SECURITIES AND EXCHANGE COMMISSION
Washington,
WASHINGTON, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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2016
2023
NOTICE OF ANNUAL MEETING
AND
A MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER
April 24, 2023
Dear Shareholders,
Despite the uncertainties that the world faced in 2022, including one of
Annual Meetingthe highest inflationary periods in recent history, it was a good year for Citizens, with strong underlying performance across our business segments. With a clear focus on providing long-term stability through introduction of
ShareholdersTuesday, June 7, 2016
10:00 AM (CDT)
400 East Anderson Lane, Austin, Texas
Citizens, Inc.
April 28, 2016
Dear Fellow Shareholder,
Onnew products and new distribution channels, improved policy retention, roadmap execution, and financial and expense discipline, we were able to achieve the following in 2022:
•Increased first year sales in our life insurance segment;
•Record levels of newly issued insurance in both of our operating segments;
•Increased net investment income from our limited partnership investments, a growing diversified invested asset base and reinvesting into a higher interest rate environment; and
•Lower surrenders due to our retention efforts.
We are committed to driving continued improvements in these areas and therefore, on behalf of the entire Board of Directors, it is my privilege,
as your fellow shareholder, to invite you to our
20162023 Annual Meeting of Shareholders to be held on Tuesday, June
7, 20166, 2023 at 10:00 a.m. Central
Daylight Time, at our
officesheadquarters located at
400 East Anderson Lane,11815 Alterra Parkway, Suite 1500, Austin, Texas
78752.We appreciate all78758. Holders of record of our shareholders,Class A common stock as of April 11, 2023 are entitled to notice of, and look forward to communicating with you regarding our efforts to achieve long-term sustainable growth for your Company and create value throughvote at, the right business strategies, prudent risk management and corporate governance, and effective succession planning.
The Board of Directors hopes you can attend the meeting, but if you cannot, it is still very important that we receive your representation and vote on the proposals detailed in this proxy statement. Regardless of the number of shares you own, PLEASE VOTE THROUGH THE INTERNET, BY TELEPHONE OR BY MAIL according to the instructions provided on the proxy card.
Annual Meeting.
We hope the material contained in this
proxy statementaccompanying Proxy Statement demonstrates how seriously we take the trust you place in us through your ownership of Citizens shares, and we ask that you vote in accordance with
ourthe Board of Directors’ recommendations as a sign of your support for our continuing efforts.
Thank you for helping us Keep our Promises.
Sincerely,
Kay E. Osbourn
President
Gerald W. Shields
Chief Executive Officer and
Chief Corporate OfficerPresident
Citizens, Inc.
NOTICE OF
2016 CITIZENS, INC.2023 ANNUAL MEETING OF SHAREHOLDERS
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Tuesday, June 7, 20166, 2023 10:00 a.m., Central Daylight Time | |
Citizens, Inc. Executive Offices400 East Anderson Lane
Headquarters 11815 Alterra Parkway, Suite 1500, Austin, Texas 7875278758
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| The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K are available free of charge at www.envisionreports.com/cia |
We are pleased
ITEMS OF BUSINESS:
(1) To elect each of the eight director nominees identified in the accompanying Proxy Statement to invite you to attendserve until the Citizens, Inc. 2016next annual meeting of shareholders or until his or her successor is duly elected and qualified;
(2) To ratify the appointment of Grant Thornton LLP as the Company's independent registered public accounting firm for 2023;
(3) To approve, on a non-binding advisory basis, executive compensation (“Say-on-Pay”); and
(4) To transact such other business as may properly come before the Annual Meeting of Shareholders
for the following purposes: | (1) | To elect the nine (9) members of the Board of Directors of the Company to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified; |
| (2) | To approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers; |
| (3) | To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2016; and |
| (4) | To transact such other business as may properly come before the meeting or any adjournment or postponement or adjournment thereof. |
RECORD DATE:
The Board of Directors setApril 13, 2016 as the record date for the meeting. Our shareholders as of the closemeeting.
RECORD DATE:
Close of business on that date are entitled to receiveApril 11, 2023. You can vote if you were a shareholder on this notice of the meeting and vote at the meeting and any adjournmentsdate.
On or
postponements of the meeting.HOW TO VOTE:
Your vote is important. Whether or not you plan to attend the meeting,about April 24, 2023, we encourage you to vote as soon as possible. You may cast your vote via the internet, by telephone, by mail or in person at the meeting. Please carefully reviewfirst mailed the proxy materials for the 2016 Annual Meetingor a Notice of Shareholders and follow the instructions in the Voting Information section on page 3 to vote.If your shares are held in street or nominee name, please respond to the communication you receive from the holder of record as soon as possible so your shares can be represented at the meeting.
Important Notice RegardingInternet Availability of Proxy Materials to shareholders who own our Class A common stock as of the Record Date in connection with our solicitation of proxies for Shareholderthis year’s Annual Meeting to be held June 7, 2016:The Proxy Statementof Shareholders. You may also read the proxy materials, our 2022 Annual Report on Form 10-K and our 2022 Annual Report to Shareholders, are availableon our website at www.edocumentview.com/cia.
https://www.citizensinc.com/investors/.
By Order of the Board of Directors
Sheryl Kinlaw
Vice President, Chief Legal Officer and Secretary
Austin, Texas
April 24, 2023
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| | By Order of the Board of Directors |
April 28, 2016 | | Cheri D. Duncan, Secretary |
TABLE OF CONTENTS
CITIZENS, INC.
