CITIZENS, INC.

Effective December 31, 2025, the Company reorganized its insurance reporting structure, shifting from Life Insurance and Home Service Insurance segments to Domestic Insurance and International Insurance segments.

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 re-segmentation has been applied retrospectively to all periods presented to ensure comparability. The following tables present segment information for the years ended December 31, 2025 and 2024, as if the current segment structure had been in place during those periods. The following table sets forth income (loss) before federal income taxes by segment during the periods indicated.

INTERNATIONAL INSURANCE

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

In our International Insurance segment, income before federal income tax was $14.4 million in 2025, as compared to $23.5 million in 2024. Maturing endowments over the last several years have negatively impacted renewal premiums and in 2025, we had our highest level of matured endowments, which led to the $21.3 million increase in claims and surrenders. We expect this amount to decrease in 2026 and consistently over the next few years, as these contracts continue to expire.

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Premium breakout is detailed below.

Direct premiums decreased by $0.3 million in 2025 as compared to 2024 due to the impact the matured endowments have had on renewal premiums. First year premiums continued to grow due to sales of new products.

Our International Insurance segment derives its premiums from policyholders residing in nearly 80 countries worldwide. The following table sets forth our premiums by top locations for the years ended December 31, 2025 and 2024.

Sales in Taiwan have been declining recently due to leadership succession related difficulties within our primary distribution agency in Taiwan, regulatory challenges and geopolitical shift. We are facing some headwinds in Venezuela that may affect premium revenues due to the strength of the U.S. dollar compared to the local currency and their difficulties to obtain dollars. The recent political instability may cause further decline in this business. We continue to closely monitor emerging trends in our Venezuela business.

Investment Related Gains (Losses), Net. Investment related gains and losses improved in 2025 compared to 2024 largely due to the BlackRock write-down in 2024. These gains and losses are generally a result of the change in estimated fair market value for our limited partnerships, as previously discussed.

Other Income. Other income consists primarily of supplemental contracts issued to policyholders 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. As our matured endowments have increased, a growing number of policyholders have chosen to enter into a supplemental contract and thus other income has steadily increased over the last few years.

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Benefits and Expenses.

Claims and surrender benefits breakout is detailed below.

As discussed, the majority of our claims and surrender benefits in this segment were related to payment of matured endowment benefits. Surrender benefits are also a large component of this expense; often as surrender charges expire on endowments after certain periods, policyholders surrender their policies to access the cash value. Surrenders decreased in 2025 compared to 2024, which we believe is due to our retention efforts.

Other General Expenses. General expenses increased due primarily to elevated convention costs and increased consulting related to the campaigns to expand our market to drive long-term value.

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DOMESTIC INSURANCE

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

In our Domestic Insurance segment, income before federal income tax was $12.1 million in 2025, as compared to $1.9 million in 2024. The significant increase was driven by increased premiums and lower insurance benefits paid or provided due to better experience in this segment.

Premium breakout is detailed below.

Total direct premiums increased in 2025 compared to 2024 due largely to continued first year premium growth in our CLOA final expense business as well as higher renewal premiums due to the large volume of sales in 2024.

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Because of the RGA Agreement, reinsurance premiums ceded also increased significantly, leading to an overall increase in premium revenue in this segment of $3.5 million.

Benefits and Expenses.

Claims and surrender benefits breakout is detailed below.

In our Domestic Insurance segment, the majority of claims and surrender benefits is death claim benefits. Death claim benefits decreased 11% in 2025 compared to 2024 due to a combination of lower volume and our coinsurance agreement with RGA alleviating some of our liability to pay these claims. We did not have the RGA Agreement during a portion of 2024. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims.

Policyholder Liability Remeasurement (Gain) Loss. In 2025, remeasurement gain increased significantly as a result of favorable mortality experience compared to our previous assumptions.

Other General Expenses. Other general expenses increased by $0.9 million in 2025 compared to 2024 due to growth in this business.

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 loss reported for 2025 decreased mostly due to a $3.5 million legal fee incurred during the second quarter of 2024, which did not recur in 2025, though this was somewhat offset by increased equity incentive compensation program from additional participants and a higher share price, which led to greater costs recognized as these awards vest.

