## Item 1. BUSINESS 

## OVERVIEW 

## PART I 

Citizens, Inc. ("Citizens" or the "Company") is an insurance holding company incorporated in Colorado serving the life insurance needs of individuals in the United States since 1969 and internationally since 1975. Through our insurance subsidiaries, we pursue a strategy of offering traditional insurance products in niche markets where we believe we are able to achieve competitive advantages. We had approximately $1.7 billion of assets at December 31, 2019 and approximately $4.2 billion of insurance in force. Our core insurance operations include: 

• U.S. dollar-denominated ordinary whole life insurance and endowment policies predominantly sold to foreign residents, located principally in Latin America and the Pacific Rim, through independent marketing consultants; 

• ordinary whole life insurance policies to middle income households concentrated in the Midwest, Mountain West and southern United States through independent marketing consultants; and 

• final expense and limited liability property policies to middle and lower income households in Louisiana, Mississippi and Arkansas through employee and independent agents in our home service distribution channel and funeral homes. 

## STRATEGIC INITIATIVES 

We are implementing our enduring value customer-centric growth strategy, in cooperation with our Board of Directors. In doing so, we are focused on our core strengths, as we strategically realign our Life and Home Service Insurance segments. We anticipate significant transformation with an emphasis on people, processes and technology. In our current operational environment, change is seen as a positive and is now taking root in our culture, creating the best atmosphere for value creation and value capture for all our stakeholders. 

As a result of the Company’s continued strategic review of its technology systems, we converted the ordinary whole life policies of Security Plan Life Insurance Company ("SPLIC") to a new actuarial valuation software solution that provides enhanced modeling capabilities as of July 1, 2019. This system conversion, which impacted the Home Service Insurance segment, resulted in changes in estimates due to refinements reflected as a decrease in policyholder benefit reserves of $2.3 million and a decrease in deferred acquisition costs of $1.4 million, before tax as of and for the year ended December 31, 2019. 

The Company reviews its investment strategies routinely to monitor the portfolio's rate of return as compared to the product features in our insurance policies and strive to maximize returns on our investment portfolio within our conservative investment guidelines. The Company is looking for opportunities in other asset classes to increase our yields while maintaining a prudent risk profile. 

The following pages describe the operations of our two business segments: Life Insurance and Home Service Insurance. CICA Life Insurance Company of America ("CICA"), CICA Life Ltd. ("CICA Ltd.") and Citizens National Life Insurance Company ("CNLIC") constitute the Life Insurance segment, and Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC") and Magnolia Guaranty Life Insurance Company ("MGLIC") constitute the Home Service Insurance segment. In addition to the Life Insurance and Home Service Insurance segments, the Company also has other non-insurance operations ("Other Non-Insurance Enterprises") which primarily include the Company's IT and Corporate-support functions. 

Citizens had over 400 employees as of December 31, 2019, over half of which worked in the Home Service Segment. 

Revenues derived from any single customer did not exceed 10% of consolidated revenues in any of the last three years. For more information about the financial performance of our business segments, see Note 8. Segment and Other Operating Information of the notes to our consolidated financial statements. 