400 East Anderson Lane
Austin, Texas 78752
April 28, 2016
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 7, 2016
SOLICITATION OF PROXIES
NOTICE OF THE ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation of proxies by and on behalf of the Board of Directors of Citizens, Inc. for use at the Annual Meeting of Shareholders to be held Tuesday, June 7, 2016, at 10:00 a.m., Central Daylight Time, (the “Meeting”) at theCitizens Inc. Executive Offices located at 400 East Anderson Lane, Austin, Texas 78752.We are distributing this Proxy Statement and our 2015 Annual Report to Shareholders on or before April 28, 2016.
In accordance with Rule 14a-16 promulgated under the Securities Exchange Act of 1934, a registrant may furnish a proxy statement or annual report to a security holder by sending the security holder a Notice of Internet Availability of Proxy Materials (“Notice”) forty (40) or more calendar days prior to the Annual Meeting of Shareholders. On or about April 28, 2016, Notice was sent to our shareholders, giving them the option to execute a proxy via an on-line format, or the option to request a paper delivery of a full set of proxy materials (called Full Set Delivery) of this Proxy Statement and our 2015 Annual Report to Shareholders.
HOUSEHOLDING
The Securities and Exchange Commission (“SEC”) rules allow us, subject to certain conditions, to send only one proxy statement and annual report or Notice to two or more shareholders who share the same last name and address. This “householding” rule provides greater convenience for our shareholders and cost savings for us by reducing the number of duplicate documents that households receive. Also, this allows us to be more environmentally friendly by reducing the unnecessary use of materials. Please note that each shareholder will continue to receive a separate proxy card, which will allow each individual to vote independently.
If you are a Citizens, Inc. shareholder who resides in the same household with another Citizens, Inc. shareholder with the same last name, or if you hold more than one account with Computershare registered in your name at the same address, and wish to receive a separate or single proxy statement and annual report or Notice for each account, please contact our transfer agent, Computershare.
Computershare Trust Company, NA
P. O. Box 30170
College Station, TX 77842-3170
Toll-Free Number: 877-785-9659
Outside the United States: 781-575-4621 (International Dial Direct)
You may revoke your consent at any time by contacting Computershare using the same contact information as set forth above.
ELECTRONIC DELIVERY OF PROXY MATERIALS AND ANNUAL REPORT
This Proxy Statement and our 2015 Annual Report are available on our website atwww.citizensinc.com. If you vote by Internet, simply go towww.envisionreports.com/cia and follow the prompts regarding electronic distribution consent on that site.
PROXY SOLICITATION
We bear all expenses incurred in connection with the solicitation of proxies. We will reimburse banking institutions, brokerage firms, custodians, nominees and fiduciaries for their costs in forwarding proxy materials to beneficial owners of our Common Stock. Our directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. We have not engaged a proxy solicitation firm to solicit investors for this Annual Meeting.
PURPOSES OF THE ANNUAL MEETING
It is very important that you vote in order to play a part in the future of the Company. Shareholders are being asked to vote on the following proposals set forth below at the 2016 Annual Meeting of Shareholders. Each shareholder, regardless of share class, is entitled to one vote per share held by such holder on all matters coming before the Annual Meeting.
Shares represented by properly executed proxies received by us prior to the Meeting will be voted as specified thereon. Unless you instruct otherwise in the proxy, any proxy that is given and not revoked will be voted at the meeting in accordance with the recommendation of the Board of Directors.
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PROPOSALS
| | OUR BOARD’S
RECOMMENDATION
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Item 1. Election of Directors (page 22) | | |
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The Board has nominated nine individuals to serve as directors for a one-year term, expiring at the 2017 Annual Shareholders Meeting, or until their successors are duly elected and qualified. Four of the nine nominees will be elected by the Class A shareholders and five of the nine nominees will be elected by the Class B shareholders. The Board believes the director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.INFORMATION ABOUT THE ANNUAL MEETING AND VOTING | | FOR each
Director Nominee
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Item 2. Advisory Vote to Approve Executive Compensation (page 26)OTHER INFORMATION | |
PROXY SUMMARY
This proxy summary highlights selected information that is provided in more detail throughout this Proxy Statement, which is first being sent or made available to shareholders of Citizens, Inc., a Colorado corporation, on or about April 24, 2023. This summary does not contain all of the information you should consider before voting, so please read the full Proxy Statement carefully before voting. For more information regarding our 2022 performance, please read our 2022 Annual Report on Form 10-K.
ABOUT CITIZENS
Citizens, Inc. is an insurance holding company incorporated in Colorado. Through our operating insurance companies, we have served the life insurance needs of individuals throughout the world for over 45 years. We specialize in offering traditional insurance products in niche markets where we believe we can optimize our competitive position. At December 31, 2022, we had approximately $1.6 billion of assets and $4.3 billion of insurance in force.
OUR PRINCIPAL BRANDS
Life Insurance Segment
Internationally, we conduct our Life Insurance segment business through CICA Life Ltd. (Bermuda) and beginning January 1, 2023, through CICA Life, A.I. (Puerto Rico). We provide insurance benefits to residents in more than 70 different countries, with the primary concentration of our insureds in Latin America and Taiwan.
Domestically, we conduct our Life Insurance segment business primarily through CICA Life Insurance Company of America, a Colorado-based insurance company. CICA Life Insurance Company of America is licensed in 32 U.S. states.
