CITIZENS INC
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
CIA$4.13+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000024090-24-000141
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsSegment OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000024090-24-000174
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsSegment OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 165 previous paragraphs and 171 current paragraphs.
92 unchanged; 62 reworded; 15 added; 9 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 43 previous and 43 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
•Actuarial assumptions
Current report
endowments in our international business during the last few years, which has led to a lower number of policies paying renewal premiums.
Current report
•death claim benefits increased due to the significant growth in our domestic life in force business as well as a higher volume of reported claims in our Home Services Insurance segment,
Current report
While surrenders and matured endowments do not significantly affect current profitability since reserves are released in a corresponding amount of the surrendered policy or matured endowment benefit payment, they
Current report
negatively affect future renewal premium revenue and thus have a greater impact to future profitability versus current profitability.
Current report
Actuarial Assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, lapses and discount rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience.
Current report
As discussed above, our domestic growth in the Life Insurance segment has been significantly expanded. Our current profitability is affected by the amount of reserves we have to hold for this new business, and how closely actual experience matches our actuarial assumptions. The actuarial assumptions that underlie our reserves are
Current report
based upon our best estimates of mortality and lapses and are inherently more difficult to predict for a new product line. Actuarial assumptions are continually monitored and are expected to become less volatile as this business matures and we develop more experience.
Current report
Our net income before federal income taxes decreased to $3.0 million in the three months ended September 30, 2024 from $4.6 million in the three months ended September 30, 2023. While our revenues increased by $2.3 million due primarily to higher first year premiums and investment related gains, our net income decreased due primarily to (i) lower renewal premiums resulting from high surrenders and matured endowments in the past few years, and (ii) an increase in total benefits and expenses paid including (a) an increase in future policyholder benefit reserves primarily related to increases in our domestic life in force business and issuance of supplemental contracts; (b) policyholder remeasurement loss related to updating our actuarial assumptions in our CICA Domestic business; and (c) an increase in death claims.
Current report
Our net income before federal income taxes decreased from $17.4 million in the nine months ended September 30, 2023 to $11.3 million in the nine months ended September 30, 2024. In addition to the reasons described above, during the nine month period we accrued $3.5 million in legal fees awarded to the certain defendants in the trade secret lawsuit.
Current report
In our Life Insurance segment, income before federal income tax was $4.4 million and $17.7 million during the three and nine months ended September 30, 2024, respectively, compared to $6.6 million and $20.4 million during the
Current report
same prior year periods. Our higher revenues were offset by increases in reserves, higher policyholder liability remeasurement loss and higher general expenses supporting our CICA Domestic growth.
Current report
Policyholder Liability Remeasurement (Gain) Loss. The third quarter update to mortality and lapse assumptions for CICA Domestic negatively affected our policyholder liability remeasurement loss. This was partially offset by better than expected surrender experience in our international business.
Current report
Premiums. Our life and A&H premiums declined in the three and nine months ended September 30, 2024, respectively, compared to the same prior year periods. The decrease is largely due to strategic actions intended to improve sales quality and persistency, which actions led to a decrease in our agent sales force as we focus on these improvements. Additionally, we believe external economic pressures, such as inflation, have impacted revenue in this segment disproportionately.
Removed paragraphs (9)
Previous report
June 30, 2024 | 10-Q 36
Previous report
•death claim benefits decreased for three months ended June 30, 2024 and increased for six months ended June 30, 2024 from fluctuation in the number of reported claims,
Previous report
Our net income before federal income taxes decreased to $3.3 million in the three months ended June 30, 2024, from $6.0 million in the three months ended June 30, 2023. While our revenues increased by $3.6 million due primarily to higher premiums and other income, which is generated mostly from supplemental contracts with life contingencies that are entered into by policyholders with maturing endowments, our net income decreased due to the accrual of the $3.5 million in legal fees awarded to the defendants in the trade secret lawsuit described above, as well as a $1.8 million increase in claims and surrenders benefits paid due to higher matured endowments, which increased as expected due to many of our endowment policies reaching their contractual maturity dates.
