

The following unaudited pro forma condensed balance sheet as of June
30, 1995 reflects the purchase of the Company by Citizens (including a
similar acquisition of American Liberty Financial Corporation ("ALFC")
by Citizens pending as of the date of this 10-Q) as if it occurred on
June 30, 1995. The unaudited pro forma condensed consolidated income
statement for the six months ended June 30, 1995 reflects the purchase
of the Company as if they had occurred on January 1, 1995.

Management's estimate of the impact of applying purchase accounting,
as if the two acquisitions had occurred as described above, is
presented below. The unaudited pro forma financial information is not
necessarily indicative either of the results of operations that would
have occurred had the acquisition been consummated at the beginning of
1995 or of future results of operations of the consolidated entities.

F-32
<PAGE> 124
APPENDIX A

PLAN AND AGREEMENT OF MERGER AND EXCHANGE

This Plan and Agreement of Merger and Exchange ("Agreement") is by and
among Insurance Investors & Holding Co. ("Investors"), Central Investors Life
Insurance Company of Illinois ("Central") and Citizens, Inc. ("Citizens") and
Citizens Acquisition, Inc. ("Acquisition").

WITNESSETH

WHEREAS, Citizens is a corporation duly organized under the laws of
the State of Colorado and Acquisition is a corporation duly organized under the
laws of the State of Illinois;

WHEREAS, Investors and Central are corporations duly organized under
the laws of the State of Illinois;

WHEREAS, Citizens desires to acquire Investors through a merger under
Illinois law and Citizens desires to acquire Central through an exchange of
stock under the Illinois Insurance Code; and

WHEREAS, the parties hereto wish to enter into this Agreement;

In consideration of the mutual covenants hereinafter set forth, it is
agreed among the parties as follows:

ARTICLE I

The Merger and Exchange

1.1 Subject to approval of this Agreement by the Insurance
Commissioner of the State of Illinois, and subject to the conditions set forth
herein on the "Effective Date" (as herein defined), Investors and Acquisition
shall enter into a Plan of Merger attached hereto as Exhibit A under which
Investors shall be the surviving corporation, and shareholders of Investors who
do not dissent to the Merger shall receive Class A common stock of Citizens as
set forth in Section 1.2. In addition, Central and Citizens shall enter into a
Plan of Exchange as set forth herein under which the shares of Central owned by
Investors and other stockholders of Central shall be transferred to Citizens as
part of a statutory exchange under the Illinois Insurance Code. The
transactions contemplated by this Agreement shall be completed at the closing
("Closing") on the closing date ("Closing Date") which shall be as soon as
possible after regulatory and shareholder approvals of the transactions
contemplated herein are obtained in accordance with applicable law and as set
forth in this Agreement.

A-1
<PAGE> 125
Upon receipt of the above-described approvals, and upon
surrender of their respective shares in Central, at the Closing Date, Citizens
shall issue to holders of Central (other than Investors), shares of its Class A
common stock as set forth in Section 1.3.

On the Closing Date, all of the documents to be furnished to
Investors, Central and Citizens, including the documents to be furnished
pursuant to Article VII of this Agreement, shall be delivered to Jones &
Keller, P.C., ("Jones & Keller") to be held in escrow until the Effective Date
or the date of termination of this Agreement, whichever first occurs and
thereafter shall be promptly distributed to the parties as their interests may
appear.

1.2 As part of the Merger of Acquisition into Investors, on the
Effective Date, for each eight (8) shares of Investors Class A or B issued and
outstanding, each Investors shareholder shall receive one (1) share of the
Class A common stock of Citizens.

1.3 On the Effective Date, for each four (4) Central shares owned
by shareholders of Central other than Investors, Citizens shall issue one (1)
share of the Class A common stock of Citizens.

1.4 If this Agreement is duly adopted by the shareholders of
Investors and Central, such documents as may be required by law to accomplish
the Agreement shall be filed to effectuate same, and it shall become effective.
The time of filing the last document required by law shall be the Effective
Date for the Agreement. For accounting purposes, the Agreement shall be
effective as of 11:59 p.m., on the last day of the month preceding the
Effective Date.

ARTICLE II

Issuance and Exchange of Shares

2.1 The shares of Citizens no par value Class A common stock shall
be distributed to holders of shares of Investors as set forth in the Plan of
Merger. The shares of no par value Class A common stock of Citizens
transferred to Central shareholders shall be pursuant to a statutory exchange
of stock.

2.2 The stock transfer books of Investors and Central shall be
closed on the Closing Date, and thereafter no transfers of the stock of
Investors or Central shall be made. Investors shall appoint an exchange agent
("Exchange Agent"), which is expected to be Citizens' then stock transfer agent
("Stock Transfer Agent"), to accept surrender of the certificates representing
the shares of Investors and Central, and to deliver in exchange for such
surrendered certificates, shares of Class A common stock of Citizens. The
authorization of the Exchange Agent may be terminated by Citizens after thirty
days following the Effective Date. If outstanding certificates for shares of
Investors or Central are not surrendered or the payment for them not claimed
prior to such date on which such payments would otherwise

A-2
<PAGE> 126
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and other
applicable law, become the property of Citizens (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any persons previously entitled to such items. Notwithstanding the
foregoing, neither the Exchange Agent nor any party to this Agreement shall be
liable to any holder of Investors or Central shares for any amount paid to any
governmental unit or agency having jurisdiction of such unclaimed item pursuant
to the abandoned property or other applicable law of such jurisdiction.

2.3 No fractional shares of Citizens stock shall be issued as a
result of the Agreement; rather, such fractional shares shall evidence the
right to receive a like fractional amount of $7.00 per share of Citizens Class
A common stock. In the event the transactions contemplated herein result in
any shareholder being entitled to a fraction less than whole share of Citizens
stock, such shareholder shall be paid by Citizens a cash payment of fractions
thereof at the rate of $7.00 per one share of Citizens Class A common stock.

2.4 At the Effective Date, each holder of a certificate or
certificates representing shares of Investors and each of the holders of shares
of Central, upon presentation and surrender of such certificate or certificates
to the Exchange Agent, shall be entitled to receive the consideration set forth
herein, except that holders of those shares of Investors or Central as to which
dissenters rights shall have been asserted and perfected pursuant to Illinois
law shall not be converted into shares of Citizens Class A common stock, but
shall represent only such dissenters rights. Upon such presentation,
surrender, and exchange as provided in this Section 2.4, certificates
representing shares of Investors or Central previously held shall be canceled.
Until so presented and surrendered, each certificate or certificates which
represented issued and outstanding shares of Investors or Central proposed to
be purchased herein at the Effective Date shall be deemed for all purposes to
evidence the right to receive the consideration set forth in Sections 1.2 and
1.3 of this Agreement. If the certificates representing shares of Investors or
Central have been lost, stolen, mutilated or destroyed, the Exchange Agent or
Citizens shall require the submission of an indemnity agreement and may require
the submission of a bond in lieu of such certificate.

ARTICLE III

Representations, Warranties
and Covenants of Citizens

Citizens hereby represents, warrants and covenants to Investors and
Central, except as stated in a written statement (the "Citizens Disclosure
Statement"), as follows:

3.1 Citizens and Acquisition are validly existing corporations
duly organized and in good standing under the laws of the States of Colorado
and Illinois, respectively, and each has the corporate power and authority to
own or lease its properties and to carry on its business as it is now being
conducted. The Articles of Incorporation and Bylaws of Citizens and

A-3
<PAGE> 127
Acquisition, copies of which have been delivered to Investors, are complete and
accurate, and the minute books of Citizens and Acquisition each contain a
record, which is complete and accurate in all material respects, of all
meetings, and all corporate actions of the shareholders and board of directors
of Citizens and Acquisition.

3.2 The aggregate number of shares which Citizens is authorized to
issue is 50,000,000 shares of Class A common stock with no par value and
1,000,000 shares of Class B common stock with no par value; of which 16,051,465
shares of such Class A common stock and 621,049 shares of Class B common stock
are issued and outstanding, fully paid and non-assessable. Citizens has no
outstanding options, warrants, or other rights to purchase, or subscribe to, or
securities convertible into or exchangeable for any shares of capital stock,
except an option for 100,000 shares of Class A common stock. The two classes of
stock of Citizens are equal in all respects, except (a) the Class B common
stock elects a simple majority of the Board of Directors of Citizens, and the
Class A common stock elects the remaining directors, and (b) each Class A share
receives twice the cash dividends paid on a per share basis to the Class B
common stock. There are 122,490 shares of Class A common stock held as
treasury stock of Citizens and it owns all of the issued and outstanding
capital stock of Acquisition.

3.3 Citizens has all requisite power to enter into and, upon the
appropriate approvals as required by law, to consummate the transactions
contemplated by this Agreement.

3.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by Citizens will conflict with or result in a breach or violation of the
Articles of Incorporation or Bylaws of Citizens.

3.5 The execution, delivery and performance of this Agreement has
been duly authorized and approved by the Boards of Directors of Citizens and
Acquisition.

3.6 Citizens has delivered to Investors consolidated financial
statements of Citizens and its subsidiaries, dated September 30, 1994, and the
annual convention statement of Citizens Insurance Company of America for the
year ended December 31, 1993. All such statements, herein sometimes called
"Citizens Financial Statements," are complete and correct in all material
respects and, together with the notes to these financial statements, present
fairly the financial position and results of operations of Citizens and
Citizens Insurance Company of America for the periods included. The September
30, 1994 statements have been prepared in accordance with generally accepted
accounting principles and the December 31, 1993 statement has been prepared in
accordance with statutory accounting principles.

3.7 Since the dates of the Citizens Financial Statements there
have not been any material adverse changes in the business or condition,
financial or otherwise, of Citizens or Citizens Insurance Company of America.
Other than as set forth in the Citizens Financial

A-4
<PAGE> 128
Statements, Citizens does not have any material liabilities or obligations
secured or unsecured (whether accrued, absolute, contingent or otherwise).

3.8 Citizens has delivered to Investors and Central a list and
description of all pending legal proceedings involving Citizens, Citizens
Insurance Company of America and other subsidiaries none of which will
materially adversely affect them, and, except for these proceedings, there are
no legal proceedings or regulatory proceedings involving material claims
pending, or to the knowledge of the officers of Citizens, threatened against
Citizens or Citizens Insurance Company of America or their subsidiaries or
affecting any of their assets, or properties and neither Citizens nor Citizens
Insurance Company of America is in any material breach or violation of or
default under any contract or instrument to which such persons is a party, and
no event has occurred which with the lapse of time or action by a third party
could result in a material breach or violation of or default by such persons
under any contract or other instrument to which any such person is a party or
by which they or any of their properties may be bound or affected, or under
their respective Articles of Incorporation or Bylaws, nor is there any court or
regulatory order pending, applicable to such persons.

3.9 Without the prior consent of Investors (which will not be
unreasonably withheld), neither Citizens nor Citizens Insurance Company of
America shall enter into or consummate any transactions prior to the Effective
Date other than in the ordinary course of business and will pay no dividend, or
increase the compensation of officers and will enter into no agreement or
transaction which would adversely affect its financial condition.

3.10 The assets of Citizens Insurance Company of America have
admissible values at least equal to the amounts attributed to them on its
December 31, 1993 annual convention statement.

3.11 Neither Citizens Insurance Company of America nor Citizens is
a party to any material contract performable in the future except insurance
policies, customary agent contracts, normal reinsurance agreements and those
which will not adversely affect it.