Home Service Insurance Insurance Segment
Our Home Service Insurance segment is operated primarily through Security Plan Life Insurance Company, a Louisiana-based company, and its subsidiary Security Plan Fire Insurance Company, a limited liability casualty insurance company. Security Plan also owns Magnolia Guaranty Life Insurance Company, which primarily issues burial policies in Mississippi.
IN 2021, WE BECAME A NON-CONTROLLED COMPANY
Throughout most of our history, we were led and controlled by our founder Harold E. Riley and his family members. Mr. Riley passed away in 2017 and in 2020, a change-in-control of our Company occurred when the shares held by the Harold E. Riley Trust were transferred to the Harold E. Riley Foundation (the “Foundation”). In February 2021, the Company entered into an agreement with the Foundation to purchase all of the outstanding shares of Class B common stock for a purchase price of $9.1 million (the “B Share Transaction”). After the completion of the B Share Transaction and the appointment of a new Chief Executive Officer, we believe we became positioned to offer stability to our management team, employees and independent sales force and were able to move forward with new business and strategic initiatives, as described below.
2022 HIGHLIGHTS
Historically, our insurance companies have only issued a few products and had limited distribution channels. Since the change-in-control described above, our growth strategy shifted to focusing on sales growth through introduction of new products and new distribution channels, improved policy retention, roadmap execution, and financial and expense discipline.
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| First Year Sales Increase |
The Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its Named Executive Officers as described in the Compensation Discussion and Analysis section beginning on page 19 and the Compensation Tables section beginning on page 17. The Board values its shareholders’ opinions and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. | | FOR |
| Improve Policy Retention |
Item 3. Ratification of the Appointment of Ernst | Roadmap Execution | | Financials & Young LLP as Independent Auditors (page 27) | Expense Discipline | |
| Achieve first year sales growth across all markets. |
The Audit Committee | Improve first year policy retention (measured on 15-month renewal). | | Maintain and execute on the Board believe the continued retention of Ernst & Young LLP to serve as the Company’s Independent Auditors for the fiscal year ending December 31, 2016 is in the best interests of the Company and its shareholders. As a matter of good corporate governance, shareholders are being asked to ratify the Audit Committee’s selection of the independent Auditors.approved 5 Quarter Roadmap. | | FOR |
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Item 4. Transact such Other Business as May Properly Come BeforeMaintain and execute on the Meeting or any Postponement of Adjournment thereof (page 27) | approved budget and sales plan. | |
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Should any other business come before the meeting, and management is not aware of any at this time and does not expect any, the persons named in the proxy will vote on such business as their best judgment and discretion indicates. | | | | | | | |
Voting
First Year Sales
Our Life Insurance segment first year premiums increased by proxy will4% due to the introduction of a new whole life product in our international markets, as well as focused marketing campaigns. Although our amount of insurance issued increased in our Home Service Insurance segment by 60% in 2022, as compared to 2021, our first year premiums declined, which we believe is attributed to inflationary pressures and the cessation of COVID-19 government aid programs in 2022.
Improve Policy Retention
Our surrender benefits paid decreased by $2.9 million in 2022 from 2021, which we believe was in large part due to our retention efforts.
Roadmap Execution
We achieved above expectations on our 5-quarter roadmap - importantly, we delivered 12 new or revised products tailored more specifically to our customer’s needs and delivered the infrastructure to more efficiently deliver and service those products and our customers.
Financial and Expense Discipline
We achieved budgeted net income, primarily as a result of net investment income and lower death claims then expected, as well as a lack of hurricanes in Louisiana in 2022.
Our execution on our strategic initiatives in 2022 led to a 18% increase in number of policies issued and 64% increase in amount of insurance issued in 2022 as compared to 2021.
See "Financial Highlights" below and additionally, for specific information on performance on each of the four pillars, see "Executive Compensation – Compensation Discussion and Analysis – 2022 Executive Compensation Decisions in Detail – Calculating the 2022 Annual Bonus" on page 41.
FINANCIAL HIGHLIGHTS (2022 compared to 2021)
Due to the impact inflation has had on market volatility and rising interest rates during 2022, we had a net loss of $6.6 million, compared to net income of $36.8 million in 2021. As an insurance company, we hold significant invested assets in order to pay future policy liabilities. Changes in the fair value of our limited partnership investments drove investment related losses of $10.3 million in 2022, compared to investment related gains of $11.0 million in 2021. We did not limit your rightsell these investments during 2022, but changes in fair values of our equity securities are reflected as investment related gains or losses, in addition to voteexecuted transactions that result in a gain or loss. We consider investment related gains and losses, whether realized or unrealized, as non-core and incidental in understanding the quarterly or annual operating results of our insurance business. In addition to the change in investment related gains and losses, 2021 net income was positively affected by a one-time $43.8 million non-cash tax benefit.
