UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
November 2, 1998
CITIZENS CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 1-11714 04-3178765
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(State or other jurisdic- (Commission File Number) (I.R.S. Employer
tion of Incorporation) I.D. Number)
440 Lincoln Street, Worcester, Massachusetts 01653
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(Address of Principal Executive Offices)
(Zip Code)
(508) 855-1000
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(Registrant's Telephone Number including area code)
Page 1 of 7 pages
Exhibit Index on page 4
Item 5. Other Events.
On October 29, 1998, Citizens Corporation announced
its financial results for the three months ended
September 30, 1998. A copy of the press release is
attached as Exhibit 99 and is incorporated herein by
reference.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE `SAFE
HARBOR' PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Forward-Looking Statements
The Company wishes to caution readers that the following
important factors, among others, in some cases have
affected and in the future could affect, the Company's
actual results and could cause the Company's actual
results for 1998 and beyond to differ materially from
those expressed in any forward-looking statements made
by, or on behalf of, the Company. When used in the
attached press release, words "believes," "anticipated,"
"expects" and similar expressions are intended to
identify forward-looking statements. See "Important
Factors Regarding Forward-Looking Statements" filed as
Exhibit 99.1 to the Company's 1997 Annual Report to
Shareholders.
Factors that may cause actual results to differ
materially from those contemplated or projected,
forecast, estimated or budgeted in such forward looking
statements include among others, the following
possibilities: (i) adverse catastrophe experience and
severe weather; (ii) adverse loss development for events
the Company insured in prior years; (iii) heightened
competition, including the intensification of price
competition, the entry of new competitors, and the
introduction of new products by new and existing
competitors; (iv) adverse state and federal legislation,
including decreases in rates, limitations on premium
levels, increases in minimum capital and reserve
requirements, benefit mandates, limitations on the
ability to manage care and utilization, liabilities
related to tobacco products, and tax treatment of
insurance products; (v) changes in interest rates causing
a reduction of investment income or in the market value
of interest rate sensitive investments; (vi) failure to
obtain new customers, retain existing customers or
reductions in policies in force by existing customers;
(vii) higher service, administrative, or general expense
due to the need for additional advertising, marketing,
administrative or management information systems
expenditures; (viii) loss or retirement of key
executives; (ix) increases in medical costs, including
increases in utilization, costs of medical services,
pharmaceuticals, durable medical equipment and other
covered items; (x) termination of provider contracts or
renegotiation at less cost-effective rates or terms of
payment; (xi) changes in the Company's liquidity due to
changes in asset and liability matching; (xii)
restrictions on insurance underwriting, based on certain
criteria; (xiii) adverse changes in the ratings obtained
by independent rating agencies such as Moody's, Standard
and Poors and A.M. Best; and (xiv) uncertainty related to
the Year 2000 Issue.
Item 7. Financial Statements and Exhibits.
Exhibit 99 Press Release dated October 29, 1998,
announcing Citizens Corporation third quarter financial
results.
SIGNATURES
Pursuant to the requirements of the Securities and
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
CITIZENS
CORPORATION
By:/s/ Edward J. Parry III
------------------------
Edward J. Parry III
Vice President,Chief
Financial Officer, and
Treasurer
Date: November 2, 1998
Exhibit Index
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Exhibit 99 Press Release dated October 29, 1998,announcing
Citizens Corporation third quarter financial
results.
Exhibit 99
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CITIZENS CORPORATION REPORTS
THIRD QUARTER OPERATING INCOME OF $0.37 PER SHARE
WORCESTER, Mass., October 29, 1998 - Citizens
Corporation (NYSE: CZC) today reported third quarter net
operating income of $13.0 million, or $0.37 per share,
compared to $12.2 million, or $0.35 per share in 1997.
Net operating income excludes net realized investment
gains and losses and other non-recurring gains and
charges, net of taxes.
Growth in earned premium and lower expenses more
than offset the adverse impact of increased catastrophe
losses of $18.6 million in the quarter, compared to $9.1
million in the same year earlier period. Year-to-date
catastrophe losses of $47.3 million at September 30,
represented the worst catastrophe experience in any
single year of Citizens' history.
Net operating income for nine months was $43.6
million, or $1.24 per share, compared to $45.7 million,
or $1.30 per share
Third quarter net income was $30.0 million, or $0.85
per share, up from $17.3 million, or $0.50 per share in
1997. Net income for nine months was $65.0 million, or
$1.85 per share, up from $62.3 million, or $1.77 per
share in 1997.