3.12 All policy and claim reserves of Citizens Insurance Company of
America have been properly provided for in all material respects and are
adequate in all interim respects to comply with all regulatory requirements
regarding same.

3.13 The representations and warranties of Citizens shall be true
and correct in all material respects as of the date hereof and as of the
Effective Date.

3.14 Citizens has delivered, or will deliver within two weeks of
the date of this Agreement, to Investors and Central true and correct copies of
Citizens Annual report to Shareholders for the years ended December 31, 1992
and 1993 and each of its other reports

A-5
<PAGE> 129
to shareholders and filings with the Securities and Exchange Commission ("SEC")
for the year ended December 31, 1993 and since such date.

Citizens has duly filed all reports required to be filed by it
under the Securities Act of 1933, as amended, and the Securities Exchange Act
of 1934, as amended (the "Federal Securities Laws"). No such reports, or any
reports sent to the shareholders of Citizens generally, contained any untrue
statement of material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements in such report, in light of
the circumstances under which they were made, not misleading.

3.15 Citizens has delivered to Investors and Central a copy of the
federal income tax return of Citizens for the year ended December 31, 1992 and
for any additional open years. The provisions for taxes paid by Citizens are
believed by Citizens to be sufficient in all material respects for payment of
all accrued and unpaid federal, state, county and local taxes of Citizens
(including any penalties or interest payable) whether or not disputed for the
periods then ended and for all prior fiscal periods. All returns and reports
of other information required or requested by federal, state, county, and local
tax authorities have been filed or supplied in a timely fashion, and all such
information is true and correct in all material respects. Provision has been
made for the payment of all taxes due to date by Citizens, including taxes for
the current year ended December 31, 1994. No federal income tax return of
Citizens is currently under audit.

3.16 Citizens has no employee benefit plan, except for a
non-contributory profit sharing plan and a group health insurance plan.

3.17 No representation or warranty by Citizens in this Agreement,
the Citizens Disclosure Statement or any certificate delivered pursuant hereto
contains any untrue statement of a material fact or omits to state any material
fact necessary to make such representation or warranty not misleading.

3.18 Citizens agrees that all rights to indemnification now
existing in favor of the employees, agents, directors or officers of Investors
and its subsidiaries, as provided in the Articles of Incorporation or Bylaws or
otherwise in effect on the date hereof shall survive the transactions
contemplated hereby in accordance with the terms and Citizens expressly assumes
such indemnification obligations.

A-6
<PAGE> 130
ARTICLE IV

Representations, Warranties
and Covenants of Investors and Central

No representations or warranties are made by any director, officer or
employee of Investors or Central as individuals. The representations and
warranties herein are also modified by a separate written statement (the
"Investors Disclosure Statement").

Investors and Central hereby represent, warrant and covenant to
Citizens, except as stated in the Investors Disclosure Statement, as follows:

4.1 Investors and Central are each corporations duly organized,
validly existing and in good standing under the laws of the State of Illinois,
and each such corporation has the corporate power and authority to own or lease
its properties and to carry on its business as it is now being conducted. The
Articles of Incorporation and Bylaws of each Investors and Central, copies of
which have been delivered to Citizens, are complete and accurate, and the
minute books of each of Investors and Central contain a record, which is
complete and accurate in all material respects, of all meetings, and all
corporate actions of the shareholders and Board of Directors of Investors.

4.2 The aggregate number of shares which Investors is authorized
to issue is 1,500,000 shares of Class A common stock with a par value of $1.00
per share and 500,000 shares of Class B common stock with a stated value of
$.10 per share. Investors has no outstanding options, warrants or other rights
to purchase, or subscribe to, or securities convertible into or exchangeable
for any shares of capital stock. Investors has 819,249 shares of Class A
common stock and 472,423 shares of Class B common stock issued of which 807,649
shares of Class A common stock and 472,423 shares of Class B common stock
outstanding fully paid and non assessable.

The aggregate number of shares which Central is authorized to
issue is 1,000,000 shares of common stock with a par value of $1.00 per share.
Central has no outstanding options, warrants or other rights to purchase, or
subscribe to, or securities convertible into or exchangeable for any shares of
its capital stock. Central has 650,000 shares of common stock issued and
outstanding fully paid and non assessable.

4.3 Each of Investors and Central have the requisite power to
enter into and, upon the appropriate approvals as required by law, to
consummate the transactions contemplated by this Agreement.

4.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by each of Investors and Central will conflict with or result in a
breach or violation of the Articles of Incorporation or Bylaws of Investors or
Central.

A-7
<PAGE> 131
4.5 The execution of this Agreement has been duly authorized and
approved by the Board of Directors of Investors and Central.

4.6 Investors has delivered to Citizens financial statements of
Investors and Central, dated September 30, 1994, and it will deliver to
Citizens the annual convention statement of Central as of December 31, 1993.
All such statements, herein sometimes called "Investors Financial Statements"
are complete and correct in all material respects and, together with the notes
to these financial statements, present fairly the financial position and
results of operations of Investors and Central of the periods indicated. The
September 30, 1994 statements of Investors have been prepared in accordance
with generally accepted accounting principles and the December 31, 1993, annual
convention statement of Central has been prepared in accordance with statutory
principles.

4.7 Since the dates of the Investors Financial Statements there
have not been any material adverse changes in the business or condition,
financial or otherwise, of Investors or Central. Other than as contemplated
herein and as set forth in the Investors Financial Statements, Investors and
Central do not have any material liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise).

4.8 Investors has delivered to Citizens a list and description of
all pending legal proceedings involving Investors or Central or any subsidiary
of either, none of which will materially adversely affect them individually and
in the aggregate, and, except for these proceedings, there are no legal
proceedings or regulatory proceedings involving material claims pending, or, to
the knowledge of the officers of Investors, threatened against Investors or
Central or affecting any of their assets or properties, and neither Investors
nor Central nor any subsidiary of either is in any material breach or violation
of or default under any contract or instrument to which Investors or Central or
any subsidiary of either is a party, and no event has occurred which with the
lapse of time or action by a third party could result in a material breach or
violation of or default by Investors or Central or any subsidiary of each which
they or any of their respective properties may be bound or affected, or under
their respective Articles of Incorporation or Bylaws, nor is there any court or
regulatory order pending, applicable to Investors or Central or any subsidiary
of either.

4.9 Neither Investors nor Central nor any subsidiary of either
shall enter into or consummate any transactions prior to the Effective Date
other than in the ordinary course of business and will pay no dividend, or
increase the compensation of officers and will not enter into any agreement or
transaction which would adversely affect their financial condition.

4.10 The assets of Central have admissible values at least equal to
the amounts attributed to them on its September 30, 1994 statement and had as
of December 31, 1993, values as set forth in its December 31, 1993 annual
convention statement.

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4.11 Neither Central nor Investors nor any subsidiary of either is
a party to any contract performable in the future not cancelable within 90 days
except standard insurance policies, or normal reinsurance agreements.
Furthermore, Central has no Charter or special insurance policies in-force
which contain unusual or extraordinary dividend provisions. Central and
Investors shall provide Citizens with copies of all contracts performable in
the future by them or any subsidiary.

4.12 All policy and claim reserves of Central have been properly
provided for and are adequately to comply with all regulatory requirements
regarding same.

4.13 The representations and warranties of Investors and Central
shall be true and correct as of the date hereof and as of the effective Date.

4.14 Investors has delivered, or will deliver within two weeks of
the date of this Agreement, to Citizens true and correct copies of Investors
Annual Report to Shareholders for the years ended December 31, 1991 and 1992
and each of its other reports to shareholders and filings with the Securities
and Exchange Commission ("SEC") for the years ended December 31, 1991, 1992,
and for 1993 and since such date. Investors will also deliver to Citizens on
or before the Closing Date any reports relating to the financial and business
condition of Investors which are filed with the SEC after the date of this
Agreement and any other reports sent generally to its shareholders after the
date of this Agreement.

Investors has duly filed all reports required to be filed by it under
the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, (the "Federal Securities Laws"). No such reports, or any
reports sent to the shareholders of Investors, contained any untrue statement
of material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements in such report, in light of the
circumstances under which they were made, not misleading.

4.15 Investors has delivered to Citizens a copy of each of the
federal income tax returns of Investors and Central for the years ended
December 31, 1992 and 1993 and for any additional open years. The provisions
for taxes paid by Investors and Central are believed by Investors and Central
to be sufficient for payment of all accrued and unpaid federal, state, county
and local taxes of Investors and Central (including any penalties or interest
payable) whether or not disputed for the periods then ended and for all prior
fiscal periods. All returns and reports or other information required or
requested by federal, state, county, and local tax authorities have been filed
or supplied in a timely fashion, and all such information is true and correct
in all material respects. Provision has been made for the payment of all taxes
due to date by Investors and Central, including taxes for the current year
ended December 31, 1994. No federal income tax return of Investors or Central
is currently under audit.

4.16 Investors and Central have no employee benefits plans except a
group health insurance and medical benefits plan.

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4.17 No representation or warranty by Investors and Central in this
Agreement, the Investors Disclosure Statement or any certificate delivered
pursuant hereto contains any untrue statement of a material fact or omits to
state any material fact necessary to make such representation or warranty not
misleading.

ARTICLE V

Obligations of the Parties Pending the Effective Date

5.1 This Agreement shall be duly submitted to the shareholders of
Investors and Central for the purpose of considering and acting upon this
Agreement in the manner required by law at a meeting of shareholders on a date
selected by Investors and Central, such date to be the earliest practicable
date after the proxy statement may first be sent to Investors and Central
shareholders without objection by applicable governmental authorities, provided
that Investors will have at least 30 days to solicit proxies. Citizens will
furnish to Investors the information relating to Citizens required by the
Federal Securities Laws to be included in the proxy statement. Citizens
represents and warrants that at the time of the Investors shareholders
meeting, the proxy statement, insofar as it relates to Citizens and contains
information furnished by Citizens specifically for use in such proxy statement,
(a) will comply in all material respects with the provisions of the Federal
Securities Laws and (b) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Board of Directors of Investors and
Central, subject to its fiduciary obligations to shareholders, shall use its
best efforts to obtain the requisite approval of Investors and Central
shareholders of this Agreement and the transactions contemplated herein.
Investors, Central and Citizens shall take all reasonable and necessary steps
and actions to comply with and to secure Investors and Central shareholder
approval of this Agreement and the transactions contemplated herein as may be
required by the statutes, rules and regulations of such states.

5.2 At all times prior to the Effective Date, during regular
business hours each party will permit the other to examine its books and
records and the books and records of its subsidiaries and will furnish copies
thereof on request. It is recognized that, during the performance of this
Agreement, each party may provide the other parties with information which is
confidential or proprietary information. During the term of this Agreement,
and for four years following the termination of this Agreement, the recipient
of such information shall protect such information from disclosure to persons,
other than members of its own or affiliated organizations and its professional
advisers, in the same manner as it protects its own confidential or proprietary
information from unauthorized disclosure, and not use such information to the
competitive detriment of the disclosing party. In addition, if this Agreement
is terminated for any reason, each party shall promptly return or cause to be
returned all documents or other written records of such confidential or
proprietary information, together with all copies of such writings and, in
addition, shall either furnish or cause to be furnished, or shall destroy, or
shall maintain with such standard of care as is exercised with respect to

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its own confidential or proprietary information, all copies of all documents or
other written records developed or prepared by such party on the basis of such
confidential or proprietary information. No information shall be considered
confidential or proprietary if it is (a) information already in the possession
of the party to whom disclosure is made, (b) information acquired by the party
to whom the disclosure is made from other sources, or (c) information in the
public domain or generally available to interested persons or which at a later
date passes into the public domain or becomes available to the party to whom
disclosure is made without any wrongdoing by the party to whom the disclosure
is made.

