FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
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: 1-11714
CITIZENS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3178765
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
440 Lincoln Street, Worcester, Massachusetts 01653
(Address of principal executive offices)
(Zip Code)
(508) 855-1000
(Registrant's telephone number, including area code)
(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.
Yes [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date: 35,270,800 Shares of Common Stock Outstanding, as of August
1, 1996.
16
Total Number of Pages
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 8 - 13
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 14
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CITIZENS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<S> <C> <C> <C> <C>
(Unaudited) (Unaudited)
Quarter Ended Six Months Ended
(In millions, except per share data) June 30, June 30,
1996 1995 1996 1995
Revenues
Net premiums written $ 205.9 $ 203.7 $ 421.8 $ 414.8
Change in unearned premiums,
net of prepaid reinsurance premiums (5.2) 0.5 6.2 16.6
Net premiums earned 211.1 203.2 415.6 398.2
Net investment income 21.2 20.1 40.8 40.7
Net realized gains on investments 0.3 1.1 15.0 0.2
Other income, net 0.6 0.1 1.1 0.7
Total revenues 233.2 224.5 472.5 439.8
Expenses
Losses and loss adjustment expenses 164.0 140.4 319.5 286.1
Policy acquisition and other operating expenses 52.4 53.2 106.2 107.6
Policyholders' dividends 1.8 1.6 3.6 2.7
Total expenses 218.2 195.2 429.3 396.4
Income before federal income taxes 15.0 29.3 43.2 43.4
Federal income tax expense 2.9 5.3 8.6 7.8
Net income $ 12.1 $ 24.0 $ 34.6 $ 35.6
Per share data
Net income $ 0.34 $ 0.64 $ 0.97 $ 0.93
Dividends declared to shareholders $ 0.05 $ 0.05 $ 0.10 $ 0.10
Weighted average shares outstanding 35.6 36.1 35.7 36.1
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CITIZENS CORPORATION
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
(Unaudited)
(In millions, except per share data) June 30, December 31,
1996 1995
Assets
Investments:
Debt securities available-for-sale, at fair value
(Amortized cost of $1,314.9 and $1,247.5) $ 1,323.2 $ 1,289.5
Equity securities available-for-sale, at fair value
(Cost of $123.6 and $149.6) 164.3 189.5
Other investments, at fair value (Cost of $9.0 and $9.6) 13.3 11.8
Total investments 1,500.8 1,490.8
Cash and cash equivalents 36.3 59.1
Accrued investment income 26.3 25.1
Premiums and notes receivable (less allowance for
doubtful accounts of $0.8 and $0.8) 146.1 141.0
Reinsurance recoverable on paid and unpaid losses 549.6 521.8
Prepaid reinsurance premiums 55.0 54.5
Deferred policy acquisition expenses 54.5 52.2
Deferred federal income taxes 39.8 29.7
Other assets 88.2 96.6
$ 2,496.6 $ 2,470.8
Liabilities and Shareholders' Equity
Liabilities:
Reserve for losses and loss adjustment expenses $ 1,327.6 $ 1,291.6
Unearned premiums 358.1 351.4
Other liabilities 127.8 145.0
Total liabilities 1,813.5 1,788.0
Shareholders' Equity:
Common stock, $0.01 par value per share; authorized 100.0 million shares;
36.1 million shares issued 0.4 0.4
Additional paid-in capital 156.1 156.1
Retained earnings 506.6 475.5
Unrealized appreciation on investments, net of
deferred federal income taxes 34.7 54.7
Treasury stock, at cost (0.8 million shares and 0.2 million shares) (14.7) (3.9)
Total shareholders' equity 683.1 682.8
$ 2,496.6 $ 2,470.8
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CITIZENS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<S> <C> <C>
(Unaudited)
Six Months Ended
(In millions) June 30,
1996 1995
Preferred stock
Balance at beginning of period $ - $ 100.0
Redemption of preferred stock - (100.0)
Balance at end of period - -
Common stock
Balance at beginning and end of period 0.4 0.4
Additional paid-in capital
Balance at beginning and end of period 156.1 156.1
Retained earnings
Balance at beginning of period 475.5 409.8
Net income 34.6 35.6
Dividends declared to shareholders (3.5) (5.6)
Balance at end of period 506.6 439.8
Unrealized appreciation (depreciation) on investments, net
