Citizens Inc (CIA) 2007 Q4 法說會逐字稿

Welcome to the Citizens Inc. conference call for the end of the year 2007. We have present with us here today Rick Riley, the Vice Chairman and President, and then Tom Kopetic, Chief Financial Officer, and then we have other management members here in the room with us as well.

Before we get started, our first order of business is to give you what the lawyers want us to give you in terms of a disclaimer. We caution you that the presentation that we're about to make contains forward-looking statements within the meaning of 27A of the Securities Act of 1933 as amended, and section 21E of the Securities Act of 1934 as amended. Forward-looking statements include without limitation all financial guidance and statements about our plans, strategies and prospects. These statements are based upon our current expectations and projections about future events and are identified by terminology such as may, will, expect, schedule, plan, intend, anticipate, believe, estimate, aim, potential or continue, or the negatives of those terms or other comparable terminology.

Although we believe that our plans, intentions and expectations are reasonable, we may not be able to achieve our plans, intentions or expectations, and important factors could cause our actual results to differ materially from these forward-looking statements. Factors that could contribute to these differences include, among other things, risks set forth our filings with the SEC. You should not place undue reliance on any forward-looking statement. Forward-looking information is intended to reflect the opinions of the date of this presentation. Except as otherwise required by applicable laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances, or any reason after the date of this presentation.

So with all of that done and the legal disclaimers out of the way, let me first welcome you to the Citizens Inc. 2008 - December 31, 2008 conference call. We are happy to have you on the line today.

Citizens is a financial holding service company focusing on niches in the underserved markets, both internationally and here in the United States, in the home service market. Our core product base is ordinary life insurance, predominantly focused upon accumulation of cash values and return of - or providing a guaranteed income that you can't outlive, and then we're also focused on generating a stable and profitable revenue stream as we build and create these portfolios of - through life insurance sales. We have a significant experience in the industry, over 30 plus years in the international life insurance industry. We're a leading player in the Louisiana home service market. We also have a proven track record of making acquisitions and integrating those acquisitions into our operation, and that's certainly going to be a part of we're talking about here today. We strive - work under a very conservative and disciplined investment strategy. We do not use CMOs or subprime, and have no exposure in those arenas.

And with that sort of an introduction, I'm going to turn the conference call over to Tom Kopetic, our Chief Financial Officer, and let him review with you some of the results of the quarter.

Good afternoon. Thanks for joining our call.

As you all have the press release and the 10-K available, I'm just going to try to highlight some of the significant financial and operational events of 2007. We can certainly cover anything in more detail if requested, and if you have any questions we'll be happy to discuss them at the end of the conference call also.

Net income - as you've seen from the press release, it was a very profitable year. Net income of $16.6 million, and income available to stockholders of $14.6 million, was $0.35 per share compared to $0.16 and $0.13 in 2006 and 2005 respectively. The favorable results in 2007 were driven by increases in premium and investment revenue, as well as favorable claim results. Underwriting, acquisition and insurance expenses were approximately equal to last year, but as a percent of premium income, they improved significantly over 2006 and 2005.

The company's home service property company was the most significant change in 2007. We had no storm-related losses in 2007 that we -- where we had significant ones in 2005 and 2006. The property company net income improved $5 million in 2007 over what it was in 2006.

Premium revenue, during 2007 premium revenue increased 9.7% to $141 million, approximately $12 million over 2006. The increase was driven by a renewal premium, as the company is experiencing improved persistency. First-year production in 2007 approximately equaled 2006. However, 2006 contained a material growth over 2005, so although 2007 is flat, it will have a significant impact in 2008 renewals if our persistency continues to be strong. The improved persistency on renewal business is significant, not only in premium dollars but also in expense, as it costs significantly less to keep a policy on the books than it does to add a new one.

Investment income during 2007, the company's Board of Directors approved investment in high-quality mutual funds to improve yields and help offset the fall of interest rates. We're approved up to $50 million, which is still a very conservative level. During the fourth quarter, the company received dividend distributions of $2.1 million from these mutual funds, significantly increasing investment income 2007 over 2006. Claims experience, the improvement in 2007, as I mentioned previously, 2007 was more consistent with the normal operation, well below what we experienced in 2006 and 2005, because of the hurricane that we experienced in Louisiana at the end of 2005.

One thing you may have noticed from the 10-K, in 2006 - at December 31st, 2006, the company and our auditors agreed we had a material weakness in our financial statement close process. This weakness was addressed in 2007, and the material weakness related to the reporting - and the material weakness was related to the reporting of numbers, not the underlying financial statements. I am pleased to report that this material weakness has been remediated in 2007, accomplished by a strengthening of our staff resources and freeing up the resources in financial reporting, the creation of a position for a Vice President of Financial Reporting, strengthened accounting work papers reviewed by senior management, improved and increased analysis on a quarterly and annual basis, and numerous other control improvements which combined remediated the material weakness, and this is addressed in more detail on page 37 of the 10-K. The company does recognize there are still improvements to be made, and will continue to work to better controls and processes in 2008.

One other thing I did not mention was we did have a tax valuation allowance release of $1.2 million in 2007, related to a sale of one of our companies that was not going to happen. The allowance was put up when the company was put up for sale, and when we decided not to sell it that allowance was released, resulting in $2.1 million of net income.

1.2.

Or 1.2, excuse me. If anybody has any questions, we'll be happy to answer them now or if not, I'll turn it back over to Rick Riley.

Are there any questions? All right. I guess the only other thing that we would try to address here is the fact that we have worked through the end of this year integrating the - or making the final steps toward integrating the security plant operation into Citizens. Most of that has gone fairly smoothly. As you might understand, it's been a little bit hectic over the last couple of months getting that integration accomplished but certainly it's been a favorable experience, and we're pleased to report that it's going well and that we expect to see continued improvements as we work through this year.

Is there anything else anybody here around the table wants to address or deal with while we've got the call open? All right. Is there any other question on the line or with anybody on the conference call that we can address?

If not, we appreciate your participation in the call today and thank you very much for being present. At this point, we'll close the call.