Previous report
Our net income before federal income taxes decreased from $12.8 million in the six months ended June 30, 2023 to $8.2 million in the six months ended June 30, 2024. Other than the accrual of the $3.5 million in legal fees in the second quarter of 2024 mentioned above, this is due primarily to first quarter results, which despite having higher life insurance premium revenue, higher investment related gains and losses, and higher net investment income, had a decline in net income before federal income taxes due primarily to an increase in total benefits and expenses driven by higher death claims and the contractually matured endowments. We also incurred $4.8 million in higher commissions paid in the six months ended June 30, 2024 as compared to the prior year period due to the large increase in first year sales, which have a higher commission rate than renewal sales.
Previous report
Explanation of Other Benefits and Expenses
Previous report
In our Life Insurance segment, income before federal income tax was $7.5 million in both the three months ended June 30, 2024 and 2023. In the 2024 period, $3.5 million in higher revenues was offset by higher matured endowments and higher general expenses supporting our domestic growth strategy. In the six months ended
Previous report
June 30, 2024, income before federal income tax decreased by $0.6 million from the prior year period for the above reasons as well as higher death claims in thesix month period.
Previous report
Net Investment Income. Our net investment income increased by 2% and 3% for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 due to our higher average portfolio yield. The majority of our investment income is derived from fixed maturity securities; however, long-term investment income continues to increase as our limited partnership asset base grows.
Previous report
Premiums. Our first year life and A&H premiums declined 5% and 10% in the three and six months ended June 30, 2024, respectively, compared to the same prior year periods as we continue to make changes to our agents' compensation structures to improve the quality and the persistency of sales in this segment.
Reworded paragraphs (62)
Previous wording
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Current wording
The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q,as well as in conjunction with MD&A and the consolidated financial statements and notes thereto that are included in our Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Previous wording
We refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations as our “MD&A”. The objective of our MD&A is to provide investors with information in order to assess the material changes in our financial condition from December 31, 2023 to June 30, 2024 and the material changes in our results of operations for the three and six months ended June 30, 2024 as compared to the same periods in 2023. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.
Current wording
We refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations as our “MD&A”. The objective of our MD&A is to provide investors with information in order to assess the material changes in our financial condition from December 31, 2023 to September 30, 2024 and the material changes in our results of operations for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.
Previous wording
For 55 years, we have been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. Citizens conducts insurance related operations through its insurance subsidiaries, which provide benefits to policyholders throughout the United States and in 80 different countries. We specialize in offering primarily ordinary whole life insurance, endowment products and final expense insurance in niche markets where we believe we can optimize our competitive position.
Current wording
For 55 years, we have been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. Citizens conducts insurance related operations through its insurance subsidiaries, which provide benefits to policyholders globally. We specialize in offering primarily ordinary whole life insurance, endowment products and final expense insurance in niche markets where we believe we can optimize our competitive position.
Previous wording
Premium Revenues. Premium revenues and investment income are our two primary sources of revenue and thus key to our profitability.
Current wording
Premium revenues and investment income are our two primary sources of revenue and thus key to our profitability.
Previous wording
Premium revenues consist of all money deposited by customers into new and existing insurance policies. We view these premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and thereafter any premiums received are renewal premiums. We believe premium statistics are meaningful to gaining an understanding of, among other things, the attractiveness of our new products, how expansion of our distribution channels affects our revenue, customer retention and the performance of our business from period-to-period. Throughout the MD&A, we describe the actions and initiatives that we are taking to increase sales and improve retention, sales performance in each period and as compared to the prior periods, and how we view trends with respect to sales and retention.
Current wording
We believe premium statistics are meaningful to gaining an understanding of, among other things, the attractiveness of our new products, how expansion of our distribution channels affects our revenue, customer retention and the performance of our business from period-to-period. Throughout the MD&A, we describe the actions and initiatives we are taking to increase sales and improve retention, sales performance in each period and as compared to the prior periods, and how we view trends with respect to sales and retention.