Key operating results (comparison of 2022 v. 2021):
↑ $3.9 mllion of net investment income
↓ $6.8 million of total insurance benefits paid or provided, partially offset by
↑ $1.8 million of general operating expenses
↓ $1.0 million of premium revenue
GOVERNANCE UPDATES
As we have transitioned from a controlled company to a non-controlled company over the past two years, we have enhanced our corporate governance practices. Since our 2021 annual meeting of stockholders, we have:
•added diversity by electing two women to the Board in 2021 with deep insurance expertise
◦Cynthia H. Davis has been an insurance underwriter for over 30 years, with extensive experience in the international markets
◦Mary Taylor is the former insurance commissioner of the State of Ohio and a Certified Public Accountant
•updated our Board refreshment policy
◦mandatory retirement at age 75 (directors as of June 1, 2022 grandfathered to age 80)
◦12-year term limit(policy effective June 2022)
•added individual director self-assessmentsto annual governance tasks to better assess board and individual performance
•adopted Stock Ownership Guidelinesfor our directors, Chief Executive Officer and other Section 16 officers
•adopted a Director Resignation Policyfor uncontested elections
ITEMS OF BUSINESS AT OUR 2023 ANNUAL MEETING OF SHAREHOLDERS
The following table summarizes the proposals to be voted upon at the meeting if you later decide2023 Annual Meeting of Shareholders (the “Annual Meeting”) to attendbe held on June 6, 2023 at 10:00 a.m. Central Time at our headquarters in person. OtherAustin, Texas, and the Board’s voting recommendation with respect to each proposal.
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| PROPOSAL 1 | VOTING STANDARD | OUR BOARD’S RECOMMENDATION | READ MORE STARTING ON PAGE… |
| 1. | Election of Directors | Majority of Votes Cast | FOR each Nominee | |
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| NAME | AGE | PRINCIPAL OCCUPATION and RELEVANT EXPERIENCE | DIRECTOR SINCE |
INDEPENDENT |
| Gerald W. Shields | 65 | Citizens’ Chief Executive Officer and President; Vice-Chairman of the Board | 2017 | No |
| Christopher W. Claus | 62 | Retired financial and investment executive USAA of San Antonio | 2017 | Yes |
| Cynthia H. Davis | 57 | Life Insurance underwriter at NFP Corp. / Partners Financial | 2021 | Yes |
| Jerry D. Davis, Jr. | 72 | Chairman of the Board; Retired life insurance company CEO and Chairman | 2017 | Yes |
| Francis A. Keating II | 79 | Chairman of the Board of Regents, University of Oklahoma; Former Governor of Oklahoma; Former President and CEO, American Council of Life Insurers; Former President and CEO, American Bankers Association; Former Partner at Holland & Knight LLP | 2017 | Yes |
| Dr. Terry S. Maness | 73 | Former Dean at Baylor University’s Hankamer School of Business; Former Chairman of the Department of Finance, Insurance and Real Estate at Baylor University | 2011 | Yes |
| J. Keith Morgan | 72 | Retired senior legal executive; Former Chief Legal Officer at TIAA-CREF Life Insurance Co. | 2021 | Yes |
| Mary Taylor | 57 | Vice President, Operations and Finance at Northeast Ohio Medical University; CPA; former Lieutenant Governor of Ohio and former Director of the Ohio Department of Insurance | 2021 | Yes |
The current size of the Board is 9 members. Pursuant to our Director refreshment policy, Dr. Robert Sloan is retiring as of the date of the Annual Meeting. The Board does not currently anticipate filling the vacancy created by Dr. Sloan's retirement but plans to reduce the size of the Board to 8 members as of the date of the Annual Meeting. Proxies cannot be voted for a greater number of persons than the approvalnumber of nominees named herein.
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| PROPOSAL 2 | VOTING STANDARD | OUR BOARD’S RECOMMENDATION | READ MORE STARTING ON PAGE… |
| 2. | Ratify the Appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for 2023 | Majority of Votes Cast | FOR | |
Grant Thornton LLP is an independent registered public accounting firm with significant expertise and reasonable fees.
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| PROPOSAL 3 | VOTING STANDARD | OUR BOARD’S RECOMMENDATION | READ MORE STARTING ON PAGE… |
| 3. | Advisory Vote to Approve Executive Compensation | Majority of Votes Cast | FOR | |
COMPENSATION BEST PRACTICES
Since the death of our founder, Harold E. Riley, in 2017, our Compensation Committee has taken, and continues to take, critical steps to enhance our executive compensation program and move towards market best practices and pay-for-performance. The following table summarizes some highlights of our compensation practices that drive our named executive officer compensation program:
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| WHAT WE DO | WHAT WE DON'T DO |
+Align our executive pay with performance +Set quantifiable performance objectives that incentivize executives to drive revenue and improve profitability +Annual restricted stock unit (“RSU”) grants to executive officers require achievement of performance goals to receive, then vest over 3 years +Change-in-control severance limited to 2x salary and annual cash incentive pay for CEO; no other severance agreements in place +Stock ownership guidelines for CEO and Section 16 officers +Annual say-on-pay advisory vote (97% of our shareholders voted in favor of "say on pay" in 2022) +Performance-based compensation clawback policy +Engage independent compensation consultant +Benchmark executive compensation against competitive market practices
| –While the Company is party to an employment contract with the Chief Executive Officer (2 year term with annual 1 year renewal), it does not provide guaranteed salary increases nor non-performance bonus arrangements –No “single trigger” change-in-control payout provisions –No hedging, short sales or pledging of shares by directors or officers –No supplemental executive retirement plan –Limited perquisites |
The transaction of such other business as may properly come before the Annual Meeting of Shareholders or any adjournment or postponement thereof will also be conducted. The Board knows of no other matters
listed above, we do not anticipate that
will be presented for consideration at the Annual Meeting. If any other matters
will be raised atare properly brought before the
meeting.VOTING INFORMATION
RECORD DATE AND VOTING ELIGIBILITY
Only shareholdersAnnual Meeting, it is the intention of record at the close of business onApril 13, 2016 are entitledpersons named in the accompanying proxy to vote aton those matters in accordance with their best judgment.
