CITIZENS, INC.

We operate in two business segments: Life Insurance and Home Service Insurance.

These segments are reported in accordance with U.S. GAAP. The Company evaluates profit and loss performance based on U.S. GAAP net income (loss) before federal income taxes for these segments. The Company's Other Non-Insurance Enterprises include non-insurance operations such as IT and corporate-support functions, which are included in the table presented below to properly reconcile the segment information with the consolidated financial statements of the Company.

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The following table sets forth income (loss) before federal income tax by segment during the periods indicated.

LIFE INSURANCE

Detailed results of operations in the Life Insurance segment for the periods indicated are as follows:

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In the three months ended June 30, 2025, the $0.7 million increase in income before federal income tax was driven by higher first year and renewal premiums and an increase in investment related gains (losses) partially offset by higher claims and surrenders due to the matured endowments in CICA International. Commissions were lower despite higher first year sales due to our CICA Domestic coinsurance agreement with RGA.

In the six months ended June 30, 2025, income before federal income tax decreased despite a $2.3 million increase in premiums driven by a $0.9 million decrease in investment related gains and losses primarily related to the BlackRock write-down; and a $5.0 million increase in insurance benefits paid or provided due to increased matured endowments in CICA International.

Life Insurance segment premium breakout is detailed below.

Premiums. Direct premiums increased by $2.6 million and $6.1 million in the three and six months ended June 30, 2025, respectively, as compared to the same periods in 2024. The increase was driven by sales of our newer products and an increased number of producing agents, primarily in CICA Domestic. Ceded reinsurance premiums increased due to the CICA Domestic coinsurance agreement with RGA entered into in the second quarter of 2024.

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While CICA Domestic drove the significant increase in first year premiums, life insurance premiums are generated largely from our international policyholders living in almost 80 different countries across the globe. The following table sets forth our premiums by location for the three and six months ended June 30, 2025 and 2024.

Sales in Taiwan have been declining recently due to succession related difficulties within our primary distribution agency in Taiwan, regulatory challenges and geopolitical shift. We are also starting to face some headwinds in Venezuela that may affect premiums revenues, due to the strength of the US dollar compared to the local currency and their difficulties to obtain dollars.

Investment Related Gains (Losses), Net. We recorded investment related gains of $2.6 million and losses of $0.1 million during the three and six months ended June 30, 2025, respectively, compared to investment related losses of $0.3 million and gains of $0.8 million during the same prior year periods. These fluctuations in investment-related gains and losses were primarily influenced by changes in the estimated fair market value of our limited partnership investments. Notably, the loss for the six months ending June 30, 2025, was largely attributed to a write-down in the estimated fair market value of our ESG BlackRock investment. This decline was significant enough to outweigh the gains from other investments.

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, 2025 compared to the same periods in 2024.

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The majority of our claims and surrender benefits in our Life Insurance segment were related to payment of surrender benefits and matured endowment benefits in CICA International. Many of our endowment policies are reaching their contractual maturity dates and thus matured endowment benefits are expected to be higher in each quarter of 2025 as compared to 2024. We expect elevated trends to continue over the next few years but at a reduced level when compared to 2025. Death claim benefits decreased for the three and six months ended June 30, 2025, compared to the prior year periods due to a combination of lower volume and our coinsurance agreement with RGA alleviating some of our liability to pay these claims. Mortality experience is closely monitored and these amounts were within expected levels.

Increase (Decrease) in Future Policy Benefit Reserves. The change in future policy benefit reserves for the three and six months ended June 30, 2025 and 2024 was the result of reserves released due to surrenders and higher matured endowment benefits. These releases were partially offset by increases in reserves due to new insurance issued and the reserves that increase on our in force block of business nearing maturity.

HOME SERVICE INSURANCE

Detailed results of operations for the Home Service Insurance segment for the periods indicated are as follows:

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Income before federal income tax in the three months ended June 30, 2025 increased to $1.6 million from $1.4 million in the three months ended June 30, 2024. The factors that drove this increase were lower insurance benefits paid and provided and commissions, partially offset by investment related losses.

Income before federal income tax in the six months ended June 30, 2025 decreased to $1.7 million from $2.0 million in the same period in 2024. The factors that drove this decrease were investment related losses partially offset by lower insurance benefits paid and provided.

Premiums. Home Service Insurance segment life and A&H premium breakout is detailed below.

Our life and A&H premiums in the Home Service segment slightly declined in the three and six months ended June 30, 2025 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 long term improvements. Our first year sales in the second quarter of 2025 did increase over the first quarter of 2025, we believe from our strategy beginning to show positive results. Additionally, we believe external economic pressures, such as inflation, have impacted revenue in this segment disproportionately.

