CITIZENS, INC.

The effective tax rate is the ratio of federal income tax expense or tax benefit over pre-tax income. For the three and nine months ended September 30, 2026, the effective tax expense rate was 397.2% and 28.5%, respectively, compared to an effective tax expense rate of 46.0% and 24.5% for the same periods in 2025, respectively. CICA International is considered a controlled foreign corporation for federal income tax purposes. As a result, the insurance activity of CICA International is subject to Subpart F of the Internal Revenue Code and is included in Citizens’ taxable income. The Government of Puerto Rico approved a tax exemption decree for CICA International which freezes the income tax rate at 0% on taxable earnings up to $1.2 million and 4% on taxable earnings in excess of $1.2 million for a minimum of 15 years commencing in 2023. The effective tax rate varies from the prevailing corporate federal income tax rate of 21% mainly due to the impact of Subpart F and the reduced Puerto Rico income tax rate.

At September 30, 2026 and 2025, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety. The Company recorded valuation allowances of $5.8 million and $4.2 million at September 30, 2026 and 2025, respectively, in accumulated other comprehensive income (loss) on the consolidated balance sheets.

September 30, 2026 | 10-Q 36