HOW TO VOTE
YOUR VOTE IS VERY IMPORTANT.Whether or not you plan to attend the Meeting. As of the record date,Annual Meeting, we had 49,080,114 Class A shares of common stock and 1,001,714 Class B shares of common stock outstanding and entitledencourage you to vote. Ifsubmit your shares are registered directly in your name with the Company’s registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered a shareholder of record with respect to those shares. If your shares are held in a bankproxy or brokerage account, you are considered the “Beneficial Owner” of those shares, and shouldrespond to the communication you receive from the holder of recordvoting instructions as soon as possible so your shares can be represented at the meeting.HOW TO VOTE
possible. Shareholders of record may vote using any of the following methods:
VOTE IN ADVANCE. Votes submitted in advance must be received by 11:59 p.m. Eastern Time on June 5, 2023. You may vote in advance by any of the following methods:
| 1. | | | | |
| ONLINE or BY MAILSMARTPHONE: |
| Go to http://www.envisionreports.com/cia or scan the QR code. Login details are located on your proxy card. |
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| BY TELEPHONE: If you received this Proxy Statement in conjunction with a Full Set Delivery request, then mark, signCall toll-free 1-800-652-VOTE (8683) within the USA, U.S. territories and dateCanada. |
Please have your proxy card and returnthe last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the recorded message provides you. |
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| BY MAIL: If you requested printed copies of the proxy materials by mail, you will receive a proxy card, and you may vote by marking, signing and dating your proxy card and returning it in the postage-paid envelope provided.provided by 11:59 p.m. Eastern Daylight Time on June 5, 2023. The named proxies will vote your stock according to your directions. If you submit a signed proxy card without indicating your vote, the person voting the proxy will vote your stock in favor of the proposals. |
| 2. |
| VOTE AT THE MEETING |
| BY TELEPHONE |
| IN PERSON: Call toll-free (800) 652-VOTE (8683). |
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 11:59 p.m. Eastern Daylight Time on June 6, 2016.
Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the voice provides you.
| 3. | BY INTERNET:http://www.envisionreports.com/cia |
Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 11:59 p.m. Eastern Daylight Time on June 6, 2016.
Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.
| 4. | IN PERSON:You may vote in person at the meeting.Annual Meeting. If you are a beneficial owner of our shares (i.e, your stock is held in the name of a bank, broker or other holder of record,record), admission is based on proof of ownership, such as a recent brokerage statement and voting in person requires you mustto obtain a proxy, executed in your favor, by such bank, broker or other holder to be able to vote at the meeting.Annual Meeting. |
REVOCATION OF PROXIES
A shareholder
If your shares are held in a bank or brokerage account, your bank or broker will provide you with materials and instructions for voting your shares. Please check with your bank or broker and follow the voting procedures they provide to vote your shares.
If you have any questions or require assistance with voting your shares, you may revoke his or her proxyalso contact Alliance Advisors, LLC at any time before it200 Broadacres Drive, Bloomfield, New Jersey 07003. Shareholders may call toll free: 1-800-574-5928.
PROXY STATEMENT
The Board of Directors (the “Board”) of Citizens, Inc. (the “Company”) is
furnishing you this Proxy Statement to solicit proxies on its behalf for the items to be voted at the
meeting by:2023 Annual Meeting of Shareholders (“Annual Meeting”). giving written notice to the Secretary
Date: Tuesday, June 6, 2023
Time: 10:00 a.m. Central Time
Place: The Company’s principal executive office at
11815 Alterra Parkway, Suite 1500
Austin, Texas 78758
The proxies also may be voted at any adjournments or postponements of the Company;Annual Meeting.
if before
The Board is first furnishing the commencement of the meetingproxy materials to the person serving as Secretary at the meeting site;
if delivered before the date of the Meeting, to the Office of the Secretary at Citizens’ offices, 400 East Anderson Lane, Austin, Texas 78752;
delivering no later than the commencement of the Meeting a properly-executed, later-dated proxy; or
voting in person at the meeting.
CITIZENS, INC. STOCK INVESTMENT PLAN PARTICIPANTS
The Company sends or forwards to each participant in the Company’s Stock Investment Plan (the “Plan”) all applicable proxy solicitation materials. Plan participants have the exclusive right to exercise all voting rights respecting shares credited to their respective accounts under the Plan. A participant may vote any of the Participant’s whole or fractional shares of which he or she is the record holder in person or by proxy. Each participant’s proxy card includes the participant’s whole or fractional sharesholders of the Company’s Class A common stock which heon or she has the rightabout April 24, 2023.
All properly executed written proxies and all properly completed proxies submitted by Internet, telephone or mail that are delivered pursuant to
vote. A participant’s sharesthis solicitation will
not be voted
unless a participant orat the
participant’s proxy votes them. As described below, the Plan administrator may submit a participant’s unvoted shares at a shareholders meeting for purposes of establishing a quorum, unless the participant objects by notifying us in writing. For more information about the Plan, please see the Plan prospectus contained in the Company’s Registration Statement on Form S-3, as amended, (Registration No. 333-185618) filed with the SEC.QUORUM
We establish our quorum requirementsAnnual Meeting in accordance with the Colorado Business Corporation Act, which states that a quorum constitutes a majoritydirections given in the proxy unless the proxy is revoked prior to completion of voting at the votes entitledAnnual Meeting. Voting by proxy will not limit your right to be cast on a matter by a voting group, unless otherwise stated in a company’s Articles of Incorporation. Atvote at the Annual Meeting a quorum will requireif you later decide to attend in person. Other than the presence, in person or by proxy,approval of the holdersitems of business listed above, we do not anticipate that any other matters will be raised at the Annual Meeting.