Balance at beginning of period 54.7 (20.4)
(Depreciation) appreciation during the period (30.8) 76.9
Benefit (provision) for deferred federal income taxes 10.8 (27.0)
Balance at end of period 34.7 29.5
Treasury stock
Balance at beginning of period (3.9) -
Shares purchased at cost (10.8) -
Balance at end of period (14.7) -
Total shareholders' equity $ 683.1 $ 625.8
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CITIZENS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
(Unaudited)
Six Months Ended
(In millions) June 30,
1996 1995
Cash was provided by (used for):
Operating Activities
Net income $ 34.6 $ 35.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Net realized gains on investments (15.0) (0.2)
Deferred federal income tax provision (benefit) 0.7 (0.6)
Change in assets and liabilities:
Deferred policy acquisition expenses (2.3) (2.9)
Net premiums receivable, net of reinsurance premiums payable (2.2) (22.0)
Unearned premiums, net of prepaid reinsurance premiums 6.2 16.6
Reserve for losses and loss adjustment expenses,
net of reinsurance recoverable 8.2 26.4
Other, net (16.2) (4.6)
Net cash provided by operating activities 14.0 48.3
Investing Activities
Proceeds from sale of available-for-sale debt securities 241.9 227.4
Proceeds from available-for-sale debt securities maturing or called 90.1 26.6
Proceeds from held-to-maturity debt securities maturing or called - 2.8
Proceeds from sale of available-for-sale equity securities
and other investments 64.4 15.5
Purchases of available-for-sale debt securities (401.6) (251.4)
Purchases of available-for-sale equity securities and other investments (22.0) (43.4)
Change in net receivable from securities transactions not settled 5.9 (13.0)
Other investing activities, net (1.2) (1.7)
Net cash used for investing activities (22.5) (37.2)
Financing Activities
Dividends paid to shareholders (3.5) (5.6)
Redemption of Series A preferred stock - (100.0)
Treasury stock purchased, at cost (10.8) -
Net cash used for financing activities (14.3) (105.6)
Net decrease in cash and cash equivalents (22.8) (94.5)
Cash and cash equivalents at beginning of period 59.1 141.4
Cash and cash equivalents at end of period $ 36.3 $ 46.9
The accompanying notes are an integral part of these financial statements.
</TABLE>
CITIZENS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Earnings per Common Share
Earnings per common share for the quarters ended June 30, 1996
and 1995, are based upon weighted average common shares
outstanding of 35.6 and 36.1 million, respectively. Net income
available to common shareholders for the quarter ended June 30,
1995, was reduced by $1.0 million for dividends on preferred
stock. Earnings per common share for the six months ended June
30, 1996 and 1995, are based upon weighted average common shares
outstanding of 35.7 million and 36.1 million, respectively. Net
income available to common shareholders for the six months ended
June 30, 1995, was reduced by $2.0 million for dividends on
preferred stock. On July 26, 1995, the Board of Directors of
Citizens Corporation ("the Company") authorized the repurchase of
up to 0.5 million shares, or slightly more than one percent of
its outstanding common stock. On February 27, 1996, and June 7,
1996, the Board of Directors authorized the repurchase of an
additional 0.3 million shares and 1.0 million shares,
respectively, of common stock, for a total authorization of 1.8
million shares or slightly less than five percent of its issued
common stock. During the quarter ended June 30, 1996, the Company
purchased 0.5 million shares for a cumulative total of 0.8
million shares purchased since the implementation of the
repurchase program.
MANAGEMENT'S REPRESENTATION
In the opinion of management, the financial statements reflect
all adjustments of a normal recurring nature necessary for a fair
presentation of the interim periods. Certain reclassifications
have been made to the 1995 financial statements in order to
conform to the 1996 presentation. Interim results are not
necessarily indicative of results expected for the entire year.