Claims and Surrenders. Payments of claims and surrender benefits, which are the largest portion of our expenses, are summarized as follows:

The majority of claims and surrender benefits in our Home Service Insurance segment are death claim benefits. Death claim benefits decreased slightly in the three and six months ended June 30, 2025 compared to the same prior year periods due primarily to lower volume of reported claims. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims.

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OTHER NON-INSURANCE ENTERPRISES

This operating unit represents the administrative support functions for the insurance operations. Its revenues are primarily intercompany and have been eliminated in consolidation under U.S. GAAP, which typically results in a loss. Revenue in this operating unit consists primarily of net investment income and investment related gains or losses, while expenses consist of other general expenses related to corporate functions. The primary reason for the decreased loss before federal income tax in the three and six months ended June 30, 2025 compared to the same period in 2024 is lower other general expenses due to a $3.5 million legal fee expense incurred in the second quarter of 2024, partially offset by increase in costs incurred related to our equity incentive compensation program due to additional participants as well as an increased stock price, which increases our expense taken upon vesting of prior year grants.

INVESTMENTS

Our investments are an integral part of our business success, as we invest the majority of premiums collected to pay for future benefits and rely on net investment income of our ongoing operations. Our cash and invested assets at June 30, 2025 were $1.4 billion, of which 87% was invested in fixed maturity securities, all of which are classified as available-for-sale. We closely monitor the duration of our fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy our insurance obligations.

The following table sets forth the carrying value of our investments by investment category and cash, cash equivalents and the percentage of each to total cash, cash equivalents and invested assets.

(1)Includes $112.8 million and $113.4 million of securities guaranteed by third parties at June 30, 2025 and December 31, 2024, respectively.

(2) Includes $95.0 million and $92.8 million of U.S. Government-sponsored enterprises at June 30, 2025 and December 31, 2024, respectively.

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The carrying value of the Company’s fixed maturity securities investment portfolio at June 30, 2025 was $1.24 billion compared to $1.22 billion at December 31, 2024. This increase primarily reflects the impact of interest rate sensitivity on the fair value of our fixed maturity securities. The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of June 30, 2025 did not materially change from December 31, 2024 – the weighted average was “A” at both dates.

Cash and cash equivalents decreased as of June 30, 2025 from December 31, 2024 and fluctuates from period-to-period primarily due to the timing of operating and investing activities.

Other long-term investments increased by $2.8 million as of June 30, 2025 from December 31, 2024 due to additional funding and changes in the fair market value of our limited partnership investments.

Obligations of States and Political Subdivisions

The Company’s fixed maturity securities investment portfolio at June 30, 2025 and December 31, 2024 included $271.3 million and $268.3 million, respectively, of securities that are obligations of states and political subdivisions, including municipalities (collectively referred to as the municipal fixed maturity security portfolio).

The Company's municipal fixed maturity security portfolio includes third-party guarantees. Detailed below is a presentation by the Nationally Recognized Statistical Rating Organization ("NRSRO") rating of these holdings by funding type as of June 30, 2025.

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The table below shows the categories in which the Company held investments in special revenue fixed maturity securities that were greater than 10% of fair value based upon the Company's total municipal fixed maturity security portfolio at June 30, 2025.

The Company's municipal fixed maturity security portfolio is spread across many states, however, municipal fixed maturity securities from Texas and California comprise the most significant concentration of the total municipal fixed maturity security portfolio as of June 30, 2025. The Company holds 21% and 16% of its municipal fixed maturity security portfolio in Texas and California issuers, respectively, as of June 30, 2025. There were no other states or individual issuer holdings that represented or exceeded 10% of the total municipal fixed maturity security portfolio as of June 30, 2025.

The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in Texas at June 30, 2025.

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The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in California at June 30, 2025.

IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY AND EQUITY SECURITIES

The Company assesses available-for-sale ("AFS") fixed maturity securities in an unrealized loss position for expected credit losses. The Company did not record any credit valuation allowances on fixed maturity securities in either of the three and six months ended June 30, 2025 or 2024.

Gross unrealized losses on AFS fixed maturity securities amounted to $170.2 million as of June 30, 2025 and $185.7 million as of December 31, 2024. This decrease in gross unrealized losses during 2025 was a result of the decrease in average market interest rates at the end of 2025 as compared to 2024.

Information on both unrealized and realized gains and losses by category is set forth in Part I, Item 1, Note 3. Investments of the notes to our consolidated financial statements herein.

LIQUIDITY AND CAPITAL RESOURCES

Below are our primary capital resources (based on carrying value of each) as of the periods indicated.

Liquidity refers to a company's ability to generate sufficient cash flows to meet the needs of its operations. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flows to meet our obligations. We currently anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets. From time to time, we may raise capital by selling shares in our SIP (as defined below) and we may also access our Credit Facility if needed (also as described below). Citizens had no debt as of June 30, 2025.

