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