These financial statements should be read in conjunction with the
Company's 1995 Annual Report to Shareholders, as filed on Form 10-
K to the Securities and Exchange Commission.
PART I - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The results of operations for Citizens Corporation and
subsidiaries ("the Company") include the accounts of Citizens
Corporation ("Citizens"), a non-insurance holding company, and
its wholly-owned subsidiaries, Citizens Insurance Company of
America, Citizens Insurance Company of Ohio, and Citizens
Insurance Company of the Midwest (collectively, "Citizens
Operations"), and Citizens Management Inc., which is wholly-owned
by Citizens Insurance Company of America.
Results of Operations
Net income
Net income for the quarter ended June 30, 1996, was $12.1 million,
or $0.34 per share, compared to $24.0 million, or $0.64 per
share, for the quarter ended June 30, 1995. Excluding realized
gains and losses, net of taxes, net income decreased $11.3
million, to $11.9 million for the quarter ended June 30, 1996.
The decrease in net income is primarily attributable to a $23.6
million, or 16.8% increase in losses and loss adjustment expenses
(LAE) to $164.0 million, resulting primarily from increased
catastrophe losses. Catastrophe losses were $15.9 million in the
quarter ended June 30, 1996, compared to none in the quarter
ended June 30, 1995. Net investment income increased $1.1
million, or 5.5%, to $21.2 million, primarily as a result of an
increase in average invested assets and a shift from equity
securities to higher yielding debt instruments which was
completed in the first quarter of 1996. Federal income tax
expense decreased $2.4 million, to $2.9 million, while the
effective tax rate increased modestly from 18.1% in the quarter
ended June 30, 1995 to 19.3% for the same period in 1996.
Net income for the six months ended June 30, 1996, was $34.6
million , or $0.97 per share, compared to $35.6 million, or
$0.93 per share, for the six months ended June 30, 1995.
Excluding realized gains and losses, net of taxes, net income
decreased $10.7 million, to $24.8 million for the six months
ended June 30, 1996. The decrease in net income is primarily
attributable to a $33.4 million, or 11.7% increase in losses and
LAE to $319.5 million for the six months ended June 30, 1996,
resulting primarily from increased catastrophe losses.
Catastrophe losses were $20.7 million in the six months ended
June 30, 1996, compared to none during the six months ended June
30, 1995. The increase in catastrophes was partially offset by
favorable claims experience in the personal automobile line.
Federal income tax expense increased $0.8 million to $8.6
million, while the effective tax rate increased from 17.8% in the
six months ended June 30, 1995 to 19.9% for the same period in
1996.
Revenues
Net premiums earned increased $7.9 million, or 3.9%, to $211.1
million for the quarter ended June 30, 1996, resulting from $3.5
million and $4.4 million increases in the Company's personal and
commercial segments, respectively. Net premiums earned increased
$17.4 million, or 4.4%, to $415.6 million for the six months
ended June 30, 1996, resulting from increases of $9.3 million and
$8.1 million increases in the Company's personal and commercial
segments, respectively. This growth is due to increases in net
premiums earned of $5.1 million in Ohio and Indiana resulting
from expansion in these states and to price increases in all
major lines except the workers' compensation line. The growth is
partially offset by rate reductions in the workers' compensation
line where competitive conditions continue to increase in
Michigan.
Segment Results
Personal segment
Personal segment premiums represented 65.0% and 65.8% of total
net premiums earned for the quarters ended June 30, 1996 and
1995, respectively, and 65.5% and 66.0% of total net premiums
earned for the six months ended June 30, 1996 and 1995,
respectively.
