10-K: Citizens Inc. Reports Strong 2025 Growth, Strategic Shifts

Citizens, Inc. announced a second consecutive year of total premium revenue growth in 2025, driven by domestic insurance sales and strategic initiatives, despite increased international endowment maturities.

Summary

• Net income before federal income tax increased to $17.5 million in 2025 from $15.0 million in 2024.
• Total revenues increased by $10.6 million, driven by premium growth, improved investment gains, higher net investment income, and increased other income.
• Total benefits and expenses increased by $8.1 million, primarily due to a $6.4 million increase in insurance benefits paid, partially offset by a decrease in future policy benefit reserves and policyholder liability remeasurement loss.
• Total direct insurance in force reached a record $5.4 billion at December 31, 2025.
• Issued $1.1 billion in new insurance in 2025, the second highest amount ever in a year.
• Direct first-year premiums increased 16% to $38.3 million in 2025, with the Domestic Insurance segment growing 23%.
• The company reorganized its reporting structure from Life Insurance and Home Service Insurance to Domestic Insurance and International Insurance segments, effective December 31, 2025.
• International Insurance segment income before federal income tax decreased to $14.4 million in 2025 from $23.5 million in 2024, primarily due to high matured endowments.
• Domestic Insurance segment income before federal income tax significantly increased to $12.1 million in 2025 from $1.9 million in 2024, driven by increased premiums and lower insurance benefits due to better experience.
• A jury found Citizens should pay approximately $1.3 million to former consultants and the trial court awarded approximately $3.5 million in legal fees to defendants in a trade secret lawsuit; Citizens has appealed the judgment.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a generally positive report, highlighting strong domestic growth and strategic execution leading to revenue increases and record insurance in force. However, the significant legal judgment, ongoing international market challenges, and substantial matured endowment payouts present notable headwinds.

Positives

• Net income before federal income tax increased to $17.5 million in 2025 from $15.0 million in 2024.
• Total revenues increased by $10.6 million in 2025.
• Achieved a second consecutive year of total premium revenue growth, a trend not seen since 2017.
• Direct first-year premiums increased 16% to $38.3 million in 2025, with the Domestic Insurance segment experiencing 23% growth.
• Reached the highest ever total direct insurance in force of $5.4 billion.
• Issued $1.1 billion in new insurance in 2025, marking the second highest annual issuance in company history.
• Net investment income increased due to a diversified investment strategy, including a $1.7 million special dividend from a limited partnership investment.
• Policyholder liability remeasurement gain improved operating results by $2.2 million in 2025 for the Domestic Insurance segment due to better than expected experience.
• Death claim benefits decreased 9% in 2025 due to lower volume and the RGA Agreement.
• Surrender benefits decreased 5% in 2025, attributed to retention efforts.
• The company has no debt at December 31, 2025.
• Maintained effective internal control over financial reporting as of December 31, 2025.
• Domestic insurance subsidiaries exceeded minimum Risk-Based Capital (RBC) levels, and CLOA was above 350% RBC.
• CICA International exceeded required minimum capital and premium to surplus ratio.

Negatives

• Total benefits and expenses increased by $8.1 million in 2025.
• Matured endowments in the International Insurance segment led to a $21.3 million increase in claims and surrenders, negatively impacting that segment's income before federal income tax.
• Recorded an investment related loss of $5.2 million in 2025 from the BlackRock Global Renewable Power Fund III write-down, following a $3.3 million write-down in 2024.
• A legal judgment against Citizens in a trade secret lawsuit totals $1.3 million for former consultants and $3.5 million in legal fees for defendants, which could negatively impact cash if the appeal fails.
• Premium growth was constrained by high levels of surrenders and matured endowments in the International Insurance segment.
• Sales in Taiwan are declining due to leadership succession difficulties, regulatory challenges, and geopolitical shifts.
• Experienced headwinds in Venezuela affecting premium revenues due to the strength of the U.S. dollar and difficulties in obtaining dollars, with potential for further decline due to political instability.
• Rapid growth in domestic first-year sales creates a significant increase in advance commission payments, straining liquidity and capital.
• The company has never paid cash dividends on its common stock and does not expect to in the foreseeable future.
• A large number of shareholders (81,000), many with small holdings and located in foreign countries, may lead to low voter turnout and difficulty in approving corporate actions like mergers or acquisitions.
• Gross unrealized losses on available-for-sale fixed maturity securities amounted to $154.3 million as of December 31, 2025.