Only owners of record of shares of Class A common stock as of the close of business on April 11, 2023, the Record Date, are entitled to notice of, and to vote at, the Annual Meeting or at any adjournments or postponements thereof. Each shareholder of record on the Record Date is entitled to one vote for each share of Class A common stock held by such shareholder on all matters coming before the Annual Meeting. As of close of business on the Record Date, there were 49,856,895 shares of Class A common stock issued and outstanding and entitled to vote at the Annual Meeting.
We intend to hold our Annual Meeting in person. However, the COVID-19 situation in the United States is fluid and we continue to monitor developments that may impact attendees for our Annual Meeting. You are encouraged to monitor our investor relations website at https://www.citizensinc.com/investors/for any updated information about the Annual Meeting.
OUR FOCUS ON ESG
We believe that creating long-term value for our shareholders implicitly requires enacting and executing sustainable business practices and strategies that, while delivering competitive returns and executing on our strategic initiatives, also take into account Environment, Social and Governance (ESG) issues. Our Board plays a majoritypivotal role in ESG, with oversight of all elements of the programs.
We focus on the following areas of ESG:
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| GOVERNANCE | SOCIAL | ENVIRONMENT |
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| Shareholder Voting Rights | Pay Equity | Environmental Stewardship |
| Executive Compensation | Employee Engagement | Responsible Investing |
| Risk Oversight | Diversity & Inclusion | |
| Board Composition and Independence | Talent Attraction & Retention (learning and training) | |
| Employee Wellness | |
OUR COMMITMENT TO GOOD CORPORATE GOVERNANCE
Good corporate governance is a key element of our shares entitled to vote. Proxies received but marked as abstentionsESG focus. While the Board is responsible for providing oversight over governance, social and broker non-votes are counted as present for purposes of determining quorum. Additionally, unless a Participant notifies the Company in writingenvironmental issues, its key priority is ensuring that it electsfunctions well and that our management team (to whom the Board has delegated the authority to withholdmanage the Plan administrator’s authority,day-to-day operations of the Plan administratorCompany) functions well, and that the Board understands and provides guidance with respect to key risks that might affect our Company and shareholders. Below is deemeda Governance Summary which highlights our governance practices.
GOVERNANCE SUMMARY
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| Highly Independent and Diverse Board | ■Our CEO is the only non-independent director ■We elected two womento the Board in 2021 ■All Board committees are composed entirely of independent directors ■We have adopted a heightened standard of director independence - an independent director may only receive up to $25,000 in consulting fees or other income from the Company outside of Board compensation ■Independent directors hold executive sessions at least three times per year without management present ■Directors bring a wide array of qualifications, skills and attributes to our Board; see Director Nominees beginning on page 18 |
| Independent Board Chair | ■Independent Board Chair structure provides effective checks and balances to ensure the exercise of independent judgmentby the Board |
| Board Refreshment | ■3 of our 8director nominees were first elected in2021 ■2 legacy directors retired in each of 2022 and 2023 to help reduce the size of the Board ■Mandatory retirementage at 75 (any director as of June 1, 2022 grandfathered to age 80) - will apply to one director in 2024 to allow refreshment ■12-year term limit- will apply to one director in 2024 to allow refreshment |
| Director Accountability | ■Over 75% average director attendance rate at Board and committee meetings in 2022 ■Annual Board and committee self-evaluations and individual director assessments ■Director Resignation Policy |
| Shareholder Voting Rights | ■Holders of our Class A common stock elect all directors annually(no staggered board; no dual classes of outstanding voting stock) |
| Executive Compensation Practices | ■We have an annual “say on pay”advisory vote. In 2022, 97% of our shareholders voted in favor of "say on pay" ■Stock Ownership Guidelines |
| No Hedging or Pledging Company Stock | ■Our directors and officers are prohibited from entering into hedging transactions or pledging the Company’s securities |
| ERM and ESG | ■Our Board and Audit Committee oversee our Enterprise Risk Management (ERM) program and Environmental, Social and Governance (ESG) matters |
| NYSE Listing Standards | ■As of the date of this Proxy Statement, we are in compliance with all applicable NYSE listing standards |
Key Corporate Governance Documents
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•Corporate Governance Guidelines |
•Code of Business Conduct and Ethics ◦Includes our Insider Trading Policy |
•Committee Charters •Stock Ownership Guidelines •Director Resignation Policy |
The documents listed above are available in the Investors – Corporate Governance section of our website at https://www.citizensinc.com/investors/#corporate-governance. Printed copies of all of these documents are also available free of charge upon written request to haveour Secretary, at Citizens, Inc. Attn: Secretary, P. O. Box 149151, Austin, Texas 78714-9151.
The Key Corporate Governance Documents, together with our Articles of Incorporation and our Bylaws, form the written authorizationgovernance framework for the Board and its committees. We believe good governance strengthens the Board and management’s accountability. The Board regularly (and at least annually) reviews its Corporate Governance Guidelines and other corporate governance documents and from time to appear in person or by proxy at any annual or special meeting of shareholderstime revises them when it believes it serves the interests of the Company and its shareholders to submitdo so and in response to feedback from shareholders, changing regulatory and governance requirements and best practices.