5.3 Investors, Central and Citizens shall promptly provide each
other with information as to any significant developments in the performance of
this Agreement, and shall promptly notify the other if it discovers that any of
its representations, warranties and covenants contained in this Agreement or in
any document delivered in connection with this Agreement was not true and
correct in all material respects or became untrue or incorrect in any material
respect.

5.4 All parties to this Agreement shall take all such action as
may be reasonably necessary and appropriate and shall use their best efforts in
order to consummate the transactions contemplated hereby as promptly as
practicable.

ARTICLE VI

Procedure for Exchange

6.1 The parties shall file with the Insurance Commissioner of
Illinois within 30 days from the date of this Agreement, all of the documents
required by the Illinois Insurance Code.

ARTICLE VII

Conditions Precedent to the Consummation of the Exchange

The following are conditions precedent to the consummation of
the Agreement on or before the Effective date:

7.1 Citizens, Acquisition, Investors and Central shall have
performed and complied with all of their respective obligations hereunder which
are to be complied with or performed on or before the Effective Date and
Investors, Central and Citizens shall provide one another at the Closing with a
certificate to the effect that such party has performed each of the acts and
undertakings required to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement.

7.2 This Agreement and the transactions contemplated herein shall
have been duly and validly authorized, approved and adopted, at meetings of the
shareholders of Investors and Central duly and properly called for such purpose
in accordance with the applicable laws.

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7.3 This Agreement is subject to the provisions of the applicable
insurance laws and the regulations promulgated thereunder, and shall not become
effective until approval is obtained from the Commissioner of Insurance of the
State of Illinois in accordance with the provisions of the law of said state.
Citizens, Acquisition, Investors and Central, as soon as practical after the
execution and delivery of this Agreement, agree to file and to use their best
efforts to obtain such approval of the transactions contemplated by this
Agreement. No party hereto shall be obligated to file a suit or to appeal from
any Commissioner s adverse ruling, nor shall any party be obligated to make any
material changes in any lawful, good faith management policy in order to gain
such approval. In the event approval is denied, this Agreement shall
terminate.

7.4 No action, suit or proceeding shall have been instituted or
shall have been threatened before any court or other governmental body or by
any public authority to restrain, enjoin or prohibit the transactions
contemplated herein, or which might subject any of the parties hereto or their
directors or officers to any material liabilities, fine, forfeiture or penalty
on the grounds that the transactions contemplated hereby, the parties hereto or
their directors or officers, have violated any applicable law or regulation, or
have otherwise acted improperly in connection with the transactions
contemplated hereby, and the parties hereto have been advised by counsel that,
in the opinion of such counsel, such action, suite or proceeding raises
substantial questions of law or fact which could reasonably be decided
adversely to any party hereto or its directors or officers.

7.5 All actions, proceedings, instruments and documents required
to carry out this Agreement and the transactions contemplated hereby and the
form and substance of all legal proceedings and related matters shall have been
approved by counsel for Citizens, Investors and Central.

7.6 The representations and warranties made by Citizens, Investors
and Central in this Agreement shall be true as though such representations and
warranties had been made or given on and as of the Effective Date, except to
the extent that such representations and warranties may be untrue on and as of
the Effective Date because of (a) changes caused by transactions of Investors
or Central suggested or approved in writing by Citizens or (b) events or
changes (which shall not, in the aggregate, have materially and adversely
affected the business, assets, or financial condition of Investors, Central or
Citizens) during or arising after the date of this Agreement.

7.7 Investors and Central shall have furnished Citizens with:

(1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Investors and Central
approving this Agreement and the transactions contemplated by
it and directing the submission thereof to a vote of the
shareholders of Investors and Central;

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(2) a certified copy of a resolution or resolutions duly
adopted by a majority of all of the classes of outstanding
shares of Investors and Central capital stock approving this
Agreement and the transactions contemplated by it;

(3) an opinion of Counsel dated as of the Closing Date
as set forth in Exhibit "B" attached hereto;

(4) an agreement from each "affiliate" of Investors as
defined in the rules adopted under the Securities Act of 1933,
as amended, to the effect that (a) the affiliate is familiar
with SEC Rules 144 and 145; (b) none of the shares of Citizens
Class A common stock will be transferred by or through the
affiliate in violation of the Federal Securities Laws; (c) the
affiliate will not sell or in any way reduce his risk relative
to any Citizens Class A common stock received pursuant to this
Agreement until such time as financial results covering at
least 30 days of post-closing date combined operations shall
have been published by Citizens on SEC Form 10-Q or otherwise;
and (d) the affiliate acknowledges that Citizens is under no
obligation to register the sale, transfer, or the disposition
of Citizens Class A common stock by the affiliate or to take
any action necessary in order to make an exemption from
registration available to the affiliate, but understands that
Citizens intends to satisfy the public information
requirements of Rules 144 and 145 during the three-year period
following the Closing Date.

7.8 Citizens shall furnish Investors and Central with:

(1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Citizens, approving this
Agreement and the transactions contemplated by it, and

(2) an opinion dated the Closing Date of Jones & Keller,
P.C., counsel for Citizens, as set forth in Exhibit "C"
attached hereto.

ARTICLE VIII

Termination and Abandonment

8.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any time
(whether before or after the approval and adoption thereof by the shareholders
of Investors and Central) prior to the Effective Date:

(1) By consent of each of Citizens, Investors and Central;

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(2) By Citizens or Investors, if any condition set forth in
Article VII relating to the other party has not been met
or has not been waived.

(3) By Citizens, Investors or Central, if any suit, action
or other proceeding shall be pending or threatened by
the federal or a state government before any court or
governmental agency or contemplated under Section 7.4;

(4) By any party, if there is discovered any material error,
misstatement or omission in the representations and
warranties of another party; or

(5) By Citizens, if dissenters' rights are perfected in
accordance with Illinois law for more than 2.5% of the
outstanding shares of Investors or Central; or

(6) By any party if the Agreement Effective Date is not
within 180 days from the date hereof.

8.2 Any of the terms or conditions of this Agreement may be waived
at any time by the party which is entitled to the benefit thereof, by action
taken by its Board of Directors provided, however, that such action shall be
taken only if, in the judgment of the Board of Directors taking the action,
such waiver will not have a materially adverse effect on the benefits intended
under this Agreement to the party waiving such term or condition.

ARTICLE IX

Termination of Representation and
Warranties and Certain Agreements

9.1 The respective representations and warranties of the parties
hereto, shall expire with, and be terminated and extinguished ninety days after
the closing of this Agreement, provided, however, that the covenants and
agreements of the parties hereto shall survive in accordance with their terms.

ARTICLE X

Miscellaneous

10.1 This Agreement embodies the entire agreement between the
parties, and there have been and are no agreements, representations or
warranties among the parties other than those set forth herein or those
provided for herein.

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10.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one instrument.

10.3 Each of the parties hereto will pay its own fees and expenses
incurred in connection with the transactions contemplated by this Agreement.

10.4 All parties to this Agreement agree that if it becomes
necessary or desirable to execute further instrument or to make such other
assurances as are deemed necessary, the party requested to do so will use its
best efforts to provide such executed instruments or do all things necessary or
proper to carry out the purpose of this Agreement.

10.5 This Agreement may be amended upon approval of the Board of
Directors of each party provided that the shares issuable hereunder shall not
be amended without approval of the requisite shareholders of Investors and
Central.

10.6 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:

<TABLE>
<S> <C>
To Citizens and Acquisition: To Investors and Central:

Citizens, Inc. Insurance Investors & Holding Co.
Post Office Box 149151 2512 North Knoxville Avenue
Austin, Texas 78714-9151 Peoria, Illinois 61604
Attn: Harold E. Riley, Chairman Attn: Frank J. Wilkins, President

with copies to: with copies to:

Jones & Keller, P.C. Newman & Davenport, P.C.
1625 Broadway, Suite 1600 Allianz Financial Center, LB 135
Denver, Colorado 80202 2323 Bryan Street, Suite 2050
Attn: Reid Godbolt Dallas, Texas 75201
Attn: Frank G. Newman
</TABLE>

or such other addresses as shall be furnished in writing by
any party, and any such notice or communication shall be deemed to have been
given as of the date received.

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IN WITNESS WHEREOF, the parties have set their hands and seals this
28th day of November, 1994.

CITIZENS, INC.

By: /s/ Harold E. Riley
Harold E. Riley
Chairman

CITIZENS ACQUISITION, INC.

By: /s/ Harold E. Riley
Harold E. Riley
Chairman

Insurance Investors & Holding Co.

By: /s/ Frank J. Wilkins
Frank J. Wilkins
President

Central Investors Life
Insurance Company of Illinois

By: /s/ Frank J. Wilkins
Frank J. Wilkins
President

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<PAGE> 140
EXHIBIT A

ARTICLES AND PLAN OF MERGER -
CITIZENS, INC.
CITIZENS ACQUISITION, INC., and
INSURANCE INVESTORS & HOLDING CO.

THESE ARTICLES AND PLAN OF MERGER, dated this _____ day of
____________________, 1994, pursuant to Sections 5/11.05 and 5/11.25 of the
Illinois Business Corporation Act (hereinafter referred to as the "Act"), is
entered into by and among Citizens, Inc. ("Citizens"), a Colorado corporation;
Citizens Acquisition, Inc. ("Acquisition"), an Illinois corporation
wholly-owned by Citizens; and Insurance Investors & Holding Co. ("Investors" or
the "Surviving Corporation"), an Illinois corporation, with Investors and
Acquisition sometimes being referred to herein as the "Constituent
Corporations."

W I T N E S S E T H :

WHEREAS, the respective Boards of Directors of the parties hereto deem
it advisable that Acquisition be merged into Investors as hereinafter
specified;

NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, and in order to prescribe the terms and
conditions of the Merger, the mode of carrying the same into effect, the manner
of converting the shares of each of the Constituent Corporations and such other
details and provisions as are deemed desirable, the parties hereto agree as
follows:

FIRST: The Constituent Corporations have agreed to merge, and that
the terms and conditions of said merger, the mode of carrying the same into
effect and the manner and basis of converting or exchanging the shares of
issued stock of each of the Constituent Corporations into different stock or
other consideration, and the manner of dealing with any issued stock of the
Constituent Corporations not to be so converted or exchanged, are and shall be
as set forth herein. In connection with the merger described below, Citizens
is agreeing, among other things, to furnish a sufficient number of shares of
its authorized but unissued Class A Common Stock, no par value, to carry out
the terms of the merger contemplated hereby.

SECOND: The parties to these Articles and Plan of Merger are
Acquisition, Investors and Citizens.

THIRD: Investors shall be the surviving corporation of the merger
between the Constituent Corporations.

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<PAGE> 141
FOURTH: The principal office of Acquisition and Citizens, Inc. is 400
East Anderson Lane, Austin, Texas 78752. The principal office of Investors is
2512 North Knoxville Avenue, Peoria, Illinois 61604.

