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As filed with the Securities and Exchange Commission on September 22, 1995
File No. 33-77698
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMENDMENT NO. 6
CITIZENS, INC.
(Exact name of registration as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-0755371
(I.R.S. Employer Identification Number)
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)
Mark A. Oliver
Vice President and Chief Financial Officer
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)
Copies to:
Reid A. Godbolt, Esq.
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
Approximate date of commencement of proposed sale to
the public: as soon as practicable after this Registration
Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
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=================================================================================================================
Amount Proposed maximum Proposed maximum Amount of
Title of each class to be aggregate price aggregate offering Registration
to be registered Registered(a) per share(b) price fee(c)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Common Stock,
No par value 6,099,657 $ 8.00 $48,797,256 $ 21,656
=================================================================================================================
</TABLE>
(a) With this Amendment No. 5, the amount to be registered is reduced from
6,295,981 shares to 6,099,657 shares.
(b) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(c) Previously paid.
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CITIZENS, INC.
Registration Statement on Form S-3
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
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Item No. Form S-3 Caption Prospectus Caption
- -------- ---------------- ------------------
<S> <C> <C>
Item 1. Forepart of the Registration Forepart of Registration Statement;
Statement and Outside Front Cover Outside Front Cover Page of Prospectus
Page of Prospectus.
Item 2. Inside Front and Outside Back Inside Front and Back Cover Pages of
Cover Pages of Prospectus. Prospectus
Item 3. Summary Information, Risk Factors Risk Factors; The Company
and Ratio of Earnings to Fixed
Charges.
Item 4. Use of Proceeds. Not Applicable
Item 5. Determination of Offering Price. Not Applicable
Item 6. Dilution. Not Applicable
Item 7. Selling Security Holders. Selling Shareholders
Item 8. Plan of Distribution. Plan of Distribution
Item 9. Description of Securities to be Not Applicable
Registered.
Item 10. Interests of Named Experts and Not Applicable
Counsel.
Item 11. Material Changes. Not Applicable
Item 12. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference. Reference
Item 13. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities.
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ii
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PROSPECTUS
CITIZENS, INC.
Class A Common Stock, No Par Value
6,099,657 Shares
--------------------
This Prospectus relates to the offering of 6,099,657 shares (the
Shares") of Class A Common Stock, no par value (the "Class A Common Stock"), of
Citizens, Inc. (the "Company") by various selling shareholders (the "Selling
Shareholders"). See "Selling Shareholders." The Company will bear all expenses
incident to the registration and qualification of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and state securities
laws, on behalf of the Selling Shareholders. The Company will not receive any of
the proceeds from the sale of the Shares offered hereby. The total shares
offered hereby equal approximately 35.9% of the outstanding Class A Common
Stock. It may be anticipated that the sale of the Shares over a short time
period will adversely affect the price of the Class A Common Stock, as well as
create an adverse "market overhang" effect on the price of the Class A Common
Stock.
--------------------
The Class A Common Stock is traded on the American Stock Exchange under
the symbol CIA. On September 21, 1995, the last reported sale price of the
Class A Common Stock on the American Stock Exchange was $8.75.
The Company's Class B Common Stock, no par value (the "Class B Common
Stock") is privately held by one holder of record and is not publicly traded.
The Class A Common Stock and the Class B Common Stock are identical in all
respects except that (a) the holders of Class A Common Stock have the right to
elect one less than a majority of the total directors of the Company, whereas
the holders of Class B Common Stock, voting separately, have the right to elect
a simple majority of the directors, and (b) cash dividends paid on each share of
Class A Common Stock shall be twice the amount paid on each share of Class B
Common Stock.
The Selling Shareholders will offer the Class A Common Stock offered
hereby to purchasers from time to time through a broker at the prevailing price
of the Class A Common Stock on the American Stock Exchange. Any commissions or
fees associated with such sales shall be borne by the Selling Shareholders. See
"Plan of Distribution."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
SEE "RISK FACTORS" FOR A DESCRIPTION OF CERTAIN FACTORS WHICH SHOULD BE
CONSIDERED BY INVESTORS.