Previous wording
In the past year, we have significantly expanded our domestic distribution in the Life Insurance segment and first year premiums have more than doubled in this segment quarter-over-quarter and almost doubled year-to-date as compared to 2023. Because of this significant growth, in the second quarter of 2024, we entered into a coinsurance agreement with RGA Reinsurance Company ("RGA") in order to provide more capacity for growth. Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business, which means that we cede 50% of premiums in our domestic final expense business to RGA. We refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to RGA and our other reinsurers.
Current wording
Over the last couple of years, we began our "white label" program to expand our distribution by expanding CICA Domestic's state licenses, developing new final expense and living benefit products, and filing these new products in multiple states. As a result, in the past year, we have significantly expanded our domestic distribution in the Life Insurance segment and first year premiums have almost doubled in this segment quarter-over-quarter and year-to-date as compared to 2023. We incur significant upfront costs in acquiring new business such as this, including the payment of sales commissions and underwriting costs, and thus in order to provide more capacity for growth, in the second quarter of 2024, we entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business, which means that we cede 50% of premiums received and benefits paid in our domestic final expense business to RGA. We refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to RGA and our other reinsurers.
Previous wording
In addition to our domestic growth, first year premiums in our international business have increased in both the three and six months ended June 30, 2024, as compared to the same periods in 2023, due to focused marketing campaigns with our international distribution channel.
Current wording
First Year Premiums. In addition to increased first year premiums due to our domestic growth discussed above, first year premiums in our international business have increased in the nine months ended September 30, 2024, as compared to the same period in 2023 as we continue to work with our distribution partners to expand sales.
Previous wording
Our renewal life and A&H premium revenues in the six months ended June 30, 2024 decreased slightly primarily due to the impact of a higher level of surrenders during the last few years (and thus a lower amount of policies paying renewal premiums) and from matured endowment benefits, which we expected due to contractual expiration dates.
Current wording
Renewal Premiums. Our renewal life and A&H premium revenues in the three and nine months ended September 30, 2024 slightly decreased primarily due to the impact of a higher level of surrenders and matured
Previous wording
Investments. Our net investment income increased for both the three and six months ended June 30, 2024 by 2% compared to the same prior year periods, due primarily to investment income from our limited partnership investments and a growing diversified invested asset base.
Current wording
Investment Income. Our net investment income increased for both the three and nine months ended September 30, 2024 compared to the same prior year periods, due primarily to investment income from our limited partnership investments and a growing diversified invested asset base.
Previous wording
Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus also key to our profitability. The three largest components of this expense are reflected in the graphs below. In the three and six months ended June 30, 2024 compared to the prior year periods:
Current wording
Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus also key to our profitability. The three largest components of this expense are reflected in the graphs below. In the three and nine months ended September 30, 2024 compared to the prior year periods,
Previous wording
•surrenders decreased slightly as we continue to focus on retention efforts, and
Current wording
•surrenders decreased as we continue to focus on retention efforts, and
Previous wording
Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Our general operating expenses for the three and six months ended June 30, 2024 increased compared to the prior year periods. The primary reason for the increase was the accrual of $3.5 million in legal fees awarded to certain defendants in the trade secret lawsuit. We have not paid any of these fees and intend to appeal the judgment against us. See Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit. To a lesser extent, the increase was also due to our continued investment in the growth of our business and costs incurred as we transitioned to a new CEO.
Current wording
Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Our general operating expenses for the three and nine months ended September 30, 2024 increased compared to the prior year periods. The primary reason for the increase in the nine months ended September 30, 2024 was the accrual of $3.5 million in legal fees awarded to certain defendants in the trade secret lawsuit. We have not paid any of these fees and intend to appeal the judgment against us. See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit for additional details. To a lesser extent, the increase was also due to our continued investment in the growth of our business and costs incurred as we transitioned to a new CEO.