FIFTH: The Boards of Directors of Acquisition and Citizens, on
______________________, 1994, by unanimous vote of each entire Board of
Acquisition and Citizens, duly adopted a resolution which declared that a
merger upon the terms and conditions set forth in these Articles and Plan of
Merger was advised, authorized and approved, and directed their submission to
Citizens, the sole stockholder of Acquisition.

The Board of Directors of Investors, on ______________________, 1994,
by unanimous vote of the entire Board of Directors, duly adopted a resolution
which declared that a merger upon the terms and conditions set forth in these
Articles and Plan of Merger was advised, authorized and approved, and directed
their submission to the stockholders of Investors.

These Articles and Plan of Merger were duly submitted to and approved
by the affirmative vote of one hundred percent (100%) of all of the votes
entitled to be cast thereon pursuant to an action by unanimous written consent
of the sole stockholder of Acquisition, as permitted by the Articles of
Incorporation of Acquisition, and the laws of the State of Illinois.

These Articles and Plan of Merger were duly submitted to and approved
by the affirmative vote of __________ percent (___%) of all of the votes
entitled to be cast thereon at a meeting of the stockholders of Investors held
on ______________________, as permitted by the Articles of Incorporation of
Investors, and the laws of the State of Illinois.

SIXTH: The Articles of Incorporation of Investors shall constitute
the Articles of Incorporation of the Survivor.

SEVENTH: Acquisition has authority to issue shares of one class of
capital stock, namely one thousand (1,000) shares of common stock, no par value
per share ("Acquisition Common Stock"). Citizens, Inc. has authority to issue
shares of two classes of capital stock, namely 50,000,000 shares of Class A
Common Stock, no par value per share ("Citizens Class A Common Stock"), and
1,000,000 shares of Class B Common Stock, no par value per share.

EIGHTH: Investors has authority to issue shares of two classes of
capital stock, namely, 1,500,000 shares of Class A Common Stock, $1.00 par
value and 500,000 shares of Class B Common Stock with a stated value of $.10
per share ("Investors Common Stock").

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<PAGE> 142
NINTH: The manner and basis of converting or exchanging the issued
and outstanding stock of each of the Constituent Corporations into different
stock or other consideration and the treatment of any issued stock of the
Constituent Corporations not to be so converted or exchanged on the Effective
Date (as defined in Article Tenth below) of the merger contemplated hereby
shall be as follows:

(a) Except to the extent qualified in subparagraphs (b) and (c)
immediately below, each share of Investors Common Stock which is issued and
outstanding on the Effective Date (other than shares held by Citizens that were
issued to it as the sole owner of Acquisition) shall be converted into shares
of Citizens Class A Common Stock as follows:

For each eight (8) shares of Investors Class A or Class B Common Stock
issued and outstanding, each Investors shareholder shall receive one
(1) share of Class A Common Stock of Citizens, Inc.

(b) No scrip or fractional share certificates or Citizens Class A
Common Stock shall be issued as a result of the merger contemplated hereby, but
in lieu of each fractional share, a stockholder of Investors entitled to a
fractional share shall be paid by Citizens a cash payment of fractions thereof
at a rate of $7.00 per one share of Citizens Class A Common Stock.

(c) After the merger contemplated hereby shall have become effective,
except as otherwise provided in by the Act with respect to dissenting
stockholders, each holder of an outstanding certificate or certificates
theretofore representing Investors Common Stock shall surrender the same to the
Survivor and each such holder thereupon shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares of Citizens Class A Common Stock into which the Investors Common Stock
represented by the certificate or certificates so surrendered shall have been
converted or exchanged by the provisions hereof. Until such surrender,
Investors Common Stock shall be deemed for all corporate purposes, other than
the payment of dividends, to evidence ownership of the number of full shares of
Citizens Class A Common Stock to be delivered with respect to such shares.
Unless and until any such outstanding certificates shall be so surrendered, no
dividend payable to the holders of record of Investors Common Stock as of any
date subsequent to the Effective Date shall be paid to the holders of such
outstanding certificates, but upon surrender of any such certificate or
certificates, there shall be paid to the record holder of the certificate or
certificates of Investors Common Stock delivered with respect to the shares
represented by the surrendered certificate or certificates, without interest,
the amount of such dividends which shall have theretofore become payable to
them with respect to such shares of Investors Common Stock.

(d) Each share of Acquisition Common Stock, if any, which remains
unissued and all Treasury shares of Acquisition on the Effective Date of the
merger contemplated hereby shall be canceled.

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<PAGE> 143
(e) Each share of Acquisition Common Stock which is issued and
outstanding on the Effective Date shall be converted into one share of
Investors Common Stock and shall not be deemed to be converted into shares of
Class A Common Stock of Citizens.

TENTH: Upon the Effective Date:

(a) the assets and liabilities of Acquisition shall be taken up on
the books of the Survivor at the amount at which they shall at that time be
carried on the books of Acquisition, and

(b) all of the rights, privileges, immunities, powers, purposes, and
franchises of Acquisition, and all property, real, personal and mixed, and all
debts due to Acquisition on whichever account shall be vested in the Survivor,
and all property rights, privileges, immunities, powers, purposes and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Survivor as they were of Acquisition, and all debts,
liabilities obligations and duties of Acquisition shall thenceforth attach to
the Survivor and may be enforced against it to the same extent as if said
debts, liabilities, obligations and duties had been incurred or contracted by
it.

The merger provided for by these Articles and Plan of Merger shall
become effective at 5:02 p.m., _______________ Time, on _________, 199_, (the
"Effective Date"), and the separate existence of Acquisition except insofar as
continued by statue, shall cease on the date that these Articles and Plan of
Merger, duly advised, approved, signed, acknowledged, sealed and verified by
Citizens, Acquisition and Survivor as required by the laws of the State of
Illinois, are filed for record with the Secretary of State.

ELEVENTH: The merger contemplated hereby may be terminated at any
time prior to the time these Articles and Plan of Merger are filed in the
office of the Secretary of State of Illinois (a) by consent of Citizens and the
Constituent Corporations expressed by action of their respective Boards of
Directors and without further shareholder action, whether or not theretofore
adopted by the shareholders of the Constituent Corporations but the filing of
these Articles and Plan of Merger in the office of the Secretary of State of
Illinois shall conclusively evidence that any such termination has not occurred
and that any right of termination has not been exercised and has been waived.

TWELFTH: The parties hereto may, by written agreement among them
authorized by their respective Boards of Directors, amend these Articles and
Plan of Merger at any time prior to the Effective Time, provided that, after
the meeting of shareholders of Investors, no amendment shall be made which
changes the terms of these Articles and Plan of Merger in a way which is
materially adverse to the shareholders of Investors, unless such amendment is
approved by the shareholders of Investors.

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<PAGE> 144
Any condition to the performance of Citizens, Acquisition or Investors
which may legally be waived at or prior to the Effective Time may be waived at
any time by the party entitled to the benefit thereof by action taken or
authorized by the Board of Directors of the waiving party.

IN WITNESS WHEREOF, Citizens and each of the Constituent Corporations,
pursuant to the approval and authority duly given by resolutions adopted by
their respective Boards of Directors, have caused these Articles and Plan of
Merger to be signed in their respective corporation names and on their behalf
by the respective Presidents and witnessed or attested by their respective
Secretaries as of the _____ day of _______________, 1994.

INSURANCE INVESTORS
& HOLDING CO.
ATTEST:
___________________________________ By ___________________________________
Robert W. Kreutz, Secretary Frank J. Wilkins, President

CITIZENS ACQUISITION, INC.
ATTEST:
___________________________________ By ___________________________________
Mark A. Oliver, Secretary Harold E. Riley, Chairman

CITIZENS, INC.
ATTEST:
___________________________________ By ___________________________________
Mark A. Oliver, Secretary Harold E. Riley, Chairman

THE UNDERSIGNED, President of Insurance Investors & Holding Co., who
executed on behalf of said corporation the foregoing Articles and Plan of
Merger, of which this Certificate is made a party, hereby acknowledges, in the
name and on behalf of said corporation, the foregoing Articles and Plan of
Merger, to be the corporate act of said corporation and further certifies that,
to the best of his knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.

___________________________________
Frank J. Wilkins, President

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<PAGE> 145
THE UNDERSIGNED, Chairman of Citizens Acquisition, Inc., who executed
on behalf of said corporation the foregoing Articles and Plan of Merger, of
which this Certificate is made a party, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles and Plan of Merger, to be
the corporate act of said corporation and further certifies that, to the best
of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material respects,
under the penalties of perjury.

___________________________________
Harold E. Riley, Chairman

THE UNDERSIGNED, Chairman of Citizens, Inc. who executed on behalf of
said corporation the foregoing Articles and Plan of Merger, of which this
Certificate is made a party, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles and Plan of Merger, to be the
corporate act of said corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.

___________________________________
Harold E. Riley, Chairman

STATE OF ILLINOIS )
)
COUNTY OF __________ )

Frank J. Wilkins, President of Insurance Investors & Holding Co., an
Illinois corporation, personally appeared before me on the _____ day of
_______________, 1994, and, under oath, signed the foregoing Articles and Plan
of Merger and stated that the facts contained therein are true to the best of
his knowledge and belief.

Witness my hand and official seal.

___________________________________
Notary Public
My commission expires:

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<PAGE> 146
STATE OF ____________ )
)
COUNTY OF __________ )

Harold E. Riley, Chairman of Citizens Acquisition, Inc., an Illinois
corporation, personally appeared before me on the _____ day of _______________,
1994, and, under oath, signed the foregoing Articles and Plan of Merger and
stated that the facts contained therein are true to the best of his knowledge
and belief.

Witness my hand and official seal.

___________________________________
Notary Public

My commission expires:

STATE OF ____________ )
)
COUNTY OF __________ )

Harold E. Riley, Chairman of Citizens, Inc., a Colorado corporation,
personally appeared before me on the _____ day of _______________, 1994, and,
under oath, signed the foregoing Articles and Plan of Merger and stated that
the facts contained therein are true to the best of his knowledge and belief.

Witness my hand and official seal.