<TABLE>
<S> <C> <C> <C> <C>
For the Periods Ended Three Months Six Months
June 30, (in millions) 1996 1995 1996 1995
Net premiums earned $ 137.2 $ 133.7 $ 272.3 $ 263.0
Losses and loss adjustment expenses 104.2 94.2 211.6 198.8
Policy acquisition and other underwriting expenses 36.2 36.5 72.6 72.8
Underwriting (loss) profit $ (3.2) $ 3.0 $ (11.9) $ (8.6)
</TABLE>
Personal segment net premiums earned increased $3.5 million, or
2.6%, to $137.2 million for the quarter ended June 30, 1996.
Personal segment net premiums earned increased $9.3 million, or
3.5%, to $272.3 million for the six months ended June 30, 1996.
This growth is attributable to price increases in the personal
automobile and homeowners lines. The growth is partially offset
by a 1.6% decrease in policies in force in the personal
automobile line since December 31, 1995, attributable to
continued strong competition in Michigan.
The personal segment underwriting loss was $3.2 million for the
quarter ended June 30, 1996, compared to a $3.0 million
underwriting profit for the comparable period in 1995. The
decrease to an underwriting loss resulted primarily from an
increase in catastrophe losses of $13.6 million during the second
quarter of 1996. The Company did not incur any catastrophe
losses during the second quarter of 1995. This was partially
offset by favorable claims activity in both current and prior
accident years in the personal automobile line attributable to
improvements in severity. Policy acquisition costs and other
underwriting expenses decreased $0.3 million, to $36.2 million
due to reductions in employee related expenses and contingent
commissions, partially offset by the effect of increases in
earned premium.
The personal segment underwriting loss was $11.9 million and $8.6
million for the six months ended June 30, 1996 and 1995,
respectively. The decline in underwriting results reflects the
impact of $17.7 million in catastrophe losses in 1996 compared to
none during the first half of 1995. This was partially offset by
favorable claims activity in both current and prior accident
years in the personal automobile line attributable to
improvements in severity. Policy acquisition and other
underwriting expenses decreased $0.2 million, to $72.6 million
due to reductions in employee related expenses and contingent
commissions, partially offset by the effect of increases in
earned premium.
Commercial segment
Commercial segment premiums represented 35.0% and 34.2% of total
net premiums earned for the quarters ended June 30, 1996 and
1995, respectively, and 34.5% and 34.0% of total net premiums
earned for the six months ended June 30, 1996 and 1995,
respectively.
<TABLE>
<S> <C> <C> <C> <C>
For the Periods Ended Three Months Six Months
June 30, (in millions) 1996 1995 1996 1995
Net premiums earned $ 73.9 $ 69.5 $ 143.3 $ 135.2
Losses and loss adjustment expenses 59.8 46.2 107.9 87.3
Policy acquisition and other underwriting expenses 16.2 16.7 33.6 34.8
Policyholders' dividends 1.8 1.6 3.6 2.7
Underwriting (loss) profit $ (3.9) $ 5.0 $ (1.8) $ 10.4
</TABLE>
Commercial segment net premiums earned increased $4.4 million, or
6.3%, to $73.9 million for the quarter ended June 30, 1996.
Commercial segment net premiums earned increased $8.1 million, or
6.0%, to $143.3 million for the six months ended June 30, 1996.
The growth primarily reflects a 5.8% increase in policies in
force in the commercial multiple peril line since December 31,
1995. This growth is partially offset by rate reductions in the
workers' compensation line as a result of continuing competition
in this line in Michigan. Rates in the workers' compensation
line were decreased 8.5%, 7.0%, and 6.4% effective May 1, 1995,
December 1, 1995, and June 1, 1996, respectively.
The commercial segment underwriting loss was $3.9 million in the
quarter ended June 30, 1996, compared to an underwriting profit
of $5.0 million in the quarter ended June 30, 1995. The decline
in underwriting results is due primarily to increased loss
frequency in the commercial multiple peril line and also to a
$2.3 million increase in catastrophe losses in this line. The
Company did not incur any catastrophe losses during the second
quarter of 1995. Losses and LAE in the commercial multiple peril
line increased $6.0 million, or 44.4%, to $19.5 million. Policy
acquisition and other underwriting expenses decreased $0.5
million, or 3.0%, to $16.2 million due to reductions in employee
related expenses and contingent commissions, partially offset by
the effect of increases in earned premium.