Previous wording
Our net income per share of Class A common stock was $0.08 and $0.17 for the three and six months ended June 30, 2024, respectively, compared to $0.12 and $0.22 in the prior year periods.
Current wording
Our basic net income per share of Class A common stock was $0.06 and $0.23 for the three and nine months ended September 30, 2024, respectively, compared to $0.06 and $0.28 in the same prior year periods.
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•$5.1 billion of direct insurance in force
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•$5.2 billion of direct insurance in force
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•Net income per share of Class A common stock of $0.17
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•Diluted net income per share of Class A common stock of $0.22
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•Book value per share of Class A common stock of $3.85
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•Book value per share of Class A common stock of $4.16
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Our insurance operations are the primary focus of the Company, as these operations generate most of our income. See the discussion under Segment Operations below for detailed analysis. The amount of insurance, number of policies, and average face amounts for ordinary life policies issued during the periods indicated are shown below.
Current wording
Our insurance operations are the primary focus of the Company, as these operations generate most of our income. See the discussion under Segment Operations below for a detailed analysis. The amount of direct insurance, number of policies, and average face amounts for ordinary life policies issued during the periods indicated are shown below.
Previous wording
As we previously disclosed, our strategic initiatives include the introduction of new products tailored to our specific markets and expansion of our distribution channels both domestically and internationally. These new products and distribution channels helped drive the 73% increase in total insurance issued in the six months ended June 30, 2024 as compared to the prior year period.
Current wording
As we previously disclosed, our strategic initiatives include the introduction of new products tailored to our specific markets and expansion of our distribution channels both domestically and internationally. These new products and distribution channels helped drive the 74% increase in total insurance issued in the nine months ended September 30, 2024 as compared to the prior year period.
Previous wording
The growth in our Life Insurance segment is primarily attributable to strong sales of our new domestic final expense products, which accounted for over half of the insurance issued through June 30, 2024. The Life Insurance segment also benefited from sales of our international whole life product, which accounted for 65% of total insurance issued internationally in this segment for the six months ended June 30, 2024.
Current wording
The growth in our Life Insurance segment is primarily attributable to strong sales of our new domestic final expense products, which accounted for over half of the insurance issued through September 30, 2024. The Life Insurance segment also benefited from sales of our international whole life product, which accounted for 68% of total insurance issued internationally in this segment for the nine months ended September 30, 2024.
Previous wording
Insurance issued in our Home Service Insurance segment decreased for the six months ended June 30, 2024 compared to the prior year period as we continue to make changes to our agents' compensation structures to improve the quality of sales in this segment and believe the impact of inflation has affected new sales since the customer demographic is primarily middle- and lower-income individuals.
Current wording
Insurance issued in our Home Service Insurance segment decreased for the nine months ended September 30, 2024 compared to the prior year period largely due to strategic actions intended to improve sales quality and persistency, which led to a decrease in our agent sales force as we focus on these improvements. We also believe the impact of inflation on the cost of living has affected new sales since the customer demographic is primarily middle- and lower-income individuals.
Previous wording
Total revenues increased in the three and six months ended June 30, 2024 as compared to the prior year periods, due to significantly higher first year life insurance premiums, higher net investment income and higher other income from supplemental contract revenue. The Company stopped accepting premiums for property insurance at the end of May 2023 and ceased these operations on June 30, 2023. Therefore, the table below shows a summary of our life and A&H premiums for the periods indicated.
Current wording
The Company stopped accepting premiums for property insurance at the end of May 2023 and ceased these operations on June 30, 2023. Therefore, the table below shows a summary of our life and A&H premiums for the periods indicated.
Previous wording
Premium Income. Total direct premiums increased 9% and 6% in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023 due to strong first year premium growth primarily in our Life Insurance segment.
Current wording
Premium Income. Direct premiums increased 5% and 6% in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 due to strong first year premium growth in our Life Insurance segment. Renewal premiums decreased in both periods due to the high level of surrenders and matured endowments in the prior year, which negatively affect renewal premiums in the current periods.
