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Form 10-Q CITIZENS, INC. For: Mar 31

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May 5, 2022 4:50 PM EDT
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2022
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:  000-16509

cia-20220331_g1.jpg
CITIZENS, INC.
(Exact name of registrant as specified in its charter)
Colorado84-0755371
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

11815 Alterra Pkwy, Floor 15, Austin, TX 78758
(Current Address)

Registrant's telephone number, including area code: (512) 837-7100
Securities registered pursuant to Section 12(b) of the Act
Class A Common StockCIA NYSE
(Title of each class)(Trading symbol(s))(Name of each exchange on which registered)

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 o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer☐Accelerated filer☒Emerging growth company☐
Non-accelerated filer☐Smaller reporting company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
As of May 2, 2022, the Registrant had 50,508,640 shares of Class A common stock outstanding and 0 shares of Class B common stock outstanding.




























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TABLE OF CONTENTS
Page Number
Part I. FINANCIAL INFORMATION
 Item 1. 
  
  
  
 Item 2.
 Item 3.
 Item 4.
Part II. OTHER INFORMATION 
 Item 1.
Item 1A.
 Item 2.
 Item 3.
 Item 4.
 Item 5.
 Item 6.


March 31, 2022 | 10-Q 1

PART I.  FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)March 31, 2022December 31, 2021
Assets(Unaudited)
Investments:  
Fixed maturity securities available-for-sale, at fair value (amortized cost: $1,361,254 and $1,343,755 in 2022 and 2021, respectively)
$1,355,410 1,470,617 
Equity securities, at fair value 13,902 14,844 
Policy loans79,345 80,307 
Other long-term investments (portion measured at fair value $62,564 and $56,038 in 2022 and 2021, respectively)
63,927 57,399 
Total investments1,512,584 1,623,167 
Cash and cash equivalents21,298 27,294 
Accrued investment income15,755 16,197 
Reinsurance recoverable3,574 5,539 
Deferred policy acquisition costs139,688 140,380 
Cost of insurance acquired10,528 10,611 
Current federal income tax receivable589 762 
Property and equipment, net14,088 14,074 
Due premiums8,971 10,748 
Other assets (less allowance for losses of $109 and $111 in 2022 and 2021, respectively)
5,886 5,739 
Total assets$1,732,961 1,854,511 

See accompanying Notes to Consolidated Financial Statements.

March 31, 2022 | 10-Q 2


CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets, Continued
(In thousands, except share amounts)March 31, 2022December 31, 2021
Liabilities and Stockholders' Equity(Unaudited)
Liabilities:  
Policy liabilities:  
Future policy benefit reserves:  
Life insurance$1,284,792 1,278,987 
Annuities85,662 83,918 
Accident and health766 784 
Dividend accumulations38,576 37,760 
Premiums paid in advance40,433 40,690 
Policy claims payable9,659 14,590 
Other policyholders' funds32,656 30,690 
Total policy liabilities1,492,544 1,487,419 
Commissions payable1,816 2,285 
Deferred federal income tax payable6,577 15,456 
Payable for securities in process of settlement3,815 — 
Other liabilities31,307 28,780 
Total liabilities1,536,059 1,533,940 
Commitments and contingencies (Note 7)
Stockholders' Equity:  
Common stock:
Class A, no par value, 100,000,000 shares authorized, 53,532,873 and 53,170,413 shares issued and outstanding in 2022 and 2021, respectively, including shares in treasury of 3,135,738 in 2022 and 2021
267,442 265,561 
Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2022 and 2021, including shares in treasury of 1,001,714 in 2022 and 2021
3,184 3,184 
Accumulated deficit(46,898)(45,565)
Accumulated other comprehensive income (loss):  
Net unrealized gains (losses) on fixed maturity securities, net of tax(6,725)117,492 
Treasury stock, at cost(20,101)(20,101)
Total stockholders' equity196,902 320,571 
Total liabilities and stockholders' equity$1,732,961 1,854,511 

See accompanying Notes to Consolidated Financial Statements.