----------------
The date of this Prospectus is ____________, 1995.
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TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION ......................... 3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE ................................ 3
THE COMPANY ................................... 4
RISK FACTORS .................................. 5
USE OF PROCEEDS ............................... 11
SELLING SHAREHOLDERS .......................... 11
PLAN OF DISTRIBUTION .......................... 13
EXPERTS ....................................... 13
</TABLE>
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information concerning the Company may be inspected and copies
may be obtained at the Commission's Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C., as well as the following regional offices: 7 World Trade
Center, 13th Floor, New York, New York and 500 West Madison Street, Suite 1400,
Chicago, Illinois. The Company has filed with the Commission a Registration
Statement under the Securities Act of 1933, as amended, with respect to the
securities offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and the exhibits thereto, which
are available for inspection at no fee at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. Copies
of the foregoing material can also be obtained at prescribed rates from the
Public Reference Section of the Commission. The Company's Class A Common Stock
is also listed on the American Stock Exchange (the "Amex"), and in accordance
therewith, the Company files periodic reports, proxy statements and other
information with the Amex. Such reports and other information concerning the
Company can be inspected at American Stock Exchange, 86 Trinity Place, New York,
New York 10006- 1881.
The Company furnishes to its stockholders annual reports containing
financial statements audited by its independent public accountants and quarterly
reports containing unaudited financial statements for the first three quarters
of each fiscal year.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated in this Prospectus by
reference:
1. The Company's Annual Report on Form 10-K, as amended, for the year
ended December 31, 1994.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, as amended, and for the quarter ended June 30, 1995, as amended.
The following documents, which have been filed by American Liberty
Financial Corporation with the Commission, are incorporated into this
Registration Statement and are deemed to be a part hereof (see discussion under
"Pending Acquisitions" in "Risk Factors"):
1. ALFC's Annual Report on Form 10-KSB, as amended, for the year
ended December 31, 1994.
2. ALFC's Quarterly Reports on Form 10-QSB, for the quarter ended
March 31, 1995, as amended, and for the quarter ended June 30, 1995, as
amended.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents (such documents, and the documents enumerated above, being
hereafter referred to as "Incorporated Documents").
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Any statement contained in an Incorporated Document shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed Incorporated
Document modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, including any beneficial
owner, on the written or oral request of any such person, a copy of any or all
of the Incorporated Documents, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference therein. Requests shall
be directed to Citizens, Inc., 400 East Anderson Lane, Austin, Texas 78752, Mark
A. Oliver, Vice President and Chief Financial Officer (telephone number (512)
837-7100). The information relating to the Company contained in this Prospectus
does not purport to be comprehensive and should be read together with the
information contained in the Incorporated Documents.
THE COMPANY
Citizens, Inc. ("Citizens") was incorporated in 1977 as Continental
Investors Life, Inc. in the State of Colorado. Citizens is the parent holding
company that directly or indirectly owns 100 percent of Citizens Insurance
Company of America ("CICA"), Computing Technology, Inc., formerly Continental
Leasing Corporation, Industrial Benefits, Inc. and Insurance Investors, Inc.
Collectively, Citizens and its subsidiaries are referred to herein as the
"Company."
Citizens' principal business, through CICA, is selling selected lines
of individual life insurance. CICA markets its life insurance products primarily
in Third World countries. At December 31, 1994, CICA had approximately $2.1
billion of life insurance in force. The Company's principal executive offices
are located at 400 East Anderson Lane, Austin, Texas 78752. Its telephone number
is (512) 837-7100.
The transactions which give rise to the securities offered hereby are
described in "Transactions with Affiliates" (under "Risk Factors"), and in
"Selling Shareholders." Of the total shares offered hereby, 5,999,647 were
acquired in a private transaction with an affiliated party under which assets
were purchased for, among other things, Class A Common Stock. The other 100,000
shares which may be offered hereby are with respect to an option granted to an
unaffiliated third party.