Risks

• Exposure to unknown risks related to foreign regulation, foreign currency restrictions, and political instability in international markets, potentially leading to significant loss of sales.
• Risk that foreign governments may enforce perceived violations of their laws, imposing fines or criminal penalties, or ordering cessation of sales, as the company operates on a non-admitted basis without local licenses or product approvals.
• Currency control laws or other restrictions in international markets could limit policyholders' ability to remit premiums in U.S. dollars or receive U.S. dollar benefits, increasing costs and reducing product attractiveness.
• Political instability, regime changes, anti-democratic or anti-U.S. policies, or U.S. sanctions in countries of operation could adversely affect the ability to sell policies or receive premium payments.
• Significant competition for customers and distributors in international markets from companies with greater financial, marketing, or local resources.
• Greater risk of money laundering activity associated with sales derived from residents of certain foreign countries, potentially leading to regulatory scrutiny, penalties, litigation, operational burden, and reputational harm.
• Financial performance depends on the accuracy of pricing assumptions (morbidity, mortality, lapses, discount rates); differences in actual experience could reduce margins, increase reserves, and negatively affect profitability.
• Failure to accurately underwrite risks, especially with simplified underwriting processes for newer domestic products, could negatively impact profitability by leading to higher benefit payments than priced for.
• Inadequate claims processes, training, technology, or fraud detection, or higher fraudulent activity, could increase costs, trigger litigation or fines, and harm the company's reputation.
• Lower than expected policyholder retention (lapses, surrenders) can negatively affect business operations and liquidity, particularly with aging endowment products reaching maturity.
• Reinsurance may not be available or affordable, or reinsurers may be unwilling or unable to meet their obligations, which may adversely affect results of operations or financial condition.
• Reliance on independent consultants and agencies reduces control over sales and distribution, subjecting the company to risks from agent misconduct (e.g., TCPA violations) or agents leaving for competitors.
• Failure to comply with complex and varying insurance regulations across jurisdictions (U.S. states, Puerto Rico, foreign countries) could lead to license loss, suspension, or substantial fines.
• Failure to meet statutory minimum capital and surplus requirements could lead to regulatory action, restrictions on distributions, or forced capital contributions.
• As a holding company, Citizens depends on dividends and service payments from subsidiaries, which are subject to regulatory restrictions; insufficient internal liquidity may force asset sales or external financing.
• Changes in accounting standards (e.g., LDTI) may adversely affect reported results of operations and financial condition, increase earnings volatility, and reporting complexity.
• Unexpected losses in future reporting periods may require recording a valuation allowance against deferred tax assets, which could have a material adverse effect on results of operations and financial condition.
• A ratings downgrade or other negative action by a rating agency (e.g., A.M. Best) could materially affect the ability to attract independent insurance agencies or reduce product attractiveness.
• Global or regional changes in financial markets or economic conditions (inflation, recession, market volatility, interest rate changes, U.S. dollar strength, prepayment risk) could adversely affect revenues, results of operations, and financial condition.
• Cybersecurity risks, including the failure of IT systems, data breaches, or inability to maintain confidentiality, integrity, and availability of policyholder and claims data, could result in a materially adverse effect on business, reputation, financial condition, and results of operations.
• The number and location of shareholders, particularly many small foreign shareholders, may make it difficult to obtain approval of certain corporate actions requiring majority votes.
• Class A common stock is not registered in any foreign country, risking fines or cease and desist orders if foreign securities regulatory authorities deem sales non-compliant.
• A decrease in participation in the Stock Investment Plan (SIP) could negatively impact the Class A common stock price.
• Applicable insurance laws and company anti-takeover provisions (Class B common stock electing majority of Board, preferred stock issuance without shareholder approval) may discourage takeovers and business combinations.

Future Outlook

The company expects matured endowment benefits to remain at elevated, but slightly lower levels over the next few years as contracts expire. It anticipates meeting short-term and long-term cash needs through insurance operations and invested assets. Continued investment in digital platforms, system modernization, and data capabilities is a key part of the long-term strategy. The trend of product mix shifting towards newer, lower-margin whole life products is expected to continue. The company will closely monitor its Venezuela business due to ongoing headwinds and may seek loans from its Credit Facility or issue new stock to manage liquidity risks from commission payments or capital contributions to CLOA. U.S. capital loss carryforwards begin expiring in 2026, and Puerto Rico capital loss carryforwards in 2031.

Management Comments

• Our strategy shifted to the pursuit of long-term profitable growth through a 4-pronged strategy: Grow first year sales, Improve Policy Retention (Persistency), Focus on execution, Financial and expense discipline.
• Because of the focused execution on our strategic goals, in 2025, we issued the second highest amount of insurance ever within a year by Citizens $1.1 billion and achieved our highest ever total direct insurance in force $5.4 billion.
• We believe that issuing U.S. dollar-denominated products is a key competitive advantage for us.
• We believe that our white-label strategy provides a competitive advantage in this space by offering products that align with the needs of our distributors and policyholders.
• We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received.
• We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.
• We continue to work on managing controllable operating expenses while investing in growth initiatives.
• We currently anticipate that our available operating cash flow and capital resources will be adequate to meet our needs for funds.
• We are closely monitoring our policyholder behavior patterns, and in 2024, introduced a new product designed to allow policyholders with maturing endowments to purchase a new life insurance policy.

Industry Context

StockSavvy.ai notes that the life insurance industry continues to navigate economic volatility, shifting financial market conditions, evolving regulatory expectations, geopolitical uncertainty, and rapid technological change. The material uptick in interest rates has generally benefited life insurers by improving reinvestment yields, though partially offset by unrealized losses in fixed-income portfolios. Inflation continues to affect insurers by reducing customer discretionary income and increasing operating expenses. Reinsurance markets are tightening due to increased risks, leading to higher costs and limited availability. The industry is also heavily investing in digital distribution, automated underwriting, and advanced analytics to improve customer experience and efficiency, while facing cybersecurity challenges.