March 31, 2022 | 10-Q 3


CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three Months Ended March 31,
(In thousands, except per share amounts)
20222021
Revenues: 
Premiums:  
Life insurance$37,746 37,642 
Accident and health insurance286 343 
Property insurance1,332 1,047 
Net investment income15,487 15,244 
Investment related gains (losses), net(582)292 
Other income1,088 915 
Total revenues55,357 55,483 
Benefits and Expenses:  
Insurance benefits paid or provided:  
Claims and surrenders28,434 30,589 
Increase in future policy benefit reserves6,569 5,232 
Policyholders' dividends1,353 1,306 
Total insurance benefits paid or provided36,356 37,127 
Commissions7,673 8,157 
Other general expenses11,030 11,382 
Capitalization of deferred policy acquisition costs(4,781)(4,985)
Amortization of deferred policy acquisition costs5,817 6,183 
Amortization of cost of insurance acquired236 367 
Total benefits and expenses56,331 58,231 
Income (loss) before federal income tax(974)(2,748)
Federal income tax expense (benefit)359 825 
Net income (loss)(1,333)(3,573)
Per Share Amounts:  
Basic and diluted earnings (losses) per share of Class A common stock(0.03)(0.07)
Basic and diluted earnings (losses) per share of Class B common stock— (0.04)
Other Comprehensive Income (Loss):  
Unrealized gains (losses) on fixed maturity securities:  
Unrealized holding gains (losses) arising during period(133,342)(55,898)
Reclassification adjustment for losses (gains) included in net income (loss)59 (35)
Unrealized gains (losses) on fixed maturity securities, net(133,283)(55,933)
Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities(9,066)585 
Other comprehensive income (loss)(124,217)(56,518)
Total comprehensive income (loss)$(125,550)(60,091)

See accompanying Notes to Consolidated Financial Statements.

March 31, 2022 | 10-Q 4


CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
 Common StockAccumulated
deficit		Accumulated other
comprehensive
 income (loss)		Treasury
stock		Total
Stock-holders'
equity
(In thousands)Class AClass B
Balance at December 31, 2021$265,561 3,184 (45,565)117,492 (20,101)320,571 
Comprehensive income (loss):
Net income (loss)— — (1,333)— — (1,333)
Unrealized investment gains (losses), net— — — (124,217)— (124,217)
Total comprehensive income (loss)— — (1,333)(124,217)— (125,550)
Common stock issuance1,788 — — — — 1,788 
Stock-based compensation93 — — — — 93 
Balance at March 31, 2022$267,442 3,184 (46,898)(6,725)(20,101)196,902 


Balance at December 31, 2020$262,869 3,184 (82,352)128,255 (11,011)300,945 
Comprehensive income (loss):
Net income (loss)— — (3,573)— — (3,573)
Unrealized investment gains (losses), net— — — (56,518)— (56,518)
Total comprehensive income (loss)— — (3,573)(56,518)— (60,091)
Stock-based compensation(14)— — — — (14)
Balance at March 31, 2021$262,855 3,184 (85,925)71,737 (11,011)240,840 

See accompanying Notes to Consolidated Financial Statements.


March 31, 2022 | 10-Q 5


CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended March 31,
(In thousands)
20222021
Cash flows from operating activities: 
Net income (loss)$(1,333)(3,573)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Investment related (gains) losses on sale of investments and other assets582 (292)
Net deferred policy acquisition costs1,036 1,198 
Amortization of cost of insurance acquired236 367 
Depreciation153 308 
Amortization of premiums and discounts on investments1,386 1,323 
Stock-based compensation132 76 
Deferred federal income tax expense (benefit)187 (432)
Change in:  
Accrued investment income442 275 
Reinsurance recoverable1,965 1,410 
Due premiums1,777 1,771 
Future policy benefit reserves6,494 5,185 
Other policyholders' liabilities(2,406)4,528 
Federal income tax payable172 1,257 
Commissions payable and other liabilities1,489 (11,317)
Other, net(172)(275)
Net cash provided by (used in) operating activities12,140 1,809 
Cash flows from investing activities:  
Purchases of fixed maturity securities, available-for-sale(26,050)(37,294)
Sales of fixed maturity securities, available-for-sale1,100 4,445 
Maturities and calls of fixed maturity securities, available-for-sale10,435 14,376 
Principal payments on mortgage loans2 4 
(Increase) decrease in policy loans, net962 644 
Sales of other long-term investments1,681 15,089 
Purchases of other long-term investments(7,940)(4,619)
Purchases of property and equipment(34)(15)
Purchases of short-term investments(5)— 
Net cash provided by (used in) investing activities(19,849)(7,370)
See accompanying Notes to Consolidated Financial Statements.