___________________________________
Notary Public

My commission expires:

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EXHIBIT B

OPINION OF COUNSEL FOR INVESTORS AND CENTRAL

At the Closing, Investors and Central shall deliver to Citizens, an
opinion, in form and substance satisfactory to Citizens and its counsel, dated
the Closing Date, of Newman and Davenport, P.C., counsel to Investors and
Central, to the effect that:

1. The execution, delivery, and performance of the Agreement by Investors and
Central shall not result in a breach of, or constitute a default (or an
event which, with or without notice or lapse of time or both, would
constitute a default) under any contract, commitment, agreement,
indenture, mortgage, pledge agreement, note, bond, license, or other
instrument or obligation to which Investors or Central is a party or by
which Investors or Central is bound or the charter or bylaws of Investors
or Central or other governing instruments of Investors or Central;

2. The Agreement has been duly authorized, executed and delivered by
Investors and Central and is a legal, valid and binding obligation of
Investors enforceable against Investors or Central in accordance with its
terms (subject to the applicability of equitable principles or the effect
of bankruptcy or creditors rights laws on the enforceability of the
Agreement);

3. Investors and Central are each an Illinois corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois;

4. Investors and Central have full corporate power and authority to enter
into the Agreement and to carry out the transactions contemplated by the
Agreement;

5. To such counsel s knowledge, after due inquiry, there are no civil or
criminal actions, suits, arbitrations, administrative or other proceedings
or governmental investigations pending or threatened against Investors or
Central which will constitute a breach of the representations, warranties
or covenants under the Agreement or will prevent Investors or Central from
consummating the transactions contemplated by the Agreement;

6. The authorized and outstanding capital stock of Investors is as stated in
Section 4.2 of the Agreement, and such shares have been duly authorized,
are fully paid and non-assessable and were not issued in violation of the
pre- emptive rights of any party;

7. To such counsel s knowledge, after due inquiry, except as set forth in the
Agreement, there are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, privileges or other
arrangements, pre-emptive or contractual, calling for or requiring the
acquisition of, or the issuance, transfer, sale, or other

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disposition of any shares of the capital stock of Investors or Central, or
calling for or requiring the issuance of any securities or rights
convertible into or exchangeable for shares of capital stock of Investors
or Central; and

8. The execution, delivery, and performance of the Agreement, and the
performance by Investors and Central of its obligations thereunder, is not
in contravention any law, ordinance, rule, or regulation of any State or
political subdivision of either the United States or of any applicable
foreign jurisdiction, or contravene any order, writ, judgment, injunction,
decree, determination, or award of any court or other authority having
jurisdiction, will not cause the suspension or revocation of any
authorization, consent, approval, or license, presently in effect, which
affects or binds, Investors or any of its subsidiaries or any of its or
their material properties, and will not have a material adverse effect on
the validity of the Agreement or on the validity of the consummation of
the transactions contemplated by the Agreement or which constitutes
grounds for the loss or suspension of any permits, licenses, or other
authorizations used in the business of Investors.

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EXHIBIT C

OPINION OF COUNSEL FOR CITIZENS

At the Closing, Citizens shall deliver to Investors and Central, an
opinion, in form and substance satisfactory to Investors and its counsel, dated
the Closing Date, of Jones & Keller, counsel to Citizens, to the effect that:

1. The execution, delivery, and performance of the Agreement by Citizens
shall not result in a breach of, or constitute a default (or an event
which, with or without notice or lapse of time or both, would constitute a
default) under any contract, commitment, agreement, indenture, mortgage,
pledge agreement, note, bond, license, or other instrument or obligation
to which Citizens is a party or by which Citizens is bound or the charter
or bylaws of Citizens or other governing instruments of Citizens;

2. The Agreement has been duly authorized, executed and delivered by Citizens
and is a legal, valid and binding obligation of Citizens enforceable
against Citizens in accordance with its terms (subject to the
applicability of equitable principles or the effect of bankruptcy or
creditors rights laws on the enforceability of the Agreement);

3. Citizens is a Colorado corporation duly organized, validly existing and in
good standing under the laws of the State of Colorado;

4. Citizens has full corporate power and authority to enter into the
Agreement and to carry out the transactions contemplated by the Agreement;

5. To such counsel s knowledge, after due inquiry, there are no civil or
criminal actions, suits, arbitrations, administrative or other proceedings
or governmental investigations pending or threatened against Citizens
which will constitute a breach of the representations, warranties or
covenants under the Agreement or will prevent Citizens from consummating
the transactions contemplated by the Agreement;

6. The authorized and outstanding capital stock of Citizens is as stated in
Section 3.2 of the Agreement, and each of the shares of Class A common
stock to be issued pursuant to the Agreement has been duly authorized and
when issued pursuant to the terms of the Agreement shall be validly issued
and fully paid and non-assessable and not issued in violation of the
pre-emptive rights of any party;

7. To such counsel s knowledge, after due inquiry, except as set forth in the
Agreement or Citizens Disclosure Statement, there are not outstanding
subscriptions, options, warrants, rights, convertible securities, calls,
commitments, privileges or other arrangements, pre-emptive or contractual,
calling for or requiring the acquisition of, or the issuance, transfer,
sale, or other disposition of any shares of the capital stock of

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Citizens, or calling for or requiring the issuance of any securities or
rights convertible into or exchangeable for shares of capital stock of
Citizens; and

8. The execution, delivery, and performance of the Agreement, and the
performance by Citizens of its obligations thereunder, is not in
contravention any law, ordinance, rule, or regulation of any State or
political subdivision of either or of the United States or of any
applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award of any court or other
authority having jurisdiction, will not cause the suspension or revocation
of any authorization, consent, approval, or license presently in effect,
which affects or binds Citizens or any of its subsidiaries or any or any
of its or their material properties, and will not have a material adverse
effect on the validity of the Agreement or on the validity of the
consummation of the transactions contemplated by the Agreement or
constitute grounds for the loss or suspension of any permits, licenses, or
other authorizations used in the business of Citizens.

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CITIZENS DISCLOSURE STATEMENT

Pursuant to the provisions of Article III of the Plan and Agreement of
Merger and Exchange by and among Insurance Investors & Holding Co., Central
Investors Life Insurance Company of Illinois, Citizens Acquisition, Inc. and
Citizens, Inc., Citizens, Inc. hereby makes the following disclosures
respecting the similarly numbered sections in the Plan and Agreement of Merger
and Exchange:

3.7 Citizens has the liabilities disclosed in the Citizens Financial
Statements and those incurred thereafter in the ordinary course of
business.

3.8 Civil Action No. CV 91 5390, Dr. Lang T. Harp v. Continental Investors
Life Insurance Company, American Lifestyles Protection and Security
Trust; and C.M.C., Ltd. The plaintiff sued for alleged failure to pay
medical bills incurred by Plaintiff's wife, breach of contract,
compensatory damages in the amount of $35,426.00 and punitive damages
in the amount of $3,000,000.00. Citizens Insurance Company is a party
to such suit.

Civil Action No. C-3687-93E, Dary Luz Sierra de Romera, et. al., v.
Rafael Alvarez Carbonel, Hector A. Tamara and Citizens Insurance
Company of America. The plaintiff sued for alleged failure to pay
policy death benefits and breach of contract in the amount of
$300,000.00 plus attorney's fees of $10,000.00.

3.11 Management Service Agreement between Citizens, Inc. and Citizens
Insurance Company of America, effective July 1, 1991.

Management Service Agreement between Citizens, Inc. and Computing
Technology, Inc., effective October 1, 1991.

Information Systems Management and Service Contract between Citizens,
Inc. and Computing Technology, Inc., effective October 1, 1991.

Computer Maintenance Agreement between Computing Technology, Inc. and
Wang Laboratories, effective July 1, 1991 and amended August 26, 1991.

3.16 Citizens is a party to a noncontributory qualified profit sharing plan
operated under a separate trust.

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INVESTORS AND CENTRAL DISCLOSURE STATEMENT

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AGREEMENT TO AMEND
PLAN AND AGREEMENT OF MERGER AND EXCHANGE

THIS AGREEMENT is made and entered into this 15th day of September,
1995, by and among Insurance Investors & Holding Co. ("Investors"), Central
Investors Life Insurance Company of Illinois ("Central"), Citizens, Inc.
("Citizens") and Citizens Acquisition, Inc.

WHEREAS, the parties to this Agreement have entered into a Plan and
Agreement of Merger and Exchange (the "Merger Agreement") dated November 28,
1994; and

WHEREAS, the parties hereto wish to amend the Merger Agreement;

NOW, THEREFORE, for good and valuable consideration consisting of the
promises below, it is agreed among the parties as follows:

FIRST, that Subsection (6) of Section 8.1 of the Merger Agreement is
hereby amended in its entirety to read as follows (subsections (1) through (5)
of Section 8.1 shall remain unchanged):

8.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any
time (whether before or after the approval and adoption thereof by the
shareholders of Investors and Central) prior to the Effective Date:

. . . .

(6) By any party if the Effective Date is not on or
before November 9, 1995.

. . . .

SECOND, that the following addendum is added to and made part of the
Merger Agreement:

WHEREAS, Section 1.1 of this Agreement provides, in part,
that: "Central and Citizens shall enter into a Plan of Exchange as
set forth herein under which the shares of Central owned by Investors
and other stockholders of Central shall be transferred to Citizens . .
."; and

WHEREAS, Item 6 of Form A, Statement Regarding the
Acquisition or Control of or Merger with a Domestic Insurer, dated
December 20, 1995, which was submitted by Citizens to the Department
of Insurance of the State of Illinois, states

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in part that Citizens "will own indirectly through Investors 650,000
shares (or 100 percent) of the outstanding common stock of [Central]";
and

WHEREAS, the parties to this Agreement wish to set forth and
confirm the manner in which the Plan of Exchange shall be consummated;

NOW THEREFORE, the parties to this Agreement agree as follows:

THAT (i) the aforesaid Plan of Exchange shall be consummated
in a manner so that Citizens will acquire 100% of the issued and
outstanding common stock of Central (650,000 shares) indirectly
through Citizen's ownership of 100% of the issued and outstanding
capital stock of Investors; (ii) Citizens shall contribute a
sufficient number of the shares of its Class A Common Stock to
Investors, to be used to consummate the Plan of Exchange; (iii)
Investors shall then deposit said shares of Citizens Class A Common
Stock with the Exchange Agent as provided elsewhere in this Agreement;
(iv) the Exchange Agent shall then, upon presentation of shares of
Central Common Stock by shareholders other than Investors, issue to
each such Central shareholder tendering such Central Common shares one
share of the Citizens Class A Common Stock deposited by Investors for
each four shares of Central Common Stock tendered, and the Exchange
Agent shall make payment for partial shares of Citizens Class A Common
Stock as provided in this Agreement; (v) Investors shall retain all
its Central Common Stock; (vi) the Exchange Agent shall deliver to
Investors all tendered Central Common Stock; and (vii) following the
termination of the appointment of the Exchange Agent, all holders of
shares of Central Common Stock shall be directed to tender their
shares to Investors rather than to Citizens.

THIRD, all other terms of the Merger Agreement shall remain in full
force and effect.

IN WITNESS WHEREOF, the undersigned have set their hands this 15th day
of September, 1995.

CITIZENS, INC. INSURANCE INVESTORS & HOLDING CO.

By: _________________________________ By: _________________________________
Harold E. Riley, Chairman Frank J. Wilkins, President

CITIZENS ACQUISITION, INC. CENTRAL INVESTORS LIFE INSURANCE
COMPANY OF ILLINOIS

By: _________________________________ By: _________________________________
Harold E. Riley, Chairman Frank J. Wilkins, President

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APPENDIX B

ILLINOIS BUSINESS CORPORATION ACT OF 1983

ARTICLE 11. MERGER AND CONSOLIDATION -- DISSENTERS' RIGHTS

5/11.65 RIGHT TO DISSENT. -- (a) A shareholder of a corporation is
entitled to dissent from, and obtain payment for his or her shares in the event
of any of the following corporate actions:

(1) consummation of a plan of merger or consolidation or a plan of
share exchange to which the corporation is a party if (i) shareholder
authorization is required for the merger or consolidation or the share exchange
by Section 11.20 or the articles of incorporation or (ii) the corporation is a
subsidiary that is merged with its parent or another subsidiary under Section
11.30;

(2) consummation of a sale, lease or exchange of all, or
substantially all, of the property and assets of the corporation other than in
the usual and regular course of business;

(3) an amendment of the articles of incorporation that materially
and adversely affects rights in respect of dissenter's shares because it:

(i) alters or abolishes a preferential right of such shares;

(ii) alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of such shares;

(iii) in the case of a corporation incorporated prior to January 1,
1982, limits or eliminates cumulative voting rights with respect to such
shares; or

(4) any other corporate action taken pursuant to a shareholder
vote if the articles of incorporation, by- laws, or a resolution of the board
of directors provide that shareholders are entitled to dissent and obtain
payment for their shares in accordance with the procedures set forth in Section
11.70 or as may be otherwise provided in the articles, by-laws or resolution.