The commercial segment underwriting loss was $1.8 million in the
six months ended June 30, 1996, compared to an underwriting
profit of $10.4 million in the six months ended June 30, 1995.
The decline in underwriting results reflects an increase in
claims activity in the commercial multiple peril line.
Commercial multiple peril losses and LAE increased $12.5 million,
or 63.1%, to $32.3 million in the six months ended June 30, 1996.
In addition, catastrophe losses were $3.0 million in this segment
during the six months ended June 30, 1996. There were no
catastrophe losses in this segment during the comparable period
of 1995. Policy acquisition and other underwriting expenses
decreased $1.2 million, or 3.4%, to $33.6 million due to
reductions in employee related expenses and contingent
commissions, partially offset by the effect of increases in
earned premium.
Reserve for Losses and Loss Adjustment Expenses
The Company regularly updates its reserve estimates as new
information becomes available and further events occur which may
impact the resolution of unsettled claims. Changes in prior
reserve estimates are reflected in results of operations in the
year such changes are determined to be needed and recorded. The
table below provides a reconciliation of the beginning and ending
reserve for unpaid losses and LAE as follows:
<TABLE>
<S> <C> <C>
For the periods ended June 30, (in millions) 1996 1995
Reserve for losses and LAE, beginning of period $ 1,291.6 $ 1,196.6
Reserve for losses and LAE, net of reinsurance recoverable:
Provision for insured events of the current period 333.8 293.1
Decrease in provision for insured events of prior years (14.3) (7.0)
Total incurred losses and LAE 319.5 286.1
Payments, net of reinsurance recoverable:
Losses and LAE attributable to insured events of current period 149.3 119.5
Losses and LAE attributable to insured events of prior years 155.2 142.6
Total payments 304.5 262.1
Change in reinsurance recoverable on unpaid losses 21.0 2.6
Reserve for losses and LAE, end of period $ 1,327.6 $ 1,223.2
</TABLE>
As part of an ongoing process, the reserves have been re-
estimated for all prior accident years and were decreased by
$14.3 million, and $7.0 million for the six months ended June 30,
1996 and 1995, respectively. The increase in favorable reserve
development in 1996 primarily reflects reduced medical costs in
the personal automobile line.
Investment Results
Net investment income before taxes was $21.2 million and $20.1
million for the quarters ended June 30, 1996 and 1995,
respectively. This increase is primarily attributable to an
increase in average invested assets and a higher level of debt
securities in the portfolio. The average yield on debt
securities remained constant at 6.2% during the quarter ended
June 30, 1996 as compared to the quarter ended June 30, 1995.
Net investment income after taxes was $17.9 million and $17.0
million for the quarters ended June 30, 1996 and 1995,
respectively.
Net investment income before taxes was $40.8 million and $40.7
million for the six months ended June 30, 1996 and 1995,
respectively. The increase in average invested assets was offset
by a decrease in the average yield on debt securities from 6.2%
for the six months ended June 30, 1995, to 6.0% for the
comparable 1996 period. Net investment income after taxes was
$34.1 million and $34.2 million for the six months ended June 30,
1996 and 1995, respectively.
Investment Portfolio
The Company's investment portfolio increased $10.0 million, from
$1,490.8 million at December 31, 1995, to $1,500.8 million at
June 30, 1996. Debt securities increased $33.7 million, to
$1,323.2 million, from $1,289.5 million, and represented 88.2%
and 86.5% of the carrying value of all investments at June 30,
1996, and December 31, 1995, respectively. This increase is
consistent with the Company's strategy of increasing the level
of debt securities in the portfolio. This was accomplished by
reducing the level of equities in the portfolio, which resulted
in a $25.2 million decrease in equity securities to $164.3
million in the first six months of 1996. Tax-exempt securities
increased $32.3 million, to $950.6 million, from $918.3 million
during the period. Tax-exempt securities represented 71.8% of
total debt securities at June 30, 1996, compared to 71.2% at
December 31, 1995. This increase reflects the Company's efforts
to maximize after-tax investment income.