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 for our ongoing operations. Our cash and invested assets at December 31, 2025 were $1.5 billion, of which 88% 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.

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CITIZENS, INC.

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

(1) Includes $106.9 million and $113.4 million of securities guaranteed by third parties at December 31, 2025 and 2024, respectively.

(2) Includes $101.1 million and $92.8 million of U.S. Government-sponsored enterprises at December 31, 2025 and 2024, respectively.

The carrying value of the Company’s fixed maturity securities investment portfolio at December 31, 2025 was $1.3 billion compared to $1.2 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 December 31, 2025 did not materially change from December 31, 2024 – the weighted average was “A” at both dates.

Cash and cash equivalents decreased as of December 31, 2025 compared to December 31, 2024 and fluctuate from period to period primarily due to the timing of operating and investing activities.

Other long-term investments decreased to $85.4 million as of December 31, 2025, as compared to $93.6 million as of December 31, 2024 primarily due to the fact that we divested from one of our holdings to invest in new opportunities, including investment grade private placement fixed income securities and structured notes. This reduction was partially counterbalanced by capital contributions to other investments and the impact of changes in the fair market value of our limited partnership holdings.

The following table shows annualized investment yields by segment and on a consolidated basis as of December 31 for each year presented.

Yields on invested assets vary between segment operations due to different portfolio mixes and durations in each segment's portfolio. The consolidated yields include our other non-insurance enterprises. Our fixed maturity investment portfolio, primarily invested in callable securities, has faced challenges due to the sustained low interest rate environment over the past decade. Many securities were called between 2019 and 2021, necessitating

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reinvestment in lower interest rate fixed maturity assets, which has begun and will continue to impact net investment income and yields. However, diversification of our investment portfolio into limited partnership investments helped offset that challenging investment environment.

Credit quality is an important feature of our fixed maturity securities because it directly affects the likelihood that an issuer will repay its debt—and therefore impacts both risk and return in a bond portfolio. Credit ratings are assigned by a Nationally Recognized Statistical Rating Organization ("NRSRO") such as Moody’s Investors Service and Standard & Poor’s. A credit rating assigned by a NRSRO is a quality-based rating, with AAA representing the highest quality (i.e., strong finances and lowest default risk) and D the lowest, with BBB and above being considered high-quality investment grade. If an issuer does not have a NRSRO rating, we may look at credit ratings assigned by the NAIC Securities Valuation Office ("SVO"). Fixed maturity securities that we hold that are rated by the SVO are grouped together with the bonds held in the equivalent NRSRO category, and securities that are not rated by a NRSRO or SVO are included in the "other" category.

The following table shows the credit ratings of our fixed maturity securities portfolio by carrying value.

Our investment policy requires us to invest primarily in fixed maturity securities that are investment grade. The small percentage of non-investment grade securities that we hold are primarily the result of ratings downgrades. Additionally, in the third quarter of 2025, the Company purchased a structured note that includes a component categorized as non-investment grade fixed maturity securities.

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Obligations of States and Political Subdivisions

18% of the Company’s fixed maturity securities investment portfolio at December 31, 2025 consists of municipal bonds, which are securities that are obligations of states and political subdivisions. A portion of these municipal bonds include third-party guarantees, which enhances a bond's credit rating. A presentation of our municipal bonds by credit rating and third-party guarantee is below.

The table below shows the categories in which we held investments in special revenue municipal bonds that were greater than 10% of the fair value of our total municipal bond portfolio at December 31, 2025.

The Company's municipal bond portfolio consists of bonds from state and political subdivisions in many states; however, as of December 31, 2025, municipal bonds from issuers in Texas and California comprised 21% and 17%, respectively, of the portfolio. There were no other states or individual issuer holdings equal to or greater than 10% of the total municipal bond portfolio as of December 31, 2025.

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The table below reflects our Texas municipal bonds by credit rating at December 31, 2025.

The table below reflects our California municipal bonds by credit rating at December 31, 2025.

IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY AND EQUITY SECURITIES

We analyze our available-for-sale ("AFS") fixed maturity securities that are experiencing unrealized losses to ascertain if there is an expectation of credit-related impairments. We did not record any credit valuation allowances on fixed maturity securities in either 2025 or 2024.