On October 27, Allmerica Financial Corporation
(NYSE: AFC) announced that it, or one of its subsidiaries
will make a tender offer of $29 per share for the 5.9
million outstanding common shares, or 16.8 percent
minority interest of Citizens which it does not already
own.
Operating Results
Net premiums earned increased to $220.8 million for
the third quarter of 1998, from $214.6 million last year.
Net earned premium excluding workers' compensation
increased 5.5 percent; rate cuts in the workers'
compensation line resulted in a 16.6percent decline in
workers' compensation premium. Through nine months, net
premiums earned were $659.2 million, compared to $634.6
million in the same period last year. Growth in earned
premiums and a decrease in underlying expenses were
offset by increased catastrophe losses.
Loss and loss adjustment expenses for the third
quarter were $180.9 million and $171.2 million, in 1998
and 1997, respectively. Pretax catastrophe losses
included were $18.6 million and $9.1 million,
respectively. Two weather-related events centered in
Michigan added 8.4 points to the combined ratio for the
quarter, bringing the nine month combined ratio to 103.5.
Policy acquisition and other underwriting
expenses were $53.3 million for the third quarter of
1998, compared to $55.5 million last year, due primarily
to lower employee-related costs. The expense ratio for
the third quarter improved to 24.1 in 1998, from 25.9 in
the same 1997 period. Through nine months, expenses were
$166.8 million and $168.0 million in 1998 and 1997,
respectively. The nine-month expense ratio was 25.3,
down from 26.5 reported for nine months last year.
Investment Results
Third quarter net investment income was $25.1
million, compared to $25.2 million in the same 1997
period. Through nine months, net investment income was
$75.8 million, and $74.9 million in 1998 and 1997,
respectively.
After-tax net realized investment gains were $17.0
million for the third quarter of 1998, compared to $5.4
million of after-tax net realized losses for the third
quarter of 1997. After-tax net realized investment gains
through the first nine months of 1998 were $21.4 million,
compared to $17.8 million in 1997. Realized gains
principally related to the sale of appreciated equities.
Statutory Combined Ratio
Citizens' statutory combined ratio was 105.1 for the
third quarter of 1998, basically unchanged from the 105.0
reported for the third quarter of 1997. Catastrophe-
related losses in the 1998 quarter added 8.4 points to
the combined ratio, compared to 4.2 points for the same
quarter last year. Through the first nine months of both
1998 and 1997, the statutory combined ratio was 103.5.
Catastrophe-related losses added 7.2 points to the
combined ratio through the first three quarters of 1998,
compared to 2.8 points for the same period last year.
Statutory combined ratios include policyholders'
dividends.
Balance Sheet
At the close of the third quarter, shareholders'
equity was $913.6 million, or $25.93 per share, compared
to $872.9 million, or $24.75 per share at December 31,
1997. Excluding the impact of SFAS No. 115, book value
was $23.79 per share at September 30, 1998, compared to
$22.15 per share at December 31, 1997.
Interim information is unaudited.
Citizens Corporation is the holding company for
Citizens Insurance Company of America, a leading
underwriter of personal and commercial property and
casualty insurance in the Midwest. Citizens is a
subsidiary of Allmerica Financial Corporation (NYSE:
AFC), the holding company for a diversified group of
insurance and financial services companies based in
Worcester, Mass.
-30-
CONTACTS: Investors Media
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Jean Peters Michael F. Buckley
(508) 855-3599 (508) 855-3099
AF-37
10/29/1998
CITIZENS CORPORATION
(in millions, except per share data)
<TABLE>
<S> <C> <C>
Quarter ended September 30,
1998 1997
--------------------------
Net income * $ 30.0 $ 17.3
Net income per share $ 0.85 $ 0.50
Weighted average shares 35.2 35.3
</TABLE>
* Results for the third quarter of 1998 included $17.0 million of
after-tax net realized investment gains. Third quarter 1997 results
included $5.4 million of after-tax net realized investment gains.
Through September 30, results in 1998 included $21.4 million of after-
tax net realized investment gains. Results for the first nine months
of 1997 included $17.8 million of after-tax net realized investment
gains and a $1.2 million restructuring charge, net of taxes.
The impact of these items is demonstrated below in the
reconciliation from net operating income to net income per share:
<TABLE>
<S> <C> <C>
Quarter ended September 30,
1998 1997
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Net operating income $ 0.37 $ 0.35
Net realized gains on investments,
net of applicable federal income 0.48 0.15
taxes
Other, net of taxes - -
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Net income $ 0.85 $ 0.50
===========================
All figures reported are unaudited and are in accordance with
generally accepted accounting principles.
</TABLE>