Comparison to Industry Standards

• StockSavvy.ai observes that Citizens, Inc.'s experience with rising interest rates leading to improved reinvestment yields but also unrealized losses in fixed-income portfolios aligns with broader industry trends.
• The company's focus on digital tools and customer experience enhancements, such as faster underwriting and portal upgrades, reflects a common strategic imperative across the life insurance sector to meet evolving customer expectations for simpler buying experiences.
• The tightening reinsurance market, as described by Citizens, Inc., is a global trend impacting many insurers, driven by factors like increased cybersecurity risks and weather-related losses.
• Citizens, Inc.'s strategy of offering U.S. dollar-denominated products in international markets provides a unique competitive advantage, particularly in regions with currency instability, differentiating it from local carriers or those offering local currency products.

Corporate Governance

Legal Proceedings

• A jury in a trade secret lawsuit (filed in 2018) found that Citizens should pay Alexis Delgado and Carlos Nalsen Landa approximately $1.3 million for money had and received.
• The trial court awarded defendants Michael P. Buchweitz and Randall Riley approximately $3.5 million for legal fees incurred during the trade secret lawsuit.
• A Final Judgment reflecting these decisions was signed on August 16, 2024.
• Citizens has appealed the judgment, believing the jury's findings and fee awards were improper.
• An appeal bond was filed on September 17, 2024, to stay execution of the judgment, and the appeal is currently pending in the Court of Appeals, Third District of Texas.

Related Party Transactions

• The company has routine related party transactions with its subsidiaries, including management service agreements related to costs incurred, a tax sharing agreement between entities, and inter-company dividends and capital contributions.
• An annual expense study is performed, utilizing an enterprise-wide time study, to adjust cost allocations among entities as needed.
• No changes related to these relationships occurred during the year ended December 31, 2025, and no additional related party transactions were disclosed.

Stakeholder Impact

• Shareholders face potential dilution if capital is raised through stock issuance and a potential negative impact on stock price from the legal judgment if the appeal fails. Low voter turnout for corporate actions due to a dispersed shareholder base, particularly internationally, may make approvals difficult. Anti-takeover provisions may prevent shareholders from receiving takeover premiums.
• Policyholders benefit from improved customer experience initiatives and new product offerings, as well as the security and stability offered by U.S. dollar-denominated international policies. There is potential liquidity risk if many endowment policyholders elect lump sum distributions, but regulatory oversight of insurance subsidiaries aims to protect their interests.
• Employees are impacted by the human capital strategy focused on attracting, developing, and retaining talent, and participate in equity compensation programs.
• Independent Agents/Consultants are affected by changes in distribution channels, compensation structures, and support services. They face potential for fines or cessation of sales if foreign regulatory laws are enforced and the risk of agents leaving for competitors.
• Creditors of the holding company are subordinate to policyholders' claims, which have priority with respect to the assets and earnings of the insurance subsidiaries in case of insolvency.

Next Steps

• Continue to drive growth in first-year sales by introducing innovative new products and expanding distribution channels.
• Improve policy retention by focusing on customer experience.
• Implement process upgrades and integrate advanced technologies to expedite product delivery and improve agent/policyholder experience.
• Control costs while investing in business growth.
• Monitor policyholder behavior patterns regarding maturing endowments and continue efforts to retain cash.
• Continue to monitor competitive trends and adjust product offerings, distribution support, and pricing strategies.
• Actively engage in continued modernization of technology, including ongoing research into next-generation PAS solutions.
• Appeal the judgment in the trade secret lawsuit.
• File definitive proxy materials for the 2026 Annual Meeting of Shareholders within 120 days after December 31, 2025.

Key Dates

Recommendation

Citizens, Inc. demonstrates solid operational improvements with a second consecutive year of premium revenue growth, record insurance in force, and a significant turnaround in its Domestic Insurance segment's profitability. The strategic initiatives focused on sales growth, retention, and technology modernization are yielding positive results. However, the substantial legal judgment under appeal, persistent challenges in key international markets like Venezuela and Taiwan, and the ongoing liquidity management required for maturing endowments and advance commissions introduce considerable uncertainty. While the company is moving in the right direction strategically, these unresolved issues and inherent industry risks suggest a "Hold" recommendation until there is greater clarity on the legal outcome and sustained improvement in international segments.

Keywords

Life insurance, Endowment products, Final expense insurance, SEC filing, 10-K, Financial reporting, Insurance holding company, Class A common stock, NYSE:CIA, International insurance, Domestic insurance, CICA International, CICA Life Insurance Company of America (CLOA), RGA Reinsurance Company, BlackRock, Investment portfolio, Fixed maturity securities, Policyholder benefits, Premiums, Net investment income, Corporate governance, Risk factors, Cybersecurity, Regulatory compliance, Colorado Division of Insurance, Puerto Rico Office of the Insurance Commissioner (OIC), Capital maintenance agreement, LDTI, Actuarial assumptions, Money laundering, Anti-takeover provisions, Trade secret lawsuit