(b) A shareholder entitled to dissent and obtain payment for his
or her shares under this Section may not challenge the corporate action
creating his or her entitlement unless the action is fraudulent with respect to
the shareholder or the corporation or constitutes a breach of a fiduciary duty
owed to the shareholder.

(c) A record owner of shares may assert dissenters' rights as to
fewer than all the shares recorded in such person's name only if such person
dissents with respect to all shares beneficially owned by any one person and
notifies the corporation in writing of the name and address of each person on
whose behalf the record owner asserts dissenters' rights. The rights of a
partial dissenter are determined as if the shares as to which dissent is made
and the other shares [are] recorded in the names of different shareholders. A
beneficial owner of shares who is not the record owner may assert dissenters'
rights as to shares held on such person's behalf only if the beneficial owner
submits to the corporation the record owner's written consent to the dissent
before or at the same time the beneficial owner asserts dissenters' rights.

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5/11.70 PROCEDURE TO DISSENT. -- (a) If the corporate action giving
rise to the right to dissent is to be approved at a meeting of shareholders,
the notice of meeting shall inform the shareholders of their right to dissent
and the procedure to dissent. If, prior to the meeting, the corporation
furnishes to the shareholders material information with respect to the
transaction that will objectively enable a shareholder to vote on the
transaction and to determine whether or not to exercise dissenters' rights, a
shareholder may assert dissenters' rights only if the shareholder delivers to
the corporation before the vote is taken a written demand for payment for his
or her shares if the proposed action is consummated, and the shareholder does
not vote in favor of the proposed action.

(b) If the corporate action giving rise to the right to dissent is
not to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform
the shareholders of their right to dissent and the procedure to dissent. If,
prior to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenter's rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.

(c) Within 10 days after the date on which the corporate action
giving rise to the right to dissent is effective or 30 days after the
shareholder delivers to the corporation the written demand for payment,
whichever is later, the corporation shall send each shareholder who has
delivered a written demand for payment a statement setting forth the opinion of
the corporation as to the estimated fair value of the shares, the corporation's
latest balance sheet as of the end of a fiscal year ending not earlier than 16
months before the delivery of the statement, together with the statement of
income for that year and the latest available interim financial statements, and
either a commitment to pay for the shares of the dissenting shareholder at the
estimated fair value thereof upon transmittal to the corporation of the
certificate or certificates, or other evidence of ownership, with respect to
the shares, or instructions to the dissenting shareholder to sell his or her
shares within 10 days after delivery of the corporation's statement to the
shareholder. The corporation may instruct the shareholder to sell only if
there is a public market for the shares at which the shares may be readily
sold. If the shareholder does not sell within that 10 day period after being
so instructed by the corporation, for purposes of this Section the shareholder
shall be deemed to have sold his or her shares at the average closing price of
the shares, if listed on a national exchange, or the average of the bid and
asked price with respect to the shares quoted by a principal market maker, if
not listed on a national exchange, during that 10 day period.

(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
canceled or modified by the consummation of the proposed corporate action.
Upon consummation of that action, the corporation shall pay to each dissenter
who transmits to the corporation the certificate or other evidence of ownership
of the shares the amount the corporation estimates to be the fair value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.

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(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's statement of value, shall notify the corporation in writing of
the shareholder's estimated fair value and amount of interest due and demand
payment for the difference between the shareholder's estimate of fair value and
interest due and the amount of the payment by the corporation or the proceeds
of sale by the shareholder, whichever is applicable because of the procedure
for which the corporation opted pursuant to subsection (c).

(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall
either pay the difference in value demanded by the shareholder, with interest,
or file a petition in the circuit court of the county in which either the
registered office or the principal office of the corporation is located,
requesting the court to determine the fair value of the shares and interest
due. The corporation shall make all dissenters, whether or not residents of
this State, whose demands remain unsettled parties to the proceeding as an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law. Failure of the corporation to commence an
action pursuant to this Section shall not limit or affect the right of the
dissenting shareholders to otherwise commence an action as permitted by law.

(g) The jurisdiction of the court in which the proceeding is
commenced under subsection (f) by a corporation is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
power described in the order appointing them, or in any amendment to it.

(h) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value
of his or her shares, plus interest, exceeds the amount paid by the corporation
or the proceeds of sale by the shareholder, whichever amount is applicable.

(i) The court, in a proceeding commenced under subsection (f),
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of the appraisers, if any, appointed by the court
under subsection (g), but shall exclude the fees and expenses of counsel and
experts for the respective parties. If the fair value of the shares as
determined by the court materially exceeds the amount which the corporation
estimated to be the fair value of the shares or if no estimate was made in
accordance with subsection (c), then all or any part of the costs may be
assessed against the corporation. If the amount which any dissenter estimated
to be the fair value of the shares materially exceeds the fair value of the
shares as determined by the court, then all or any part of the costs may be
assessed against that dissenter. The court may also assess the fees and
expenses of counsel and experts for the respective parties, in amounts the
court finds equitable, as follows:

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(1) Against the corporation and in favor of any or all dissenters
if the court finds that the corporation did not substantially comply with the
requirements of subsections (a), (b), (c), (d), or (f).

(2) Against either the corporation or a dissenter and in favor of
any other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this Section.

If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and that the fees
for those services should not be assessed against the corporation, the court
may award to that counsel reasonable fees to be paid out of the amounts awarded
to the dissenters who are benefited. Except as otherwise provided in this
Section, the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.

(j) As used in this Section:

(1) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the consummation of the corporate action
to which the dissenter objects excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.

(2) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.

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PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article 109 of Title Seven of the Colorado Revised Statutes enables a
Colorado corporation to indemnify its officers, directors, employees and agents
against liabilities, damages, costs and expenses for which they are liable if:
(i) in their Official Capacities (as defined by this statute) if they acted in
good faith and had no reasonable basis to believe their conduct was not in the
best interest of the Registrant; (ii) in all other cases, that their conduct
was at least not opposed to the Registrant's best interests; and (iii) in the
case of any criminal proceeding, they had no reasonable cause to believe their
conduct was unlawful.

The Registrant's Articles of Incorporation limit the liability of
directors to the full extent provided by Colorado law.

The Registrant's Bylaws provide indemnification to officers,
directors, employees and agents to the fullest extent provided by Colorado law.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

Exhibit Number Description of Exhibits

2.2 Plan and Agreement of Merger - American Liberty Financial
Corporation, American Liberty Life Insurance Company,
Citizens, Inc. and Citizens Acquisition, Inc., dated December
8, 1994(e)

2.21 Plan and Agreement of Merger and Exchange - See Appendix A

3.1 Articles of Incorporation, as amended(a)

3.2 Bylaws(e)

5.1 Opinion and consent of Jones & Keller, P.C. as to the legality
of Citizens, Inc. Common Stock(c)

8.1 Opinion re: tax matters(c)

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10.5 Automatic Yearly Renewable Term (NR) Life Reinsurance
Agreement between Citizens Insurance Company of America and
The Centennial Life Insurance Company dated March 1, 1982(b)

10.6 Summary of Coinsurance Agreement between Citizens Insurance
Company of America and Alabama Reassurance Company dated
December 31, 1985(b)

10.7 International Marketing Agreement - Citizens Insurance Company
of America and Negocios Savoy, S.A.(b)

11 Statement re: Computation of per share earnings(d)

22 Subsidiaries of the Registrant(d)

23.1 Consent of Jones & Keller, P.C.(c)

23.2 Consent of KPMG Peat Marwick LLP(c)

25 Power of Attorney (see signature page)

_______________
(a) Filed with the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993 and incorporated by reference.
(b) Filed with the Registrant's Amendment No. 1 to Registration
Statement on Form S-4, Registration No. 33- 4753, filed with
the Commission on or about June 19, 1992.
(c) Filed herewith.
(d) Filed with the Registrant's Annual Report on Form 10-K for the
Year Ended December 31, 1994, and incorporated herein by
reference.
(e) Filed with the Registrant's Registration Statement on Form
S-4, Registration No. 33-59039, filed with the Commission on
May 2, 1995.

(B) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

See "Financial Statements."

ITEM 22. UNDERTAKINGS

The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "1933 Act"), each
filing of The Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of

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1934, as amended), that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

The Registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.

The Registrant hereby undertakes that every prospectus (i) that is
filed pursuant to the paragraph immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the 1933 Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
part of an amendment to the Registration Statement and will not be used until
such amendment is effective; and that, for purposes of determining any
liability under the 1933 Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

The Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the Effective Time of the Registration Statement through
the date of responding to the request.

The Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired, that was not the subject of and included in the
Registration Statement when it became effective.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the

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Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the Effective Time of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.

Provided, however, that paragraphs (1)(i) and (1)(ii), above, do not apply if
the Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

II-IV
<PAGE> 163
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Austin,
State of Texas, on October 6, 1995.

CITIZENS, INC.

By: /s/ Harold E. Riley
Harold E. Riley, Chairman of
the Board

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers or
directors of the Registrant, by virtue of their signatures to this Registration
Statement appearing below, hereby constitute and appoint Harold E. Riley and
Mark A. Oliver, attorneys-in-fact in their names, place, and stead to execute
any and all amendments to this Registration Statement in the capacities set
forth opposite their names and hereby ratify all that said attorneys-in-fact
may do by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Harold E. Riley Chairman of the Board October 6, 1995
Harold E. Riley

/s/ Randall Riley Vice Chairman, Chief Executive October 6, 1995
Randall Riley Officer and Director

/s/ T. Roby Dollar Vice Chairman, Chief Actuary October 6, 1995
T. Roby Dollar and Assistant Secretary

/s/ Rick D. Riley President, Chief Administrative October 6, 1995
Rick D. Riley Officer and Director

/s/ Mark A. Oliver Executive Vice President, October 6, 1995
Mark A. Oliver Secretary/Treasurer and
Chief Financial Officer
</TABLE>
<PAGE> 164
<TABLE>
<S> <C> <C>
/s/ Stephen Curtis Vice President and Controller October 6, 1995
Stephen Curtis

Director
Flay F. Baugh

/s/ Joe R. Reneau Director October 6, 1995
Joe R. Reneau, M.D.

/s/ Steven F. Shelton Director October 6, 1995
Steven F. Shelton

Director
Ralph M. Smith. Th.D.

