CITIZENS, INC.CIA
CITIZENS, INC. Fair Value Disclosure
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations and comprehensive income (loss).
Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories:
•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs or whose significant value drivers are observable.
•Level 3 - Instruments whose significant value drivers are unobservable.
Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments.
Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes. These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments. All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities.
Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. We have no investments in this category.
The following tables set forth our assets that are measured at fair value on a recurring basis as of the dates indicated.
December 31, 2025 (In thousands) | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasury and U.S. Government-sponsored enterprises | $ | 5,654 | 1,354 | — | 7,008 | ||||||||||||||||||
| States and political subdivisions | — | 268,792 | — | 268,792 | |||||||||||||||||||
| Corporate | 42 | 866,828 | — | 866,870 | |||||||||||||||||||
| Commercial mortgage-backed | — | 8,894 | — | 8,894 | |||||||||||||||||||
| Residential mortgage-backed | — | 103,088 | — | 103,088 | |||||||||||||||||||
| Asset-backed | — | 33,209 | — | 33,209 | |||||||||||||||||||
Total fixed maturity securities | 5,696 | 1,282,165 | — | 1,287,861 | |||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Bond mutual funds | 219 | — | — | 219 | |||||||||||||||||||
| Common stock | 1,130 | — | — | 1,130 | |||||||||||||||||||
| Non-redeemable preferred stock | 7 | — | — | 7 | |||||||||||||||||||
| Total equity securities | 1,356 | — | — | 1,356 | |||||||||||||||||||
Other long-term investments (1) | — | — | — | 85,157 | |||||||||||||||||||
| Total financial assets | $ | 7,052 | 1,282,165 | — | 1,374,374 | ||||||||||||||||||
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
December 31, 2024 (In thousands) | Level 1 | Level 2 | Level 3 | Total Fair Value | |||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
Fixed maturity securities: | |||||||||||||||||||||||
| U.S. Treasury and U.S. Government-sponsored enterprises | $ | 5,909 | 3,304 | — | 9,213 | ||||||||||||||||||
| States and political subdivisions | — | 268,302 | — | 268,302 | |||||||||||||||||||
| Corporate | 42 | 794,947 | — | 794,989 | |||||||||||||||||||
| Commercial mortgage-backed | — | 311 | — | 311 | |||||||||||||||||||
| Residential mortgage-backed | — | 93,642 | — | 93,642 | |||||||||||||||||||
| Asset-backed | — | 54,504 | — | 54,504 | |||||||||||||||||||
Total fixed maturity securities | 5,951 | 1,215,010 | — | 1,220,961 | |||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Bond mutual funds | 739 | — | — | 739 | |||||||||||||||||||
| Common stock | 810 | — | — | 810 | |||||||||||||||||||
| Non-redeemable preferred stock | 7 | — | — | 7 | |||||||||||||||||||
| Non-redeemable preferred stock fund | 3,891 | — | — | 3,891 | |||||||||||||||||||
| Total equity securities | 5,447 | — | — | 5,447 | |||||||||||||||||||
Other long-term investments (1) | — | — | — | 93,337 | |||||||||||||||||||
| Total financial assets | $ | 11,398 | 1,215,010 | — | 1,319,745 | ||||||||||||||||||
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.
FINANCIAL INSTRUMENTS VALUATION
FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
Fixed maturity securities, available-for-sale. At December 31, 2025, fixed maturity securities, valued using a third-party pricing source, totaled $1.3 billion for Level 2 assets and comprised 93.3% of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets as of December 31, 2025 and 2024. For the year ended December 31, 2025, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.
Equity securities. Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices.
Structured note. At December 31, 2025, the Company held an investment in a structured note, which includes components classified as fixed maturity securities and other long-term investments on the consolidated balance sheets. The partner interest is included in other long-term investments and is measured at its net asset value ("NAV") of $2.6 million as a practical expedient, which approximates fair value. The Company recognized investment related gains of $0.3 million for the year ended December 31, 2025. These investments are included in Other Long-term Investments on the consolidated balance sheets.
As of December 31, 2025, we are committed to fund this investment up to $4.6 million over the next nine years.
Limited partnerships. The Company considers the NAV to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. The Company recognized net investment related losses of $0.4 million and $1.0 million on limited partnerships held for the year ended December 31, 2025 and 2024, respectively. These investments are included in other long-term investments on the consolidated balance sheets.
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
(In thousands, except years) | Fair Value Using NAV Per Share | Unfunded Commit- ments | Range (In years) | Fair Value Using NAV Per Share | Unfunded Commit- ments | Range (In years) | ||||||||||||||||||||
| Description | ||||||||||||||||||||||||||
Limited partnerships: | ||||||||||||||||||||||||||
| Middle market | Investments in privately-originated, performing senior secured debt primarily in North America-based companies | $ | 30,956 | — | 2 | $ | 35,369 | 1,660 | 3 | |||||||||||||||||
| Global equity fund | Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth | — | — | 0 | 11,568 | — | 0 | |||||||||||||||||||
| Late-stage growth | Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale | 36,623 | 2,232 | 2 to 4 | 27,825 | 8,134 | 3 to 5 | |||||||||||||||||||
| Infrastructure | Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution | 15,013 | 4,052 | 8 | 18,575 | 5,637 | 9 | |||||||||||||||||||
| Total limited partnerships | $ | 82,592 | 6,284 | $ | 93,337 | 15,431 | ||||||||||||||||||||
The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments.
FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE
Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments. The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.
The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (In thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Policy loans | $ | 67,455 | 67,455 | 71,216 | 71,216 | ||||||||||||||||||
| Residential mortgage loans | 24 | 24 | 33 | 34 | |||||||||||||||||||
| Cash and cash equivalents | 22,976 | 22,976 | 29,271 | 29,271 | |||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Annuity - investment contracts | 68,975 | 64,066 | 68,888 | 63,629 | |||||||||||||||||||
Policy loans. Policy loans had a weighted average annual interest rate of 7.7% at both December 31, 2025 and 2024 and no specified maturity dates. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value reflected on the consolidated balance sheets and are considered Level 3 assets in the fair value hierarchy.
Residential mortgage loan. The mortgage loan is secured principally by a residential property. The interest rate for this loan was 7.0% at December 31, 2025 and 2024. At December 31, 2025, the remaining loan matures in three years. Management estimated the fair value using an annual interest rate of 6.25% at both December 31, 2025 and 2024. Our mortgage loan is considered a Level 3 asset in the fair value hierarchy and is included in other long-term investments on the consolidated balance sheets.
Cash and cash equivalents. The fair value of cash and cash equivalents approximates carrying value and these assets are characterized as Level 1 assets in the fair value hierarchy.
Annuity liabilities. The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at December 31, 2025 and 2024 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.31% to 4.98% and 3.96% to 4.96%, respectively. The fair value of liabilities under all insurance contracts are taken into consideration in the overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.
Other long-term investments. Financial instruments included in other long-term investments are classified in various levels of the fair value hierarchy. The following table summarizes the carrying amounts of these investments.
As of December 31, (In thousands) | 2025 | 2024 | ||||||
| Other long-term investments: | ||||||||
| Limited partnerships | $ | 82,592 | 93,337 | |||||
Structured note | 2,565 | — | ||||||
| FHLB common stock | 222 | 212 | ||||||
All other investments | 60 | 55 | ||||||
| Total other long-term investments | $ | 85,439 | 93,604 | |||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 11, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 11, 2020 | |
| 2018 | Mar 26, 2019 | |
| 2017 | Mar 29, 2018 | |
| 2016 | Apr 27, 2017 | |
| 2015 | Mar 24, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.