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RISK FACTORS
The following risk factors, in addition to those discussed elsewhere in
this Prospectus, should be considered carefully in evaluating the Company and
its business.
SIGNIFICANT MARKET OVERHANG. This Prospectus relates to the offering of
6,099,657 shares (the "Shares") of Class A Common Stock, no par value (the
"Class A Common Stock"), of Citizens, Inc. (the "Company") by various selling
shareholders (the "Selling Shareholders"), including Harold E. Riley, Chairman
of the Board of Citizens. See "Selling Shareholders." The Company will bear all
expenses incident to the registration and qualification of the Shares under the
Securities Act of 1933, as amended (the "Securities Act"), and state securities
laws, on behalf of the Selling Shareholders. The Company will not receive any of
the proceeds from the sale of the Shares offered hereby. The total Shares
offered hereby equal approximately 35.9% of the outstanding Class A Common Stock
before the issuance of shares pursuant to the "Pending Acquisitions" and the
"Proposed Offering of 3,500,000 Shares" as described below among these risk
factors. It may be assumed that sales of the shares offered hereby in the public
market could have a depressive effect on the price of the Citizens Class A
Common Stock. Further, the prospect, event without the actual sales, of such
significant numbers of shares being offered in the public market place may have
a depressive effect on the price of the 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. The
closing market price of the Class A Common shares on the date the offering
commenced (May 2, 1994) was $7.75 per share (as reported on the American Stock
Exchange). Gross proceeds raised were $6,414,625 and net proceeds were
approximately $5,400,000. On December 21, 1994, the Company contributed
$5,200,000 to Citizens Insurance Company of America, its wholly-owned
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 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
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following the initial purchase, and a legend to such effect has been 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.
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 Citizens Class A Common Stock. In
addition, it is planned that additional Class A Common Stock of up to
approximately 2.3 million shares will be issued in conjunction with the
acquisition of American Liberty Financial Corporation ("ALFC"), an insurance
holding company. Assuming the ALFC acquisition is consummated, the issuance of
the shares in that transaction as well as the shares in the Regulation S
offering would have the effect of increasing the aggregate number of Class A
common shares outstanding by approximately 34%.
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.
ACQUISITIONS. On December 9, 1994, Citizens announced that it had
signed definitive written agreement for the acquisition of 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 Class A Common Stock for each share of ALFC Common Stock owned and
2.926 shares of 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
Citizens system. The agreement was approved by ALFC's shareholders at a meeting
on September 14, 1995. The transaction was closed and consummated that same
day.
Additionally, on November 28, 1994, Citizens signed a definitive
written agreement for the acquisition of Insurance Investors & Holding Co.
("Investors"), a Peoria, Illinois based insurance holding company. In the
transaction, for each eight shares of Investors Class A or Class B Common Stock,
Investors' shareholders will receive one share of Citizens Class A Common Stock.
The agreement also includes a statutory plan of exchange with Investors'
93%-owned insurance subsidiary, Central Investors Life Insurance Company of
Illinois ("Central"). In the plan of exchange, Central shareholders other than
Investors will receive one Citizens Class A Common share for each four shares
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of Central Common Stock. This agreement provides for the issuance of up to
approximately 171,000 Citizens Class A Common shares. Citizens has not yet filed
a registration statement, nor has a date been set for the special meetings of
the Investors and Central shareholders to approve the transactions.
Although the acquisitions of ALFC and Investors are material to
Citizens, there can be no assurances as to what the ultimate impacts of the
acquisitions will be, nor can there be assurances that the Investors transaction
will be consummated.
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 on 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% 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 licensed 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.
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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.
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 presently, before sale of the shares
pursuant to this Prospectus, 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 Company's
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 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
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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 that of 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.
The Company 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 Citize 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.
The Company 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
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continue. Management is not able to predict the effect of any such regulation of
the business of the Company.