/s/ Timothy T. Timmerman Director October 6, 1995
Timothy T. Timmerman
</TABLE>
<PAGE> 165
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
2.21 Plan and Agreement of Merger and Exchange Appendix A

3.2 Bylaws (see Registrant's
Registration Statement
on Form S-4 Dated
May 2, 1995)

5.1 Opinion and consent of Jones & Keller, P.C.
as to the legality of Citizens, Inc. Common Stock Filed herewith

8.1 Opinion re: tax matters Filed herewith

11 Statement re: Computation of per share earnings (see "Financial
Statements")

22 Subsidiaries of the Registrant (see Registrant's
Form 10-K for Year
Ended December
31, 1994)

23.1 Consent of Jones & Keller, P.C. (see Exhibit 5.1)

23.2 Consent of KPMG Peat Marwick LLP Filed herewith

25 Power of Attorney (see Signature
Pages)

99.1 Form of Proxy, Insurance Investors & Holding Co. Filed herewith

99.2 Form of Proxy, Central Investors Life Insurance
Company of Illinois Filed herewith
</TABLE>

<PAGE> 1
EXHIBIT 5.1 AND 23.1

JONES & KELLER
[Letterhead]

October 6, 1995

Citizens, Inc.
400 East Anderson Lane
Austin, Texas 78714-9151

Gentlemen:

We have acted as special counsel for Citizens, Inc. in connection with
a Registration Statement on Form S-4, to be filed by the Company under the
Securities Act of 1933 with the Securities and Exchange Commission. The
Registration Statement relates to the proposed issuance of up to 171,391 shares
of Common Stock, no par value, to be issued in connection with the Plan and
Agreement of Merger and Exchange dated as of the 28th day of November, 1994 by
and between Insurance Investors & Holding Co., Central Investors Life Insurance
Company of Illinois, Citizens, Inc. (the "Company"), and Citizens Acquisition,
Inc. The Registration Statement and exhibits thereto to be filed with the
Securities and Exchange Commission under such Act are referred to herein as the
"Registration Statement".

This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991).

We have examined the Articles of Incorporation of the Company as filed
with the Colorado Secretary of State, the Bylaws of the Company, and the
minutes of the meetings and records of proceedings of the Board of Directors of
the Company, the applicable laws of the State of Colorado and a copy of the
Registration Statement.

Based upon the foregoing, and having regard for such legal
considerations as we deemed relevant, we are of the opinion that when issued
pursuant to the Registration Statement, the above-referenced 171,391 shares of
Common Stock of the Company shall have been legally issued, fully paid and
non-assessable.

We hereby consent to the use of this opinion as part of the
Registration Statement and to the reference to our name under the heading
"Legal Matters" in the Proxy Statement-Prospectus constituting a part of the
Registration Statement.

Very truly yours,

/s/ Jones & Keller, P.C.
Jones & Keller, P.C.

<PAGE> 1
EXHIBIT 8.1
JONES & KELLER
[Letterhead]

October 5, 1995

Citizens, Inc.
Post Office Box 149151
Austin, Texas 78714-9151

Citizens Acquisition, Inc.
Post Office Box 149151
Austin, Texas 78714-9151

Insurance Investors & Holding Co.
Central Investors Life Insurance Company
2512 North Knoxville Avenue
Peoria, Illinois 61604

Gentlemen:

Our opinions as expressed below are based solely upon: (1) the
information contained in the Registration Statement on Form S-4 as filed with
the Securities and Exchange Commission on _______________, 1995 and declared
effective on ___________________, 1995 (hereafter "Registration Statement");
(2) relevant information provided by the principals and disclosed under the
facts section of this letter; (3) the Internal Revenue Code of 1986, as amended
(hereinafter "IRC"), the regulations promulgated thereunder, and the current
administrative positions of the Internal Revenue Service ("IRS") contained in
published Revenue Rulings and Revenue Procedures; and (4) existing judicial
decisions. Any or all of the above are subject to change or modification by
subsequent legislative, regulatory, administrative or judicial decisions which
could adversely affect our opinions.

This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this letter should be read in
conjunction therewith.

"Merger" and "Exchange" refer to the transactions set forth in the
Plan and Agreement of Merger ("Merger Agreement") dated November 28, 1994
between Citizens, Inc. ("Citizens"), Citizens Acquisition, Inc.
("Acquisition"), Insurance Investors & Holding Co. ("Investors") and Central
Investors Life Insurance Company of Illinois ("Central"). Capitalized terms
herein have the same meaning as in the Merger Agreement. Central is a
subsidiary of Investors. Acquisition is a subsidiary of Citizens. The Class A
Common

1
<PAGE> 2
Stock of Investors is herein referred to as "Investors Class A Common Stock";
the Class B Common Stock of Investors is herein referred to as "Investors Class
B Common Stock"; and both are sometimes herein referred to as "Investors
Stock". Central Common Stock is sometimes herein referred to as "Central
Stock".

Shareholders residing or conducting business in foreign countries,
states or municipalities having tax laws could be required to pay tax with
respect to transactions in that country, state or municipality. We do not
express any opinion as to foreign, state or local tax consequence.

The consequences described in this summary are not applicable to
nonresident aliens, to foreign corporations, to debtors under the jurisdiction
of a court in a case under Title 11 of the United States Code or in a
receivership, foreclosure, or similar proceeding, to investment companies
within the meaning of IRC Section 351(e), to shareholders who are dealers in
securities, to shareholders who are subject to alternative minimum taxes, to
shareholders who do not hold their common stock as capital assets, to
shareholders who are financial institutions, or to shareholders who acquired
their shares in connection with stock option or stock purchase plans or in
other compensatory transactions.

The principal reasons for the Merger and the Exchange can be
summarized as follows:

(1) to create a combined entity with greater financial
strength and an enhanced competitive position as compared to the
separate entities;

(2) to achieve improved capitalization and economies of
scale;

(3) to consolidate the ownership and operation of the
assets of the separate entities into an affiliated group of
corporations having greater and more diversified reserves, properties
and products;

(4) to provide greater liquidity and diversity to
Investors and Central shareholders; and

(5) to promote more efficient operation of Central by
eliminating minority shareholder interests.

This letter is conditioned on the accuracy of the factual information,
assumptions and representations contained in the Registration Statement and
provided by Citizens, Acquisition, Investors, Central and shareholders of
Investors and Central, including the following:

(1) that Citizens, Investors and Central, in arriving at
the method used to determine the number of shares of Citizens Common
Stock to be received by each

2
<PAGE> 3
Investors and Central shareholder, attempted in good faith to value
the Investors Class A Common Stock, Investors Class B Common Stock and
Central Common Stock to be transferred and to value the Citizens
Common Stock to be exchanged for such Investors Class A Common Stock,
Investors Class B Common Stock and Central Common Stock in an effort
to ensure that each shareholder receiving Citizens Common Stock
pursuant to the Merger and Exchange received a number of shares of
such stock approximately equal in value to the Investors Class A
Common Stock, Investors Class B Common Stock and Central Common Stock
exchanged therefor;

(2) that, with respect to any persons who own one percent
or more of the value of Investors Stock there is no plan or intention,
and to the best of the knowledge of Investors management, there is no
plan or intention on the part of remaining shareholders of Investors
to sell, exchange or otherwise dispose of Citizens Common Stock
received in the Merger which would reduce Investors shareholders
ownership of Citizens Common Stock to a number of shares having a
value less than 50 percent of the value of all of the formerly
outstanding Investors Stock as of the effective date of the Merger,
and there is no binding contract or obligation to sell such stock to
persons who are not parties to this Merger. For these purposes,
shares of Investors Stock exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional
shares of Citizens Stock, will be treated as outstanding Investors
Stock on the effective date of the Merger. Moreover, shares of
Investors Stock and shares of Citizens Common Stock held by Investors
shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger will be considered;

(3) that following the Merger, Investors will hold at
least 90 percent of the Fair Market Value of its Net Assets and at
least 70 percent of the Fair Market Value of its Gross Assets and at
least 90 percent of the Fair Market Value of Acquisition's Net Assets
and at least 70 percent of the Fair Market Value of Acquisition's
Gross Assets held immediately prior to the Merger. Amounts paid by
Investors or Acquisition to dissenters, amounts paid by Investors or
Acquisition to shareholders who receive cash or other property,
amounts used by Investors or Acquisition to pay reorganization
expenses, and all redemptions and distributions (except for regular,
normal dividends) made by Investors will be included as assets of
Investors or Acquisition, respectively, immediately prior to the
Merger;

(4) that prior to the Merger, Citizens will be in control
of Acquisition within the meaning of IRC Section 368(c);

(5) that Investors has no plan or intention to issue
additional shares of its stock that would result in Citizens losing
control of Investors within the meaning of IRC Section 368(c);

3
<PAGE> 4
(6) that Central has no plan or intention to issue
additional shares of its stock that would result in Investors losing
control of Central within the meaning of IRC Section 368(c);

(7) that Citizens has no plan or intention to redeem or
otherwise reacquire any Citizens Class A Common Stock to be issued to
Investors shareholders in the Merger;

(8) that Citizens has no plan or intention to liquidate
Investors; to merge Investors with or into another corporation; to
sell or otherwise dispose of the stock of Investors except for
transfers of stock to corporations controlled by Citizens; or to cause
Investors to sell or otherwise dispose of any of its assets or any of
the assets acquired from Acquisition, except for dispositions made in
the ordinary course of business or transfers of assets to a
corporation controlled by Investors;

(9) that Investors has no plan or intention to liquidate
Central; to merge Central into another corporation; to cause Central
to sell or otherwise dispose of any of its assets, except for
dispositions made in the ordinary course of business; or to sell or
otherwise dispose of any of the Central Stock acquired in the
transaction, except for transfers described in Section 368(a)(2)(C) of
the Internal Revenue Code;

(10) that Acquisition will have no liabilities assumed by
Investors, and it will not transfer to Investors any assets subject to
liabilities, in the Merger;

(11) that neither Investors nor Citizens have any plans or
intention to redeem or otherwise reacquire any Citizens Class A Common
Stock to be issued to Central shareholders in the Exchange;

(12) that following the Merger and Exchange, Investors
will continue the historic business of Central or use a significant
portion of Central's historic business assets in a business;

(13) that Citizens, Acquisition, Investors and Central
will assume and pay their respective reorganization expenses, if any,
incurred in connection with the Merger and Exchange;

(14) that there is no corporate indebtedness between
Citizens or Investors or between Acquisition and Investors that was
issued, acquired or will be settled at a discount;

(15) that in the Merger, shares of Investors Stock
representing control of Investors, as defined in IRC Section 368(c),
will be exchanged solely for Citizens voting Common Stock. Shares of
Investors Stock exchanged for cash or other

4
<PAGE> 5
property originating with Citizens will be treated as outstanding
Investors Stock on the effective date of the Merger;

(16) that on the effective date of the Merger and
Exchange, Investors and Central will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Investors or
Central that, if exercised or converted, would affect Citizens
acquisition or retention of control of Investors or Investors
acquisition or retention of control of Central, as defined in IRC
Section 368(c);

(17) that Citizens does not own, nor has it owned during
the past five years, any shares of Investors or Central Stock;

(18) that neither Citizens, Acquisition, Investors nor
Central are investment companies as defined in IRC Section
368(a)(2)(F)(iii) and (iv);

(19) that on the effective date of the Merger, the fair
market value of the assets of Investors will equal or exceed the sum
of its liabilities, plus the amount of liabilities, if any, to which
the assets are subject;

(20) that on the effective date of the Exchange, the fair
market value of the assets of Central will equal or exceed the sum of
its liabilities, plus the amount of liabilities, if any, to which the
assets are subject;

(21) that neither Citizens, Acquisition, Investors nor
Central are under the jurisdiction of a court in a Title 11 or similar
case within the meaning of IRC Section 368(a)(3) (A);

(22) that the Merger and Exchange will be consummated in
full compliance with Illinois law;

(23) that the Investors Stock and Central Stock to be
surrendered by each Investors and Central shareholder will not be
subject to any liability and neither Investors nor Citizens will
assume liabilities with respect to the surrendered Investors Stock or
Central Stock;

(24) that the Merger and Exchange will not be consummated
in the event more than 2.5 percent of the shareholders of Investors
dissent to the Merger;

(25) that Investors will acquire Central Stock solely in
exchange for Citizens Class A Voting Common Stock at a time when
Citizens is in control of Investors as defined in IRS Section 368(c).
For purposes of this representation, Central Stock redeemed for cash
or other property furnished by Investors will be considered as
acquired by Investors. Further, no liabilities of Central or the
Central shareholders

5
<PAGE> 6
will be assumed by Investors, nor will any of the Central Stock be
subject to any liabilities;

(26) that cash payments in lieu of fractional shares are
simply a mathematical rounding-off for the purpose of simplifying
corporate and accounting problems which would have been caused by the
actual issuance of fractional shares, and such payments are not
separately bargained for consideration;

(27) that there will be no dissenters to the Exchange; and

(28) that none of the compensation received by any
shareholder of Central will be separate consideration for, or
allocable to, any of their shares of Central Stock; none of the shares
of Citizens Stock received by any shareholder will be separate
consideration for, or allocable to, any employment agreement; and the
compensation paid to any shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.