OUR CULTURE OF RESPONSIBILITY AND ETHICS
As part of our commitment to ESG, we maintain an active ethics program. Our ethics program is rooted in our mission statement and seven core values.
MISSION STATEMENT: INSURANCE IS A PROMISE MADE. CITIZENS IS A PROMISE KEPTTM.
CORE VALUES:
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| INTEGRITY | We will build trust through fair, honest and ethical relationships by adhering to a strong moral compass. |
| PERSEVERANCE | We will steadfastly pursue our mission despite obstacles, difficulties or delays in achieving success. |
| EXCELLENCE | We deliberately pursue high standards and are committed to achieving higher standards. |
| SELFLESS SERVICE | We promote the assistance of others, not for personal gain, but for the enhancement of others. |
| LEADERSHIP | We identify and take ownership of our areas of influence; guiding, developing and mentoring others along the way. |
| ACCOUNTABILITY | We are responsible for our actions and we accept the outcome of those actions. |
| COMMITMENT | With dedication we pursue this mission, vision and core values to bring success to our employees, policyholders, shareholders, agents and associates. |
Our Board, officers and employees are obligated to adhere to our core values. In that way, we can ensure that we continue to keep our promises to be good stewards of the Participant’s unvoted sharesinvestments in us by our shareholders, employees, policyholders and agents.
Our Code of Business Conduct and Ethics (“Code of Ethics”) forms the core of our ethics program and provides general statements of our expectations regarding ethical standards we expect our directors, officers and employees to adhere to while acting on our behalf. The Code of Ethics protects our shareholders by prohibiting conflicts of interest and usurping of corporate opportunities, as well as by protecting the Company’s information and assets and requiring fair dealing. If the Board grants any waivers from our Code of Ethics to any of our directors or executive officers, or if we amend our Code of Ethics, we will, as required, disclose these matters on a timely basis.
Additionally, our ethics program includes monitoring of the corruption risks that are most applicable to our industry and company, including anti-money laundering (“AML”) and anti-bribery. To that extent, our Board has direct oversight of the AML program, which is managed by our compliance function through our Chief Legal Officer. Our AML policy requires that all employees and independent agents who sell our products participate in annual AML training. Our AML program has is audited by an external, independent third-party and, in 2022, no deficiencies were found.
SOCIAL MATTERS MATTER
Our Company revolves around people. We insure people’s lives. We believe in always doing the right thing for our customers, our employees and agents, our shareholders and our community.
Empowering and Engaging Our People
The Company’s focus continues to be fostering a culture that provides equal opportunity for all, and is inclusive and attractive for all of our employees and independent sales agents. Below are some of the key initiatives that we have undertaken to foster such an environment.
Pay Equity. We are committed to provide a fair or living wage for all employees. In 2021, the Company’s outside counsel performed a pay equity audit and concluded that neither gender nor race drive or predict compensation.
Culture of Engagement. We have town hall meetings at least quarterly where all employees are invited to listen to updates from management on results and key initiatives, as well as ask questions. Confidential surveys are provided to employees after each town hall to give our employees the opportunity to provide feedback and suggest additional topics. Through these surveys, we are able to identify opportunities for improvement, and to create action plans based on feedback as appropriate.
Culture of Diversity and Inclusion. The Company continues to prioritize our efforts in creating and sustaining a culture of diversity and inclusion. The Company derives a great deal of strength from our diverse workforce.
The pie charts below illustrate the gender, racial and ethnic make-up of our total employee workforce as of December 31, 2022:
Culture of Wellness. We are committed to helping our employees have the opportunity to live healthy and active lives. To help ensure the health of our employees, we provide them with a comprehensive benefits package that includes health insurance, dental and vision insurance and fitness center access. Additionally, in response to the COVID-19 pandemic, we have decided to offer a permanent hybrid working environment, where certain employees can work part-time in the office and part-time at home.
Culture of Learning and Training. At the Company, we believe in continuous learning. We offer industry specific training (such as anti-money laundering training, which is required for all employees, and we pay for LOMA education courses), as well as routine training on information security.
FOCUS ON THE ENVIRONMENT
Environmental Stewardship. We are committed to operating in an environmentally responsible manner and strive to be a good steward of the environment. We are headquartered in Austin, Texas, one of the United States’ “greenest” cities. In 2020 we moved into a new leased headquarter building, which was designed to be highly energy efficient and has achieved LEED Gold Certification. The building is outfitted with LED lighting and motion detecting light sensors that help reduce unnecessary energy consumption. As a participant in the Austin Energy Green Building Program, the building was designed and built in a manner that reduced the impact of construction on the environment and utilized materials sourced locally. In addition, the landscaping was designed with native grasses and plants to minimize the use of irrigation and the office has refillable water stations to save use of plastic.
Reducing the amount of paper we use is another key focus for us. As we have introduced new products and enhanced our technology over the past 2 years, we have:
•moved from 100% paper applications to use of an online portal application for our new products;
•created customer portals where we reduce the use of paper through electronic changes to addresses, beneficiaries, etc.;
•created agent portals with electronic commission statements rather than mailing paper statements; and
•increased the use of electronic signature systems, such as DocuSign for our policyholders, agents and standard documents.
Additionally, updated payment processing systems eliminate the need for our policyholders to mail their checks to us, which helps not only reduce paper usage, but also air and road transportation use that might negatively impact our environment.
These efforts help us reduce our carbon footprint in an effort to be good stewards of the environment.