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. See Notes 9 and 11 of "Notes to Consolidated Financial Statements" for the
year ended December 31, 1992 and Note 11 of "Notes to Consolidated Financial
Statements" for the year ended December 31, 1993. 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 the Company as were obtainable from
unaffiliated third parties. The Company 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, Citizens would likely lose a substantial amount of its cash.
At December 31, 1994, the Company 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
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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 the Company does not issue interest sensitive or Universal Life insurance
policies and has only a small block of annuity business.
USE OF PROCEEDS
Since this Prospectus relates to the offering of Shares by the Selling
Shareholders, the Company will not receive any of the proceeds from the sale of
the Shares offered hereby.
SELLING SHAREHOLDERS
The following table sets forth (a) the name, address and the nature of
any position, office or other material relationship with the Company and its
affiliates within the past three years of each Selling Shareholder and (b) the
number of shares owned by the Selling Shareholder, the number of shares being
offered for sale by the Selling Shareholder and the number of shares to be owned
by the Selling Shareholder after the offering of the shares, assuming the sale
of all shares offered by the Selling Shareholder.
11
<PAGE> 14
<TABLE>
<CAPTION>
Beneficial
Beneficial Ownership After
Ownership Before Offering
Offering Number of (If all shares sold)
Name (Number) (%) Shares Offered (Number) (%)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Harold E. Riley 5,543,662(a) 32.6 5,288,175 -0- --
- -------------------------------------------------------------------------------------------------------
Dottie S. Riley 255,487(b) 1.5 255,487 -0- --
- -------------------------------------------------------------------------------------------------------
Rick D. Riley 337,712(c)(d) 2.00 264,484 -0- --
- -------------------------------------------------------------------------------------------------------
Rick D. Riley &
Leeann W. Riley,
Joint Tenants 9,700(c)(d) (e) 9,700 -0- --
- -------------------------------------------------------------------------------------------------------
Rick D. Riley,
Custodian for
Austyn C. Riley,
UGMA TX 21,176(c)(d) (e) 21,176 -0- --
- -------------------------------------------------------------------------------------------------------
Rick D. Riley,
Custodian for
Allyson N. Riley,
UGMA TX 21,176(c)(d) (e) 21,176 -0- --
- -------------------------------------------------------------------------------------------------------
Rick D. Riley,
Custodian for Alyca
Riley, UGMA TX 21,176(c)(d) (e) 21,176 -0- --
- -------------------------------------------------------------------------------------------------------
Stephen Booke
and Jerry Amato 100,000(f) (e) 100,000 -0- --
- -------------------------------------------------------------------------------------------------------
Randall H. Riley 102,894(d)(g) (e) 101,694 -0- --
- -------------------------------------------------------------------------------------------------------
Monique Riley 1,200(h) (e) 1,200 -0- --
- -------------------------------------------------------------------------------------------------------
Dr. Ralph Smith 15,389(d)(i) (e) 9,285 -0- --
- -------------------------------------------------------------------------------------------------------
Bess Smith 6,104(j) (e) 6,104 -0- --
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
TOTAL OFFERED 6,099,657
</TABLE>
(a) Chairman of the Board of the Company. Owns 5,288,175 shares directly
and 255,487 shares indirectly through his spouse, Dottie S. Riley.
(b) Spouse of Harold E. Riley.
12
<PAGE> 15
(c) Son of Harold E. Riley. President of the Company. Owns 264,484 shares
directly, 9,700 shares in joint tenancy with spouse, and 63,528 shares
indirectly as trustee for his three minor children.
(d) Director of the Company.
(e) Less than one percent (1%).
(f) Represents shares underlying an Option Agreement between Booke and the
Company whereby Booke and Amato may purchase up to 100,000 shares at
$2.50 per share through February 8, 1997.
(g) Son of Harold E. Riley. Vice Chairman and Chief Executive Officer of
the Company. Owns 101,694 shares directly, 1,200 shares indirectly
through his spouse, Monique Riley.
(h) Spouse of Randall H. Riley.