Previous wording
Reinsurance ceded premiums increased in the three and six months ended June 30, 2024 compared to the same periods in 2023 due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
Current wording
Reinsurance ceded premiums increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
Previous wording
Due to insurance regulations, fixed maturity securities constitute the vast majority, or 88%, of our investment portfolio based on fair value and thus provide the vast majority of our investment income. Our total investment income increased by 2% for the three and six months ended June 30, 2024 compared to the same periods in 2023, primarily due to a higher average portfolio yield on our fixed maturity securities in the current period. Long-term investment income increased as our private equity investment asset base grew.
Current wording
Due to insurance regulations, fixed maturity securities constitute the vast majority (or 88%) of our investment portfolio based on fair value and thus provide the vast majority of our investment income. Our total investment income increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to a higher average portfolio yield on our fixed maturity securities in the current period.
Previous wording
Investment Related Gains (Losses), Net. We recorded investment related losses of $0.3 million and gains of $0.7 million during the three and six months ended June 30, 2024, respectively, compared to investment related gains of $0.7 million and $0.4 million during the same prior year periods. As described above, the gains and losses are primarily related to the fair value change of our limited partnership and equity security investments, mostly in our Life Insurance segment, due to the volatility in equity markets over the past year. We did not sell these investments; however, the changes in fair values of our equity securities are reflected as investment related gains or losses in our income statement, in addition to executed transactions that result in a gain or loss.
Current wording
Investment Related Gains (Losses), Net. We recorded investment related gains of $0.8 million and $1.5 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.9 million and $0.5 million during the same prior year periods. The gains and losses are primarily related to the fair value change of our limited partnership and equity security investments, mostly in our Life Insurance segment, due to the volatility in equity markets over the past year. We did not sell these investments; however, the changes in fair values of our equity securities are reflected as investment related gains or losses in our income statement, in addition to executed transactions that result in a gain or loss.
Previous wording
Other Income. Other income consists primarily of supplemental contracts issued to policyholders in our Life Insurance segment upon the surrender or maturity of their original policies.
Current wording
Other Income. Other income consists primarily of supplemental contracts issued to international policyholders in our Life Insurance segment upon the surrender or maturity of their original policies. Supplemental contracts offer our policyholders the opportunity to leave their cash with us and be paid interest at a guaranteed rate or receive an annuity, at their option.
Previous wording
Payments of claims and surrenders benefits constitute the majority of our expenses. Total benefits and expenses increased in the three and six months ended June 30, 2024 as compared to same periods in 2023 driven primarily by higher matured endowments in both periods and higher death claim benefits in the first quarter of 2024 as compared to the same period in 2023. The $3.5 million accrual of legal fees awarded to the defendants in the trade secret trial, reflected in other general expenses, also contributed to the increase in the three months ended June 30, 2024.
Current wording
Payments of claims and surrenders benefits constitute the majority of our expenses. Total benefits and expenses increased in the three and nine months ended September 30, 2024 as compared to same periods in 2023 driven primarily by the costs related to our new CICA domestic business, as described above as well as a higher volume of reported claims in our Home Services Insurance segment. The $3.5 million accrual of legal fees awarded to the defendants in the trade secret lawsuit, reflected in other general expenses, also contributed to the increase in the nine months ended September 30, 2024.
Previous wording
Death claim benefits are being impacted by the increase in policies issued over the past few years.
Current wording
Death claim benefits are being impacted by the increase in policies issued over the past few years and an increase in volume of claims reported in our Home Service Insurance segment.
Previous wording
Surrender benefits decreased in the three and six months ended June 30, 2024 compared to the same periods in 2023. Surrenders are primarily related to international policies that are nearing maturity as well as policies that have passed their surrender charge period. We have implemented retention initiatives over the past few years, which we believe are helping to decrease surrenders.