Gross unrealized losses on AFS fixed maturity securities amounted to $154.3 million as of December 31, 2025 and $185.7 million as of December 31, 2024. The enhancement in gross unrealized losses seen in 2025 stemmed from the rise in average market interest rates at the close of 2025, relative to those at the end of 2024.

Information on both unrealized and realized gains and losses by category is set forth in Part IV. Item 15. Note 2. Investments of the notes to our consolidated financial statements.

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REINSURANCE

Our insurance subsidiaries use reinsurance to share life insurance risks with other companies, reducing exposure beyond their chosen retention limits and managing statutory capital. The Company periodically reviews and may adjust its retention levels, which can affect ceded premiums and revenues. Despite reinsurance, our subsidiaries remain responsible for policy obligations and may be liable if reinsurers fail to meet their commitments.

By evaluating our surplus in relation to the insured liabilities we maintain after retention, we consider our reinsurance arrangements to adequately provide for flexibility of strategy while protecting against downside risk.

The effect of reinsurance on premiums is as follows.

Our insurance subsidiaries monitor the solvency of their reinsurers to minimize the risk of loss in the event of default by a reinsurer. The primary reinsurers of our insurance subsidiaries are large, well-capitalized entities who have ratings by A.M. Best Company ranging from A- (Excellent) to A+ (Superior).

The effect of reinsurance on life insurance in force is as follows.

LIQUIDITY AND CAPITAL RESOURCES

Below are our primary capital resources (based on carrying value) at December 31, 2025 and 2024.

Liquidity refers to a company's ability to generate sufficient cash flows to meet the needs of its operations. Cash provided by operating activities is an important liquidity metric because it reflects, during a given period, the amount of cash generated that is available to pay operating expenses, invest in our business or make strategic acquisitions. We manage our insurance operations as described herein in order to ensure that we have stable and reliable sources of cash flows to meet our obligations. In the year ended December 31, 2025, our operations provided $18.0 million of net cash.

We currently anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets. 89% of our investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs. Additionally, we may raise capital by selling shares in our SIP (as defined below) and may access our Credit Facility if needed (also as described below). Citizens had no debt at December 31, 2025.

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We have traditionally also had significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments. 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 and maturities and reinvestment of those funds. We purchased $170.4 million of fixed maturity securities and we also used $17.0 million to purchase other long-term investments in 2025.

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 all subject insurance operations to significant regulatory restrictions. As discussed in Part I. Item 1. Business and Part I. Item 1A. Risk Factors, 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 IV. Item 15. 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. As of December 31, 2025, 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 CLOA business by developing new products and expanding our distribution channels, which has led to significant increases in first year premiums (i.e., new sales) in our Domestic Insurance segment in the last two years. 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, we entered into the RGA Agreement 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 required. 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-balance Sheet Arrangements 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.

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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 or leave the money on deposit at interest with the Company. Approximately 15% of the endowments in force will mature in the next five years, totaling approximately 5% of our in force business as of December 31, 2025. 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, and 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. Surrender benefits, which have been high the last several years, slightly decreased during 2025. 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 policies reach the age where surrender charges have expired or significantly decreased, we have experienced high levels of surrenders. 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 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 liquidity 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 year ended December 31, 2025 as compared to 2024, partially as a result of RGA paying a portion of the death benefits pursuant to the RGA Agreement.

Commissions. Another significant use of cash is payment of commissions. In our Domestic Insurance segment, 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. Since CLOA sales have increased significantly since the third quarter of 2023, in order to offset some of this strain on our capital, we entered into the RGA Agreement in the second quarter of 2024 and elected to cede 50% of our final expense business to RGA. 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 required commission payments exceed current resources.

See Part IV. Item 15. Note 8. Commitments and Contingencies, as well as Part I. Item 3. Legal Proceedings - Trade Secret Lawsuit, for a discussion of the trade secret lawsuit, which could negatively impact our cash if we do not succeed in our appeal.

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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 "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 CLOA, Citizens' wholly-owned subsidiary domiciled in Colorado, that would require Citizens to contribute capital to CLOA in order to maintain a RBC level above 350%. At December 31, 2025, our domestic insurance subsidiaries were above the required minimum RBC levels and CLOA was above 350%.

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 December 31, 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.