March 31, 2022 | 10-Q 6

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Unaudited)
Three Months Ended March 31,
(In thousands)
20222021
Cash flows from financing activities:  
Annuity deposits$2,227 2,431 
Annuity withdrawals(2,263)(2,329)
Acquisition of treasury stock— (9,090)
Issuance of common stock1,788 — 
Other(39)(89)
Net cash provided by (used in) financing activities1,713 (9,077)
Net increase (decrease) in cash and cash equivalents(5,996)(14,638)
Cash and cash equivalents at beginning of year27,294 34,131 
Cash and cash equivalents at end of period$21,298 19,493 


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the three months ended March 31, 2022 and 2021, various fixed maturity issuers exchanged securities with book values of $0.6 million and $2.0 million, respectively, for securities of equal value.

The Company had $3.8 million net unsettled security trades at March 31, 2022 and $0.7 million at March 31, 2021.

The Company accrued purchases of property and equipment of $0.8 million as of March 31, 2021 and recorded none as of March 31, 2022.

The Company recognized right-of-use assets of $0.4 million in exchange for new operating lease liabilities during the three months ended March 31, 2022 and none during the three months ended March 31, 2021.


See accompanying Notes to Consolidated Financial Statements.


March 31, 2022 | 10-Q 7


(1) FINANCIAL STATEMENTS

BASIS OF PRESENTATION AND CONSOLIDATION

The consolidated financial statements include the accounts and operations of Citizens, Inc. ("Citizens" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA"), CICA Life Ltd. ("CICA International"), Citizens National Life Insurance Company ("CNLIC"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC") and Computing Technology, Inc. ("CTI"). All significant inter-company accounts and transactions have been eliminated. Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company", "it", "we", "us" or "our".

The consolidated balance sheet as of March 31, 2022, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three months ended March 31, 2022 and March 31, 2021 and the consolidated statements of cash flows for the three months ended March 31, 2022 and March 31, 2021 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at March 31, 2022 and for comparative periods have been made. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission ("SEC").  Accordingly, the consolidated financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 ("Form 10-K").  Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Our Life Insurance segment operates through CICA International, CICA and CNLIC. Our international life insurance business, which operates through CICA International, issues U.S. dollar-denominated endowment contracts internationally, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance in U.S. dollar-denominated amounts sold to non-U.S. residents.  These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional increasing or decreasing coverage and annuity benefits to enhance accumulations. Our domestic life insurance business operates through CICA and CNLIC. CICA issues credit life and disability policies and CNLIC issues ordinary whole life policies mainly in Texas and Florida and services whole life and accident and health policies primarily in the Southern U.S., Midwest and Mountain West.

Our Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.  Our products in this segment consist primarily of small face amount ordinary whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs as well as property insurance policies, which cover dwelling and contents.

CTI provides data processing systems and services to the Company.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


March 31, 2022 | 10-Q 8

Significant estimates include those used in the evaluation of credit allowances on fixed maturity securities, actuarially determined assets and liabilities and assumptions and valuation allowance on deferred tax assets.  Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the consolidated financial statements.

SIGNIFICANT ACCOUNTING POLICIES

For a description of our significant accounting policies, see Part IV, Item 15, Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K, which should be read in conjunction with these accompanying consolidated financial statements.

(2) ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS NOT YET ADOPTED

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. This ASU amends four key areas of the accounting and impacts disclosures for long-duration insurance and investment contracts:

•Requires updated assumptions for liability measurement. Assumptions used to measure the liability for traditional insurance contracts, which are typically determined at contract inception, will now be reviewed at least annually, and, if there is a change, updated, with the effect recorded in net income;
•Standardizes the liability discount rate. The liability discount rate will be a market-observable discount rate (upper-medium grade fixed-income instrument yield), with the effect of rate changes recorded in other comprehensive income;
•Provides greater consistency in measurement of market risk benefits. The two previous measurement models have been reduced to one measurement model (fair value), resulting in greater uniformity across similar market-based benefits and better alignment with the fair value measurement of derivatives used to hedge capital market risk;
•Simplifies amortization of deferred acquisition costs ("DAC"). Previous earnings-based amortization methods have been replaced with a more level amortization basis; and
•Requires enhanced disclosures. The new disclosures include rollforwards and information about significant assumptions and the effects of changes in those assumptions.