Current wording
Surrender benefits decreased in the three and nine months ended September 30, 2024 compared to the same periods in 2023. Surrenders are primarily related to international policies that have passed their surrender charge period. We have implemented retention initiatives over the past few years, which we believe are helping to decrease surrenders.
Previous wording
Matured endowment benefits increased for the three and six months ended June 30, 2024 compared to the same periods in 2023. We anticipated this increase based upon the contractual maturity dates of the policies.
Current wording
Matured endowment benefits increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023. We anticipated this increase based upon the contractual maturity dates of the policies.
Previous wording
Increase (Decrease) in Future Policy Benefit Reserves. Future policy benefit reserves reflect the liability established to provide for the payment of policy benefits that we expect to pay in the future and thus generally increase when we have a larger in force block of business due to higher sales and better persistency (i.e., more policies on which we expect to pay future benefits) and decrease when we have lower sales and persistency. In the three and six months ended June 30, 2024, the change in future policy benefit reserves varied due to the amount of reserves released in connection with higher matured endowments compared to increases in insurance issued and increases in our in force block of business.
Current wording
Increase (Decrease) in Future Policy Benefit Reserves. Future policy benefit reserves reflect the liability established to provide for the payment of policy benefits that we expect to pay in the future and thus generally increase when we have a larger in force block of business due to higher sales and better persistency (i.e., more policies on which we expect to pay future benefits) and decrease when we have lower sales and persistency. In the three and nine months ended September 30, 2024, the change in future policy benefit reserves increased due to the amount of reserves on new insurance issued and the in force book of business somewhat offset by released reserves in connection with higher matured endowments.
Previous wording
Policyholder Liability Remeasurement (Gain) Loss. Most of our products are long-duration contracts that provide a specified, fixed amount of insurance benefit in exchange for a fixed premium. When a policy is initially issued, we establish a "net premium ratio" ("NPR") using assumptions regarding expected premiums and policyholder benefit liabilities. On a quarterly basis, we review actual versus expected experience in such quarter, which is reported as a policyholder liability remeasurement gain (if better performance than assumptions) or loss (if lower performance than assumptions).
Current wording
Policyholder Liability Remeasurement (Gain) Loss. Most of our products are long-duration contracts that provide a specified, fixed amount of insurance benefit in exchange for a fixed premium. When a policy is initially issued, we establish a "net premium ratio" ("NPR") using assumptions regarding expected premiums and policyholder benefit liabilities. On a quarterly basis, we review actual versus expected experience in such quarter, which is reported as a policyholder liability remeasurement gain (if better performance than assumptions) or loss (if lower performance than assumptions). Additionally, in the third quarter of each year, we update our cash flow assumptions to recalculate the NPR, with the impact on the liability for future policy benefits recognized as a policyholder liability remeasurement on a retrospective catch-up basis. In 2024, remeasurement (gain) loss was negatively affected by updates to mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.
Previous wording
Commissions. Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our independent consultants and independent agents for selling our products. First year commission rates are higher than renewal commission rates and thus commissions fluctuate directly in relation to first year sales. As discussed above, in the three and six months ended June 30, 2024, the increases in first year sales led to an increase in commission related expenses.
Current wording
Commissions. Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our independent consultants and independent agents for selling our products. First year commission rates are higher than renewal commission rates and thus commissions fluctuate directly in relation to first year sales. The increases in first year sales in the three and nine months ended September 30, 2024 led to an increase in commission related expenses in both periods as compared to the prior year periods.
Previous wording
Capitalization of Deferred Policy Acquisition Costs. We capitalize costs related to successful sales of our insurance products, which include certain commissions, policy issuance costs, and underwriting and agency expenses. These costs vary based upon amounts of premiums received related to new and renewal business. Capitalized DAC increased in the three and six months ended June 30, 2024, which is in line with the increases in new sales activity. Significantly lower amounts are capitalized related to renewal business in correlation with the lower commissions paid on that business compared to first year business, which has higher commission rates.