(i) Owns 9,285 shares directly and 6,104 shares indirectly through his
spouse, Bess Smith.
(j) Spouse of Dr. Ralph Smith.
PLAN OF DISTRIBUTION
The Shares offered hereby on behalf of the Selling Shareholders are to
be sold from time to time by means of (i) ordinary brokers' transactions, (ii)
block transactions in accordance with the rules of American Stock Exchange, or
(iii) a combination of any such methods of sale in each case at market prices.
In connection therewith, distributors' or sellers' commissions may be paid or
allowed which will not exceed those customary in the types of transactions
involved. Commissions may also be received from purchasers for whom brokers or
dealers act as agents.
EXPERTS
The consolidated financial statements and schedules of the Company as
of December 31,1994 and 1993 and for each of the years in the three-year period
ended December 31, 1994 have been incorporated herein by reference in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, which report is also incorporated herein by reference, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of American Liberty Financial
Corporation and Subsidiaries as of December 31, 1994 and 1993 and for each of
the years in the two-year period ended December 31, 1994, incorporated herein
by reference from American Liberty Financial Corporation's Annual Report on
Form 10-KSB-A, Amendment No. 2, have been audited by Amend, Smith & Co., P.C.,
independent certified public accountants, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance
upon such report given upon the authority of that firm as experts in
accounting and auditing.
13
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses in connection with the registration of the securities will
be paid by the Company. Such expenses are estimated as follows:
<TABLE>
<S> <C>
Registration fee $ 21,656
Legal fees and expenses* 14,000
--------
Accounting fees and expenses* 500
Printing fees* --
Blue sky qualification fees 500
Miscellaneous* --
--------
TOTAL $ 36,656
</TABLE>
- -------------
* Estimated.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Business Corporation Act, Article 109, authorizes a
corporation's board of directors or majority of shareholders to grant indemnity
to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933
(the "Act").
Sections 9.05 through 9.12 of the Bylaws of the Company provide as
follows:
Section 9.05. Indemnification. For purposes of Article IX, a
"Proper Person" means any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, by reason of the fact
that he is or was a director, officer, employee, fiduciary or agent of
the Corporation, or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee, fiduciary or agent
of any foreign or domestic profit or nonprofit corporation or of any
partnership, joint venture, trust, profit or nonprofit unincorporated
association, limited liability company, or other enterprise or employee
benefit plan. The Corporation shall indemnify any Proper Person against
reasonably incurred expenses (including attorneys' fees), judgments,
penalties, fines (including any excise tax assessed with respect to an
employee benefit plan) and amounts paid in settlement reasonably
incurred by him in connection with such action, suit or proceeding if
it is determined
II-1
<PAGE> 17
by the groups set forth in Section 9.08 of this Article that he
conducted himself in good faith and that he reasonably believed (i) in
the case of conduct in his official capacity with the Corporation, that
his conduct was in the Corporation's best interests, or (ii) in all
other cases (except criminal cases), that his conduct was at least not
opposed to the Corporation's best interests, or (iii) in the case of
any criminal proceeding, that he had no reasonable cause to believe his
conduct was unlawful. A Proper Person will be deemed to be acting in
his official capacity while acting as a director, officer, employee or
agent on behalf of this Corporation and not while acting on the
Corporation's behalf for some other entity.
No indemnification shall be made under this Article IX to a
Proper Person with respect to any claim, issue or matter in connection
with a proceeding by or in the right of the Corporation in which the
Proper Person was adjudged liable to the Corporation or in connection
with any proceeding charging that the Proper Person derived an improper
personal benefit, whether or not involving action in an official
capacity, in which he was adjudged liable on the basis that he derived
an improper personal benefit. Further, indemnification under this
Section in connection with a proceeding brought by or in the right of
the Corporation shall be limited to reasonable expenses, including
attorneys' fees, incurred in connection with the proceeding.