For calendar-year public companies, the changes will be effective on January 1, 2023, however, early adoption is permitted. We will adopt this ASU effective January 1, 2023 with a transition date of January 1, 2021 using a modified retrospective approach. We continue to make progress in our implementation process that includes, but is not limited to, making significant accounting policy decisions, employing appropriate internal controls, building and updating actuarial models and systems, revising reporting processes and developing informative qualitative and quantitative disclosures. In 2022, we will begin the process of calculating our transition adjustments and preparing for the restatement of applicable periods. We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations and will be able to better assess the effects as we progress with our implementation efforts. While it is not possible to estimate the expected impact of adoption at this time, the Company believes there is a reasonable possibility that implementation this ASU may result in a material impact to accumulated other comprehensive income and future earnings patterns.

No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.


March 31, 2022 | 10-Q 9

(3) SEGMENT INFORMATION

The Company has two reportable segments:  Life Insurance and Home Service Insurance.  Our Life Insurance segment primarily issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance, to non-U.S. residents through CICA International  These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations. CICA issues credit life and disability and accident and health related policies throughout the Midwest and southern U.S. CNLIC issues ordinary whole life in Florida.

Our Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.  Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders.  Our Home Service Insurance segment also sells property insurance policies in Louisiana and Arkansas.

The Life Insurance and Home Service Insurance portions of the company constitute separate businesses. The Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions that are included in the tables presented below to properly reconcile the segment information with the consolidated financial statements of the Company. The Company's Other Non-Insurance Enterprises are the only reportable difference between segments and consolidated operations.

The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those used in the preparation of the consolidated financial statements.  The Company evaluates profit and loss performance based on U.S. GAAP income or loss before federal income taxes for its two reportable segments.

March 31, 2022 | 10-Q 10

Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Three Months Ended March 31, 2022
(In thousands)
Revenues:    
Premiums$26,931 12,433 — 39,364 
Net investment income11,971 3,244 272 15,487 
Investment related gains (losses), net(293)(242)(47)(582)
Other income1,088 — — 1,088 
Total revenues39,697 15,435 225 55,357 
Benefits and expenses:   
Insurance benefits paid or provided:    
Claims and surrenders21,458 6,976 — 28,434 
Increase in future policy benefit reserves5,130 1,439 — 6,569 
Policyholders' dividends1,350 3 — 1,353 
Total insurance benefits paid or provided27,938 8,418 — 36,356 
Commissions3,806 3,867 — 7,673 
Other general expenses 5,691 4,350 989 11,030 
Capitalization of deferred policy acquisition costs(3,306)(1,475)— (4,781)
Amortization of deferred policy acquisition costs4,482 1,335 — 5,817 
Amortization of cost of insurance acquired56 180 — 236 
Total benefits and expenses38,667 16,675 989 56,331 
Income (loss) before federal income tax expense$1,030 (1,240)(764)(974)

March 31, 2022 | 10-Q 11

Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Three Months Ended March 31, 2021
(In thousands)
Revenues:    
Premiums$27,063 11,969 — 39,032 
Net investment income11,598 3,345 301 15,244 
Investment related gains (losses), net(108)223 177 292 
Other income913 2 — 915 
Total revenues39,466 15,539 478 55,483 
Benefits and expenses:    
Insurance benefits paid or provided:    
Claims and surrenders23,270 7,319 — 30,589 
Increase in future policy benefit reserves3,658 1,574 — 5,232 
Policyholders' dividends1,296 10 — 1,306 
Total insurance benefits paid or provided28,224 8,903 — 37,127 
Commissions4,231 3,926 — 8,157 
Other general expenses5,226 3,794 2,362 11,382 
Capitalization of deferred policy acquisition costs(3,561)(1,424)— (4,985)
Amortization of deferred policy acquisition costs5,348 835 — 6,183 
Amortization of cost of insurance acquired104 263 — 367 
Total benefits and expenses39,572 16,297 2,362 58,231 
Income (loss) before federal income tax expense$(106)(758)(1,884)(2,748)


March 31, 2022 | 10-Q 12

(4) STOCKHOLDERS' EQUITY AND RESTRICTIONS

STOCK

Our Restated and Amended Articles of Incorporation authorize the issuance of 127,000,000 shares, of which 100,000,000 shares shall be Class A common stock, 2,000,000 shares shall be Class B common stock, and 25,000,000 shall be preferred stock. The two authorized classes of common stock are equal in all respects, except (a) each share of Class A common stock is entitled to receive twice the cash dividends paid on a per share basis to the Class B common stock, if any; and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the board of Directors of Citizens. In April 2021, we repurchased all of the outstanding Class B common stock, which is now classified as treasury stock. As a result, all of the directors are elected by the holders of the Class A common stock. Citizens has never issued any preferred stock.

EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings (loss) per share.
Three Months Ended March 31,20222021
(In thousands, except per share amounts)
Basic and diluted earnings (loss) per share:
Numerator:
Net income (loss)$(1,333)(3,573)
Net income (loss) allocated to Class A common stock$(1,333)(3,537)
Net income (loss) allocated to Class B common stock— (36)
Net income (loss)$(1,333)(3,573)
Denominator:
Weighted average shares of Class A outstanding - basic50,236 49,549 
Weighted average shares of Class A outstanding - diluted50,906 50,116 
Weighted average shares of Class B outstanding - basic and diluted— 1,002 
Basic and diluted earnings (loss) per share of Class A common stock$(0.03)(0.07)
Basic and diluted earnings (loss) per share of Class B common stock— (0.04)

CAPITAL AND SURPLUS

Each of our regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements. These include capital requirements imposed by the U.S. National Association of Insurance Commissioners ("NAIC") and the Bermuda Monetary Authority ("BMA"). All insurance subsidiaries exceeded the minimum capital requirements at March 31, 2022.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation or excess risk, the BMA has established a threshold capital level (termed the Target Capital Level ("TCL")), which is set at 120% of a company’s enhanced capital requirement. The TCL serves as an early warning tool for the BMA. As of March 31, 2022, CICA International was above the TCL threshold. At the request of the BMA, on April 15, 2021, Citizens and CICA International entered into a Keep Well Agreement. The Keep Well Agreement requires Citizens to contribute up to $10 million in capital to CICA International as necessary to ensure that CICA International has a minimum capital level of 120% (equal to the TCL). Since CICA International’s capital level currently exceeds 120%, Citizens is not currently required to make a capital contribution.


March 31, 2022 | 10-Q 13

(5) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 88.4% of total cash and invested assets at March 31, 2022, as shown below.

Carrying Value
(In thousands, except for %)
March 31, 2022December 31, 2021
Amount%Amount%
Cash and invested assets:
Fixed maturity securities$1,355,410 88.4 %1,470,617 89.0 %
Equity securities13,902 0.9 %14,844 0.9 %
Policy loans79,345 5.2 %80,307 4.9 %
Other long-term investments63,927 4.2 %57,399 3.5 %
Cash and cash equivalents21,298 1.3 %27,294 1.7 %
Total cash and invested assets$1,533,882 100.0 %1,650,461 100.0 %

The following tables represent the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated.
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
March 31, 2022
(In thousands)
Fixed maturity securities:    
Available-for-sale:    
U.S. Treasury securities$9,494 681 5 10,170 
U.S. Government-sponsored enterprises3,456 693 — 4,149 
States and political subdivisions354,513 13,363 9,481 358,395 
Corporate:
Financial220,033 4,394 9,036 215,391 
Consumer227,963 7,180 12,375 222,768 
Energy76,884 1,684 1,905 76,663 
All other305,831 7,191 13,714 299,308 
Residential mortgage-backed117,848 5,549 235 123,162 
Asset-backed45,131 268 102 45,297 
Foreign governments101 6 — 107 
Total fixed maturity securities$1,361,254 41,009 46,853 1,355,410 


March 31, 2022 | 10-Q 14

Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
December 31, 2021
(In thousands)
Fixed maturity securities:    
Available-for-sale:    
U.S. Treasury securities$9,515 1,097 1 10,611 
U.S. Government-sponsored enterprises3,463 996 — 4,459 
States and political subdivisions356,594 28,056 692 383,958 
Corporate:
Financial213,652 22,477 172 235,957 
Consumer219,223 23,658 900 241,981 
Energy76,989 7,334 68 84,255 
All other302,141 29,855 1,181 330,815 
Residential mortgage-backed117,755 16,046 6 133,795 
Asset-backed44,322 368 14