In rendering an opinion on the federal income tax consequences of such
transactions, reasonable steps have been taken to assure that all material tax
issues are considered in light of the facts, and that all of such issues
involving a reasonable possibility of challenge by the IRS are fully and fairly
addressed. A "material tax issue" includes any tax issue that could have a
significant impact (either beneficial or adverse) on any Investors or Central
shareholder participating in the Merger or Exchange under any reasonably
foreseeable circumstances.

The opinions expressed below are rendered only with respect to the
specific matters described herein, and we express no opinion with respect to
any other federal income tax aspects of the Merger or Exchange. Should any of
the facts, circumstances, or assumptions specified herein be subsequently
determined incorrect or inaccurate, our conclusions may vary from those set
forth below and such variance could be material. In addition, we do not opine
as to the taxable or nontaxable status of any previous transactions not
considered to be part of the Merger and Exchange transaction.

The tax issues that are material to the Merger and the Exchange
concern tax consequences to Investors and its shareholders upon the merger of
Acquisition into and with Investors in exchange for Citizens Common Stock, and
the tax consequences to Central shareholders upon the acquisition of Central
Common Stock in exchange for Citizens Common Stock.

The Merger of Acquisition into Investors will constitute a
reorganization within the meaning of IRC Section 368(a)(1)(A) and IRC Section
368(a)(2)(E) and Citizens and Investors will each be a "party to a
reorganization" within the meaning of IRC Section 368(b), provided that the
Merger, as proposed in the Merger Agreement, qualifies as a

6
<PAGE> 7
statutory merger under the laws of the State of Illinois. The Exchange,
whereby Investors will obtain the Central Common Stock from minority
shareholders in exchange for Citizens Common Stock, will constitute a
reorganization within the meaning of IRC Section 368(a)(1)(B) and Citizens,
Investors and Central will each be a "party to a reorganization" within the
meaning of IRC Section 368(b), provided that the Exchange, as proposed in the
Merger Agreement, qualifies as a statutory exchange under the laws of the State
of Illinois.

Accordingly, in our opinion, the material tax consequences of the
Merger and Exchange are as follows:

(1) No gain or loss will be recognized by the shareholders of
Investors upon the exchange of their shares of Investors Class A Common Stock
and Investors Class B Common Stock for shares of Citizens Common Stock (except
for cash received in lieu of a fractional share of Citizens Common Stock) or by
the shareholders of Central upon the exchange of shares of Central Common Stock
for shares of Citizens Common Stock (except for cash received in lieu of a
fractional share of Citizens Common Stock). IRC Section 354(a).

(2) The tax basis of the shares of Citizens Common Stock received
by a shareholder of Investors and Central (including any fractional share of
Citizens Common Stock not actually received) will be the same as the basis of
the Investors Stock and Central Stock surrendered by that shareholder in the
Merger and Exchange. IRC Section 358(a), IRC Regulation Section 1.358-1(a).

(3) The holding period of the shares of Citizens Common Stock
received by a shareholder of Investors or Central will include the period
during which such shareholder held the Investors Stock or Central Stock
exchanged therefor, to the extent that the Investors Stock and Central Stock
was held by the shareholder as a capital asset on the date of the consummation
of the Merger and Exchange. IRC Section 1223(1).

(4) Cash received by the Investors shareholders who properly
exercise their dissenters' rights will be treated as having been received in
redemption of the shares so cashed out, and may result in taxable gain or loss,
measured by the difference (if any) between the amount of cash received and
such shareholder's basis in the Investors Stock. Provided the shares were held
as capital assets at the time of the redemption, such gain or loss will
constitute capital gain or loss, and such gain or loss will be long term
capital gain or loss if the holding period for such shares was greater than one
year. It is possible, that for some shareholders, the distribution of cash may
be treated as a dividend taxable as ordinary income. See IRC Sections 302,
301.

(5) Cash payments received by Investors shareholders or Central
shareholders in lieu of fractional shares of Citizens Common Stock will be
treated as if such fractional share of Citizens Common Stock has been issued in
the Merger and Exchange and then redeemed by Citizens. An Investors or Central
shareholder receiving such cash will

7
<PAGE> 8
recognize gain or loss, upon such payment, measured by the difference (if any)
between the amount of cash received and the basis in such fractional share.
Provided the fractional share was held as a capital asset at the time of the
redemption, such gain or loss will constitute capital gain or loss, and such
gain or loss will be long term capital gain or loss if the holding period for
such share (taking into account the holding period of the Investors Stock and
Central Stock surrendered, as described in (3) above) was greater than one
year. It is possible that the distribution of cash may be treated as a
dividend taxable as ordinary income if the IRS determines that the distribution
in redemption is essentially equivalent to a dividend. See IRC Sections 356,
302.

(6) No material gain or loss will be recognized by Investors,
Central, Citizens or Acquisition as a result of the Merger or Exchange. IRC
Sections 361 and 1032. The adjusted tax basis of Acquisition properties will
carryover to Investors. IRC Section 362.

(7) Section 382 limits the Net Operating Loss carryover of a
company following an ownership change. Investors and Central, as a group, will
be deemed to have an ownership change. After an ownership change, the amount
of income that a corporation may offset each year by Net Operating Losses that
occurred before the change is generally limited to an amount determined by
multiplying the value of the equity of the corporation immediately prior to
this change by the federal long-term tax exempt rate in effect on the date of
the change. Any unused limitation may be carried forward and added to the next
year's limitation. To the extent Investors and Central also have built-in
losses as defined in IRC Section 382(h) as of the date of the Merger, IRC
Section 382 limits the utilization of such losses after the ownership change.
IRC Section 383 will similarly limit the utilization of excess credits, net
capital losses, and foreign tax credits, if any, after the ownership change.
In addition, IRC Section 384 limits the use of preacquisition losses to offset
built-in gains, if any, after the ownership change. Proposed regulations under
IRC Sections 382 and 1502 implement the above restrictions.

(8) Each shareholder of Investors and Central must file pursuant
to IRS Regulation 1.368-3(b), with his or her income tax return for the year in
which the Merger and Exchange is consummated, a statement which provides
details relating to the property transferred, securities received and
liabilities, if any, assumed in the exchange.

The preceding discussion and opinions are based on our interpretations
of the facts and assumptions, based on the IRC, the regulations thereunder and
judicial and administrative interpretations thereof. They are subject to
change by subsequent regulatory, administrative, legislative, or judicial
actions which could have an effect on the validity of our opinions. Our
opinions are effective as of the Effective Time for the Merger and Exchange as
described in the Merger Agreement.

It should be noted that we do not express an opinion on the valuations
of Investors, Central or Citizens assets or stock or the ratio of exchange of
Investors Stock or Central Stock for Citizens Common Stock.

8
<PAGE> 9
We believe we have addressed all material tax issues in regards to the
Merger and Exchange. If the Merger and Exchange is transacted as outlined in
the facts given, the material tax issues addressed singularly and in the
aggregate will more likely than not be upheld under challenge by the IRS.

Each Investors and Central shareholder should consult his own
qualified tax advisor to evaluate the tax effects of this exchange based on his
personal facts and circumstances.

Very truly yours,
/s/ Jones & Keller, P.C.
JONES & KELLER, P.C.

<PAGE> 1
EXHIBIT 23.2

[KPMG LOGO]

The Board of Directors
Citizens, Inc.:

We consent to the use of our reports incorporated herein by reference and to
the reference to our Firm under the heading "Experts" in the Form S-4.

/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP

Dallas, Texas
October 6, 1995

<PAGE> 1
PROXY PROXY
INSURANCE INVESTORS & HOLDING CO.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned shareholder of Insurance Investors & Holding Co.
("Investors") acknowledges receipt of the Notice of Special Meeting of
Shareholders, to be held on ________, 1995, at
__________________________________, Peoria, Illinois, at ____ a.m., Central
Time, and hereby appoints Robert W. Kreutz, Robert W. McCallum, Frank J.
Wilkins and Robert D. Wilkins, each of them with the power of substitution, as
attorneys and proxies to vote all the shares of the undersigned at said Special
Meeting and at all adjournments thereof, hereby ratifying and confirming all
that said attorneys and proxies may do or cause to be done by virtue hereof.
The above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:

THE DIRECTORS RECOMMEND A VOTE FOR THE ITEMS INDICATED BELOW:

1. A proposal to approve and adopt the Plan and Agreement of Merger and
Exchange dated November 28, 1994 under which Citizens Acquisition,
Inc., a wholly-owned subsidiary of Citizens, Inc., will merge with and
into Investors, with Investors being the survivor, and shareholders of
Investors will receive shares of Citizens, Inc. Class A Common Stock
for their Investors Class A and Class B Common shares as described in
the accompanying Proxy Statement-Prospectus.

FOR _____ AGAINST _____ ABSTAIN _____

2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.

Dated this ______ day of ________________, 1995.

_______________________________
Signature

Please sign your name exactly as it
appears on your stock certificate(s).
If shares are held jointly, each holder
should sign. Executors, trustees, and
other fiduciaries should so
indicate when signing.

Please sign, date and return this proxy
immediately.

<PAGE> 1
PROXY PROXY

CENTRAL INVESTORS LIFE INSURANCE COMPANY OF ILLINOIS

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned shareholder of Central Investors Life Insurance
Company of Illinois ("Central") acknowledges receipt of the Notice of Special
Meeting of Shareholders, to be held on ________, 1995, at
__________________________________, Peoria, Illinois, at ____ a.m., Central
Time, and hereby appoints Robert W. Kreutz, Frank J. Wilkins and Robert D.
Wilkins, each of them with the power of substitution, as attorneys and proxies
to vote all the shares of the undersigned at said Special Meeting and at all
adjournments thereof, hereby ratifying and confirming all that said attorneys
and proxies may do or cause to be done by virtue hereof. The above-named
attorneys and proxies are instructed to vote all of the undersigned's shares as
follows:

THE DIRECTORS RECOMMEND A VOTE FOR THE ITEMS INDICATED BELOW:

1. A proposal to approve and adopt the Plan and Agreement of Merger and
Exchange dated November 28, 1994 under which Insurance Investors &
Holding Co. will exchange Citizens, Inc. Class A Common Stock for all
shares of Central Common Stock not held by Insurance Investors &
Holding Co. as described in the accompanying Proxy
Statement-Prospectus.

FOR _____ AGAINST _____ ABSTAIN _____

2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.

Dated this ______ day of ________________, 1995.

_______________________________
Signature

Please sign, date and return this proxy
immediately.