Net unrealized appreciation in the investment portfolio at June
30, 1996 was $53.3 million compared to $84.1 million at December
31, 1995. Unrealized depreciation in the six months was $33.7
million for bonds, and unrealized appreciation on equity
securities and other investments was $2.9 million.
Liquidity and Capital Resources
Liquidity describes the ability of a company to generate
sufficient cash flows to meet the cash requirements of business
operations. As a holding company, Citizens' primary source of
cash for payment of dividends to its shareholders is dividends
from its insurance subsidiaries, which are subject to limitations
imposed by state regulators. Such limitations require that
dividends be paid only out of statutory earned surplus
(unassigned funds) and a restriction on the payment of
"extraordinary" dividends without prior approval of the state
authorities.
Underwriting and investing, typically the two distinct, but not
separate operations in an insurance company, are the sources of
cash for Citizens Insurance. The primary sources of cash are
premiums collected, investment income and maturing investments.
Primary cash outflows are paid losses and LAE, policy acquisition
expenses, other underwriting expenses and purchases of
investments. Cash outflows related to claim losses and LAE can
be variable because of uncertainties surrounding settlement dates
for unpaid losses and the potential for large losses either
individually or in the aggregate. Accordingly, the Company's
strategy is to monitor available cash and short-term investment
balances in relation to projected cash needs by matching the
maturities of its investments to expected payments of current and
long-term liabilities.
Net cash provided by operating activities for the six months
ended June 30, 1996, was $14.0 million compared to $48.3 million
in the comparable prior year period. This decrease is primarily
attributable to the increase in underwriting losses during the
first six months of 1996 which resulted in an increase in claims
payments.
Net cash used for investing activities by the Company was $22.5
million for the first six months of 1996 compared to net cash
used of $37.2 million for the comparable prior year period. The
decrease in cash used for investing activities is primarily
attributable to the reduction in cash flow from operations.
Net cash used for financing activities by the Company was $14.3
million and $105.6 million, for the first six months of 1996 and
1995, respectively. This decrease in net cash used for financing
activities reflects the redemption of the Series A Preferred
Stock for $100.0 million from The Hanover Insurance Company on
June 30, 1995, and is partially offset by the $10.8 million of
treasury stock purchased in 1996.
Shareholders' equity was $683.1 million at June 30, 1996, or
$19.36 per common share, compared to $682.8 million at December
31, 1995, or $19.04 per common share. Shareholders' equity
reflects a decrease of $20.0 million due to a decrease, net of
deferred income taxes, in the fair values of available-for-sale
debt securities. Changes in shareholders' equity related to the
unrealized values of underlying portfolio investments will
continue to be volatile as market prices of debt securities
fluctuate with changes in the interest rate environment.
The Company expects to continue to pay dividends in the
foreseeable future. However, payment of future dividends is
subject to the Board of Directors' approval and is dependent,
among other things, upon earnings and the financial condition of
the Company.
Based on current trends, the Company expects to continue to
generate sufficient positive operating cash to meet all short-
term and long-term cash requirements. The Company maintains a
high degree of liquidity within the investment portfolio in
fixed maturity investments, common stock and short-term
investments.
PART II - OTHER INFORMATION
ITEM 4
Submission of Matters to a Vote of Security Holders
The registrant's annual shareholders' meeting was held on May 21,
1996, all seven persons nominated for directors by management
were named in proxies for the meeting which were solicited
pursuant to Regulation 14A of the Securities Exchange Act of
1934. The following individuals were elected to serve a one year
term:
VOTES FOR WITHHELD
James A. Cotter, Jr. 35,542,339 42,795
Neal J. Curtin 35,542,039 43,095
Dona Scott Laskey 35,541,939 43,195
James R. McAuliffe 35,528,239 56,895
John F. O'Brien 35,528,239 56,895
Theodore J. Rupley 35,530,439 54,695
Eric A. Simonsen 35,528,139 56,995
Shareholders ratified the appointment of Price Waterhouse LLP as
the Independent Public Accountants of the Company for 1996: for
35,565,956; against 6,600; withheld 12,578.