Section 9.06. Right to Indemnification. The Corporation shall
indemnify any Proper Person who was wholly successful, on the merits or
otherwise, in defense of any action, suit, or proceeding as to which he
was entitled to indemnification under Section 9.05 of this Article IX
against expenses (including attorneys' fees) reasonably incurred by him
in connection with the proceeding without the necessity of any action
by the Corporation other than the determination in good faith that the
defense has been wholly successful.
Section 9.07. Effect of Termination of Action. The termination
of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent shall
not of itself create a presumption that the person seeking
indemnification did not meet the standards of conduct described in
Section 9.05 of this Article IX. Entry of a judgment by consent as part
of a settlement shall not be deemed an adjudication of liability, as
described in Section 9.06 of this Article IX.
Section 9.08. Groups Authorized to Make Indemnification
Determination. Except where there is a right to indemnification as set
forth in Sections 9.05 or 9.06 of this Article or where indemnification
is ordered by a court in Section 9.09, any indemnification shall be
made by the Corporation
II-2
<PAGE> 18
only as authorized in the specific case upon a determination by a
proper group that indemnification of the Proper Person is permissible
under the circumstances because he has met the applicable standards of
conduct set forth in Section 9.05 of this Article. This determination
shall be made by the board of directors by a majority vote of those
present at a meeting at which a quorum is present, which quorum shall
consist of directors not parties to the proceeding ("Quorum"). If a
Quorum cannot be obtained, the determination shall be made by a
majority vote of a committee of the board of directors designated by
the board of directors, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are
parties to the proceeding may participate in the designation of
directors for the committee. If a Quorum of the board of directors
cannot be obtained and the committee cannot be established, or even if
a Quorum is obtained or the committee is designated and a majority of
the directors constituting such Quorum or committee so directs, the
determination shall be made by (i) independent legal counsel selected
by a vote of the board of directors or the committee in the manner
specified in this Section 9.08 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of
the shareholders.
Section 9.09. Court-Ordered Indemnification. Any Proper Person
may apply for indemnification to the court conducting the proceeding or
to another court of competent jurisdiction for mandatory
indemnification under Section 9.06 of this Article, including
indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that such Proper
Person is fairly and reasonably entitled to indemnification in view of
all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 9.05 of this Article or was adjudged
liable in the proceeding, the court may order such indemnification as
the court deems proper except that if the Proper Person has been
adjudged liable, indemnification shall be limited to reasonable
expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
Section 9.10. Advance of Expenses. Reasonable expenses
(including attorneys' fees) incurred in defending an action, suit or
proceeding as described in Section 9.05 may be paid by the Corporation
to any Proper Person in advance of the final disposition of such
action, suit or proceeding upon receipt of (i) a written affirmation of
such Proper Person's good faith belief that he has met the standards of
conduct prescribed by Section 9.05 of this Article IX, (ii) a written
undertaking, executed personally or on the Proper Person's behalf, to
repay such advances if it is ultimately determined
II-3
<PAGE> 19
that he did not meet the prescribed standards of conduct (the
undertaking shall be an unlimited general obligation of the Proper
Person but need not be secured and may be accepted without reference to
financial ability to make repayment), and (iii) a determination is made
by the proper group (as described in Section 9.08 of this Article IX)
that the facts as then known to the group would not preclude
indemnification. Determination and authorization of payments shall be
made in the same manner specified in Section 9.08 of this Article IX.
Section 9.11. Witness Expenses. The sections of this Article
IX do not limit the Corporation's authority to pay or reimburse
expenses incurred by a director in connection with an appearance as a
witness in a proceeding at a time when he has not been made a named
defendant or respondent in the proceeding.
Section 9.12. Report to Shareholders. Any indemnification of
or advance of expenses to a director in accordance with this Article
IX, if arising out of a proceeding by or on behalf of the Corporation,
shall be reported in writing to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such
action.