Cash from Operating Activities. Cash provided by or used in operating activities is an important liquidity metric because it reflects, during a given period, the amount of cash generated that is available to pay our operating

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expenses, invest in our business or make strategic acquisitions. Cash provided by operating activities was $4.2 million in the six months ended June 30, 2025.

Cash used in Investing Activities. These cash flows, for the most part, are reinvested in new investments. The investing activities fluctuate from period to period due to timing of securities activities such as calls, maturities and reinvestment of those funds. Net cash outflows from investing activities totaled $6.6 million in the six months ended June 30, 2025. 88% of total investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs.

PARENT COMPANY LIQUIDITY AND CAPITAL RESOURCES

Citizens is a holding company and has minimal operations of its own. Our assets consist of the capital stock of our subsidiaries, cash and investments. Our liquidity requirements are met primarily from two sources: cash generated from our operating subsidiaries and our invested assets. Our ability to obtain cash from our insurance subsidiaries depends primarily upon the availability of statutorily permissible payments, including payments we receive from service agreements with our insurance subsidiaries and dividends from the subsidiaries. The ability to make payments to the holding company is limited by applicable laws of the U.S. states of domicile and by the Puerto Rico Office of Commissioner of Insurance, which subject insurance operations to significant regulatory restrictions. These laws and regulations require, among other things, that our insurance subsidiaries maintain minimum solvency or premium to surplus ratio requirements, which limit the amount of dividends that can be paid to the holding company. The regulations also require approval of our service agreements with the applicable regulatory authority in order to prevent insurance subsidiaries from moving large amounts of cash to the less regulated holding company.

In addition to the above-mentioned sources of cash, we offer a Stock Investment Plan ("SIP"), which allows investors, policyholders, independent contractors and agents, employees and directors to directly purchase our stock. At our option, purchases of stock under the SIP can be made from newly issued or treasury stock, rather than in the open market, in which case, we can raise capital by selling our shares.

We renewed our Credit Facility with Regions Bank on May 3, 2024 for an additional three years. See Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements, herein, for a description of the Credit Facility. The Credit Facility provides additional liquidity to the Company for short-term or longer-term needs. We have not borrowed any money under the Credit Facility.

INSURANCE COMPANY SUBSIDIARY LIQUIDITY AND CAPITAL RESOURCES

The liquidity requirements of our insurance operations are primarily met by premium revenues, investment income and proceeds from investment maturities, calls or sales. Primary cash needs are for payments of policyholder benefits, investment purchases, and operating expenses. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flow to meet our obligations. As we have discussed, we have been growing our domestic business by developing new products and expanding our distribution channels, which has led to an increase in first year direct premiums(i.e., new sales) of 71% from the year ended December 31, 2023 to the year ended December 31, 2024, and 32% from the six months ended June 30, 2024 to the six months ended June 30, 2025. When selling new policies, we incur upfront policy acquisition costs, such as agent commission payments. While historically, cash flows from our operations have been sufficient to meet our cash needs, in the second quarter of 2024 we entered into a coinsurance reinsurance agreement with RGA to help with some of the costs, and the insurance subsidiaries also have the available-for-sale fixed maturity investment portfolio available to create additional cash flows if needed. Two of our insurance subsidiaries are members of the Federal Home Loan Bank ("FHLB") of Dallas. FHLB membership provides the insurance subsidiaries with access to various low-cost collateralized borrowings and funding agreements. While not the only source of additional liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed.

We believe that we have adequate capital resources and ability to obtain additional capital, if needed, to support the short-term and longer-term liquidity requirements of our insurance operations. See Contractual Obligations and Off-

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balance Sheet Arrangements in our 2024 Form 10-K and below for a discussion of known and estimated cash needs. Cash flow projections and cash flow tests under various market interest rate scenarios are performed annually to assist in evaluating liquidity needs and adequacy.

Trends, Demands and Restrictions on our Uses of Cash

Payments of benefits for claims and surrenders are our largest use of cash. There are three primary components of these payments: death claims, surrenders and matured endowments.

Matured Endowments. Our endowment products have contractual maturity dates and provide the policyholder with alternatives once the policy matures - they can choose to take a lump sum payout, leave the money on deposit at interest with the Company or purchase another insurance policy. Approximately 19% of the endowments in force will mature in the next five years, totaling approximately 6% of our in force business as of June 30, 2025. The highest level of maturities will occur this year. Policyholder election behavior is unknown, but if too many policyholders elect lump sum distributions, the Company could be exposed to liquidity risk in years of high maturities. Meeting these distributions could require the Company to sell its investments at inopportune times to pay policyholder withdrawals. Alternatively, if the policyholders were to leave the money on deposit with the Company at interest, our profitability could be impacted if the product guaranteed rate is higher than the market rate we are earning on our investments. We currently anticipate that our available operating cash flow and capital resources will be adequate to meet our needs for funds, but 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.