Current wording
Capitalization of Deferred Policy Acquisition Costs. We capitalize costs related to successful sales of our insurance products, which include certain commissions, policy issuance costs, and underwriting and agency expenses. These costs vary based upon amounts of premiums received related to new and renewal business. Capitalized DAC increased in the three and nine months ended September 30, 2024, which is in line with the increases in new sales activity. Significantly lower amounts are capitalized related to renewal business in correlation with the lower commissions paid on that business compared to first year business, which has higher commission rates.
Previous wording
Amortization of Deferred Policy Acquisition Costs. Amortization of DAC increased in the three and six months ended June 30, 2024, compared to the same periods in 2023. DAC is amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization.
Current wording
Amortization of Deferred Policy Acquisition Costs. Amortization of DAC increased in the three and nine months ended September 30, 2024, compared to the same periods in 2023. DAC is amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization.
Previous wording
Premiums. Our total premiums increased by 10% and 8% in the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 due to the 103% and 90% increase, respectively, in first year premiums. First year premiums rose significantly due to sales of our new products and expanded domestic distribution. Renewal premiums decreased slightly in the six months ended June 30, 2024 as compared to the same prior year period. As described above, this decline is due to high surrenders and matured endowments over the last several years; however, the growth in sales over the last 2 years contributed to the slight increase in renewal premiums in the three months ended June 30, 2024 as compared to 2023.
Current wording
Premiums. Our total premiums increased by 3% and 6% in the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 due to the 62% and 78% increase, net of reinsurance, respectively, in first year premiums. First year premiums rose significantly due to sales of our new products and expanded domestic distribution. Renewal premiums decreased in the three and nine months ended September 30, 2024 as compared to the same prior year periods. As described above, this decline is due to high surrenders and matured endowments over the last several years.
Previous wording
The increase in reinsurance ceded premiums in the three and six months ended June 30, 2024, compared to the same periods in 2023, is due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
Current wording
The increase in reinsurance ceded premiums in the three and nine months ended September 30, 2024, compared to the same periods in 2023, is due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.
Previous wording
While our domestic life insurance business drove the significant increase in first year premiums, life insurance premiums are generated largely from our international policyholders living in 80 different countries across the globe. The following table sets forth our premiums by location for the three and six months ended June 30, 2024 and 2023.
Current wording
While our domestic life insurance business drove the significant increase in first year premiums, life insurance premiums are generated largely from our international policyholders living in 80 different countries across the globe. The following table sets forth our premiums by location for the three and nine months ended September 30, 2024 and 2023.
Previous wording
Investment Related Gains (Losses), Net. We recorded investment related losses of $0.3 million and gains of $0.8 million during the three and six months ended June 30, 2024, respectively, compared to investment related gains of $0.7 million and $0.3 million during the same prior year periods, resulting primarily from the change in estimated fair market value of our limited partnership investments.
Current wording
Investment Related Gains (Losses), Net. We recorded investment related gains of $0.9 million and $1.7 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.4 million and $0.1 million during the same prior year periods, resulting primarily from the change in estimated fair market value of our limited partnership investments.
Previous wording
Claims and Surrenders. The following table sets forth our primary claims and surrender benefits paid within our Life Insurance segment for the three and six months ended June 30, 2024 compared to the same periods in 2023.
Current wording
Claims and Surrenders. The following table sets forth our primary claims and surrender benefits paid within our Life Insurance segment for the three and nine months ended September 30, 2024 compared to the same periods in 2023.
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Premium Revenues. Premium revenues consist of all money deposited by customers into new and existing insurance policies. We view these premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and thereafter any premiums received are renewal premiums.
Current report — wording carried from elsewhere
Total revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, due to significantly higher first year life insurance premiums, investment related gains and higher other income in the nine month period due to supplemental contract revenue.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Previous report — wording carried elsewhere
Company for short-term or longer-term needs. As of June 30, 2024, we have not borrowed any money under the Credit Facility.