ITEM 6
Exhibits and Reports on Form 8-K
(a) Exhibits
EX-11 Statement regarding computation of per share earnings
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
On May 2, 1996, a report on Form 8-K was filed reporting under
Item 5, Other Events, the Registrant's announcement that
second quarter results will be impacted by an estimated $14.0
million in catastrophe losses.
On June 7, 1996, a report on Form 8-K was filed reporting
under Item 5, Other Events, the Registrant's announcement that
its Board of Directors had authorized the repurchase of an
additional 1.0 million shares of common stock. The board has
authorized the repurchase of 1.8 million shares since July of
1995.
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 CORPORATION
Registrant
Dated August 12, 1996 /s/ John F. O'Brien
John F. O'Brien
President and Chief Executive Officer
Dated August 12, 1996 /s/ James R. McAuliffe
James R. McAuliffe
Vice President
Dated August 12, 1996 /s/ Eric A. Simonsen
Eric A. Simonsen
Vice President, Chief Financial Officer,
and Principal Accounting Officer
<TABLE>
Exhibit 11
CITIZENS CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
For the Periods Ended June 30, 1996 and 1995
(Unaudited)
<S> <C> <C> <C> <C>
(In millions, except per common share data)
Quarter Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Primary Net Income Per Common Share
Net income $ 12.1 $ 24.0 $ 34.6 $ 35.6
Preferred dividend - 1.0 - 2.0
Net income available to common shareholders $ 12.1 $ 23.0 $ 34.6 $ 33.6
Net income per share available to common shareholders $ 0.34 $ 0.64 $ 0.97 $ 0.93
Average shares outstanding 35.6 36.1 35.7 36.1
Net shares to be issued upon exercise of dilutive
stock options after applying the treasury stock method - - - -
Adjusted shares outstanding 35.6 36.1 35.7 36.1
Fully Diluted Net Income Per Common Share
Net income $ 12.1 $ 24.0 $ 34.6 $ 35.6
Preferred dividend - 1.0 - 2.0
Net income available to common shareholders $ 12.1 $ 23.0 $ 34.6 $ 33.6
Net income per share available to common shareholders $ 0.34 $ 0.64 $ 0.97 $ 0.93
Average shares outstanding 35.6 36.1 35.7 36.1
Net shares to be issued upon exercise of dilutive
stock options after applying the treasury stock method - - - -
Adjusted shares outstanding 35.6 36.1 35.7 36.1
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1323
<DEBT-CARRYING-VALUE> 1315
<DEBT-MARKET-VALUE> 1323
<EQUITIES> 164
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1501
<CASH> 36
<RECOVER-REINSURE> 10
<DEFERRED-ACQUISITION> 55
<TOTAL-ASSETS> 2497
<POLICY-LOSSES> 1328
<UNEARNED-PREMIUMS> 358
<POLICY-OTHER> 3
<POLICY-HOLDER-FUNDS> 7
<NOTES-PAYABLE> 0
0
0
<COMMON> 0
<OTHER-SE> 683
<TOTAL-LIABILITY-AND-EQUITY> 2497
416
<INVESTMENT-INCOME> 41
<INVESTMENT-GAINS> 15
<OTHER-INCOME> 1
<BENEFITS> 320
<UNDERWRITING-AMORTIZATION> 81
<UNDERWRITING-OTHER> 29
<INCOME-PRETAX> 43
<INCOME-TAX> 8
<INCOME-CONTINUING> 35
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
<RESERVE-OPEN> 1292
<PROVISION-CURRENT> 334
<PROVISION-PRIOR> (14)
<PAYMENTS-CURRENT> 149
<PAYMENTS-PRIOR> 155
<RESERVE-CLOSE> 1328
<CUMULATIVE-DEFICIENCY> (20)
</TABLE>