Surrenders. In order to mitigate the risk of early policyholder surrenders, we include provisions in our insurance policies, such as surrender charges, that help limit and discourage early withdrawals, but as many of our older policies have reached the age where surrender charges have expired or significantly decreased, we have experienced high levels of surrenders in the past several years. We believe that surrenders have been high due to other reasons, including the loss of one of our biggest distributors in Venezuela in 2018, increasing interest rates, which may encourage policyholders to seek higher rates of return in different investment products, post-pandemic beliefs that life insurance may not be as important as it was during the pandemic, and inflationary and tariff pressures, which may cause policyholders to want the cash values of their policies due to decreased purchasing power elsewhere. To the extent that early surrenders are higher than expected, our use of cash could be higher than expected. We continue to monitor surrenders and early withdrawals and focus on our retention initiatives and efforts to retain cash when policyholders surrender their policies.

Our cash flow from operations is also negatively impacted with high matured endowments and surrenders, as they lead to lower renewal premiums.

Death Claims. Our product pricing assumes a certain mortality rate and thus a primary liquidity concern is the risk of higher than expected mortality experience. Our death benefit payments decreased in the six ended June 30, 2025.

Another significant use of cash is payment of commissions. In our CICA Domestic business, we pay advance commissions on some of our insurance products, meaning we pay an agent a portion of their first year commission immediately upon sale of a policy, rather than "as earned", or when premiums are received by us. Because of this, another liquidity concern is that rapid growth in first year sales of these products creates a significant increase in commission payments. CICA Domestic sales have increased significantly since the third quarter of 2023. To offset some of this strain on our capital, we entered into the coinsurance agreement with RGA in the second quarter of 2024 and elected to cede 50% of our final expense business to RGA, which alleviates some of the expense strain. We may also seek other options, such as loans at the holding company level (from the Credit Facility or otherwise) that would allow us to reduce the liquidity risk should CICA Domestic's required commission payments exceed current resources.

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See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Legal Proceedings - Trade Secret Lawsuit in our 2024 Form 10-K for a discussion of the trade secret lawsuit, which could negatively impact our cash if we do not succeed in our appeal.

Regulatory Restrictions on our Use of Cash

As discussed above, we are subject to regulatory capital requirements that could affect the Company’s ability to access capital from our insurance operations or cause the Company to have to put additional cash in our wholly-owned subsidiaries.

Our domestic companies are subject to minimum capital requirements set by the NAIC in the form of risk-based capital ("RBC"). RBC considers the type of business written by an insurance company, the quality of its assets, and various other aspects of an insurance company's business to develop a minimum level of capital called the "Authorized Control Level Risk-Based Capital". This level of capital is then compared to an adjusted statutory capital that includes capital and surplus as reported under statutory accounting principles, plus certain investment reserves. Should the ratio of adjusted statutory capital to control level RBC fall below 200% for our domestic companies, a series of remedial actions by the affected company would be required. Additionally, we have a Capital Maintenance Agreement between Citizens and CICA Domestic, Citizens' wholly-owned subsidiary domiciled in Colorado, which would require Citizens to contribute capital to CICA Domestic in order to maintain a RBC level above 350%. At June 30, 2025, our domestic insurance subsidiaries were above the required minimum RBC levels and CICA Domestic was above 350%.

For CICA Domestic, commission advances are non-admitted assets, which means we need capital to "replace" these assets in order to maintain required regulatory capital levels. As discussed above, management is investigating various options in order to reduce both regulatory capital and liquidity risk should the capital required to support this pace of growth exceed current resources. Citizens may have to contribute capital to CICA Domestic to maintain the required RBC ratio.

CICA International is a Puerto Rico domiciled company. The Insurance Code of Puerto Rico does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the OIC that includes proposed minimum capital and surplus. CICA International is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1. At June 30, 2025, CICA International exceeded the required minimum capital and related ratio.

Any capital that Citizens is required to contribute to its insurance subsidiaries would negatively impact the holding Company's capital resources and liquidity.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2025, we have no additional contractual obligations or off-balance sheet arrangements other than those described in Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements herein and in Part II, Item 7, Contractual Obligations and Off-Balance Sheet Arrangements in our 2024 Form 10-K. We do not utilize special purpose entities as investment vehicles, nor are there any such entities in which we have an investment that engage in speculative activities of any nature, and we do not use such investments to hedge our investment positions.

CRITICAL ACCOUNTING POLICIES

We believe that the accounting policies set forth in Part I, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - "Critical Accounting Policies" and Part IV, Item 15, Note 1. Summary of Significant Accounting Policies of our consolidated financial statements in our 2024 Form 10-K continue to describe the significant judgments and estimates used in the preparation of our consolidated financial statements.

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