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS
- ------- --------
<S> <C>
(1) Underwriting Agreement Not applicable
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession Not applicable
(4) Instruments defining the rights of security holders, including
indentures Not applicable
(5) Opinion re: legality Filed with Amendment No. 1
on or about July 12, 1994
(8) Opinion re: tax matters Not applicable
(12) Statements re: computation of ratios Not applicable
(15) Letter re: unaudited interim financial information Not applicable
(23) (a) Consent of experts - KPMG Peat Marwick LLP Filed herewith
</TABLE>
II-4
<PAGE> 20
<TABLE>
<S> <C>
(b) Consent of counsel - Jones & Keller, P.C. Filed herewith
(c) Consent of experts - Amend, Smith & Co., P.C. Filed herewith
(24) Power of attorney Filed herewith
(see signature pages)
(25) Statement of eligibility of trustee Not applicable
(26) Invitations for competitive bids Not applicable
(27) Financial Data Schedules Not applicable
(28) Information from reports furnished to state insurance
regulatory authorities Not applicable
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) 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 date 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.
(b) 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.
(c) 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-5
<PAGE> 21
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act 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.
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 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.
II-6
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused Amendment No. 6
to this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Austin, State of Texas, on September
22, 1995.
CITIZENS, INC.
By:/s/Mark A. Oliver
---------------------------------------------------
Mark A. Oliver, Executive Vice President,
Secretary/Treasurer and Chief Financial Officer
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 below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/Mark A. Oliver Chairman of the Board September 22, 1995
- --------------------
Harold E. Riley
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver Vice Chairman, Chief Executive September 22, 1995
- --------------------
Randall H. Riley Officer and Director
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver Vice Chairman, Chief Actuary, September 22, 1995
- --------------------
T. Roby Dollar Assistant Secretary and Director
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver President, Chief Administrative September 22, 1995
- --------------------
Rick D. Riley Officer and Director
by Mark A. Oliver,
Attorney in Fact
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/Mark A. Oliver Executive Vice President, September 22, 1995
- --------------------
Mark A. Oliver Secretary/Treasurer and Chief
Financial Officer
Vice President and Controller
- --------------------
Stephen Curtis
Director
- --------------------
Flay F. Baugh
/s/Mark A. Oliver Director September 22, 1995
- --------------------
Joe R. Reneau, M.D.
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver Director September 22, 1995
- --------------------
Steven F. Shelton
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver Director September 22, 1995
- --------------------
Ralph M. Smith. Th.D.
by Mark A. Oliver,
Attorney in Fact
/s/Mark A. Oliver Director September 22, 1995
- --------------------
Timothy T. Timmerman
by Mark A. Oliver,
Attorney in Fact
</TABLE>
<PAGE> 24
INDEX TO EXHIBITS
Exhibit
Number Description Page
- ------ ----------- ----
23(a) Consent of KPMG Peat Marwick LLP
23(b) Consent of Jones & Keller, P.C.
23(c) Consent of Amend, Smith & Co., P.C.
24 Power of Attorney (see signature
page)
<PAGE> 1
[KPMG LOGO] EXHIBIT 23(A)
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-3.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Dallas, Texas
September 22, 1995
<PAGE> 1
EXHIBIT 23(B)
[JONES & KELLER, P.C. LETTERHEAD]
Citizens, Inc.:
We consent to the use of our opinion, which was attached as Exhibit 5
to Amendment No. 1 of the Registration Statement on Form S-3 for Citizens, Inc.,
filed on or about July 12, 1994.
Very truly yours,
/s/ Jones & Keller, P.C.
JONES & KELLER, P.C.
Denver, Colorado
September 22, 1995
<PAGE> 1
EXHIBIT 23(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement,
Amendment No. 6, of Citizens, Inc. on Form S-3 of our report dated February 27,
1995 appearing in the Annual Report on Form 10-KSB-A, Amendment No. 2, of
American Liberty Financial Corporation for the year ended December 31, 1994
and to the reference to us under the heading "Experts" in the Form S-3.
/s/ AMEND, SMITH & CO., P.C.
AMEND, SMITH & CO., P.C.
Oklahoma City, Oklahoma
September 22, 1995
--