Responsible Investing. In addition to financial considerations and prudent diversification, we work with our external portfolio manager, Wellington Management, to evaluate ESG criteria when making investment decisions for our investment portfolio, as appropriate. Wellington Management maintains a comprehensive ESG framework and utilizes proprietary ESG ratings in considering every investment. We made our first investment in a private equity fund focused on global renewal power generation (wind and solar energy) in 2020, and additional investment into companies developing products and solutions with the potential to help mitigate and/or adapt to climate change. ESG considerations are critical in achieving our core objective of long term, sustainable income within our fixed income portfolio and we will continue to seek responsible investing opportunities in the future.
BOARD MATTERS
THE BOARD IS PRIMARILY RESPONSIBLE FOR:
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| ● | Overseeing Citizens’ strategic initiatives, overall performance and direction | |
| ● | Overseeing risk, cybersecurity and internal controls | |
| ● | Overseeing investment of the Company’s assets | |
| ● | Monitoring executive performance, compensation and succession planning | |
| ● | Establishing broad corporate policies, including in relation to organizational development, good governance, and corporate social responsibility | |
THE BOARD’S ROLES AND RESPONSIBILITIES
RISK OVERSIGHT
Effective risk oversight is an important priority for the Board. Our enterprise risk management (ERM) function identifies and manages the Company’s key risks. The process starts with our executive management team, who identifies key strategic, financial, regulatory and operational risks to the Company (collectively, the “Enterprise Risks”) and manages the Enterprise Risks on a day-to-day basis. On a quarterly basis, the management team reviews and discusses the Enterprise Risks with the Audit Committee, whose charter gives it oversight of the guidelines and policies that govern the ERM process. Although risk oversight is conducted primarily through the Audit Committee, in certain areas described below, other committees of the Board have responsibility (e.g., the Compensation Committee for compensation risk and the Investment Committee for investment risk) and the full Board has responsibility for general oversight of the ERM process and Enterprise Risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committees’ considerations and actions, as well as through regular reports directly from executive officers responsible for oversight of particular Enterprise Risks within the Company.
Selected Area of ERM Oversight in 2022
Key Enterprise Risks discussed among executive management, the Audit Committee and the Board during 2022 included the following:
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| ● | Mortality risks (both COVID and non-COVID deaths); pricing and underwriting new products for mortality risks | |
| ● | The impact of surrenders on the Company’s operations and the Company's initiatives to retain policies | |
| ● | The impact of inflation and rising interest rates on the Company’s investment portfolio, following an extended ultra-low interest rate environment | |
| ● | The impact of inflation on the Company's operations, e.g., increased risks of lapses and surrenders, increased labor costs | |
| ● | Risks to the Company’s strategic goals, including risks related to first year sales both internationally and domestically | |
| ● | Regulatory risk related primarily to the Company’s international operations | |
| ● | Paying for new talent; retaining talent | |
| ● | The impact to costs related to the rising cost of cybersecurity insurance and catastrophic event reinsurance | |
| ● | Financial risks related to the statutory capital ratios of the insurance subsidiaries | |
| ● | Cybersecurity risks; other information and data risks | |
| ● | Anti-money laundering risks | |
Discussions of these topics can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 10, 2023.
While the Audit Committee has primary responsibility for overseeing the Company’s ERM function, the other committees of the Board consider risks within their areas of responsibility and apprise the Board of significant risks and management’s response to those risks. For example, the Compensation Committee considers the risks that may be presented by our executive compensation philosophy and programs, and the Nominating and Corporate Governance Committee oversees the Company’s governance practices, director succession, committee composition
and leadership to manage risks associated with corporate governance. The Investment Committee oversees risks related to the Company’s assets and investment portfolio.
Oversight of Information Security Risk and Cybersecurity
Because we gather and maintain confidential and personal data for the purpose of conducting our insurance subsidiaries’ operations, the Board considers Information Security and cybersecurity to be key Enterprise Risks. The Audit Committee and the Board evaluate the adequacy and appropriateness of the Company’s Information Security program and controls. The Board and Audit Committee both receive regular reports from and engage with the Information Security Officer and other management personnel on key risk areas and related mitigation and control efforts related to Information Security and cybersecurity.
The Company’s Information Security officer provides executive direction with respect to implementation of the Company’s Information Security program throughout the organization. This officer reviews risks associated with the confidentiality, integrity, and availability of critical business systems and sensitive customer and Company data. In conjunction with our Vice President of IT , the Information Security officer conducts risk assessments that measure the likelihood and probable impact of information security events that could adversely affect the Company’s operations, finances and reputation. Quarterly updates are provided to the Audit Committee and updates are provided to the Board at each of its regular meetings on the Company's cybersecurity profile, top threats facing the Company and key risks and mitigation efforts. The Chair of the Audit Committee also provides reports to the full Board on any material information security topics presented to the Audit Committee.
While the Board and management personnel set the tone for the Company’s Information Security program, the Company has a robust information security training and compliance program. All employees receive annual training on Information Security, and our IT department has implemented a security risk awareness program to help the Company’s employees learn how to maintain sound security practices.
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS |
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| What Am I Voting On? |
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Holders of Class A common stock are being asked to elect eight directors to serve until the next annual meeting of shareholders, or until their respective successors are duly elected and qualified. |
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| Voting Recommendation: FOR |
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| The Board and the Nominating and Corporate Governance Committee believe the skills, qualities, attributes, and experience of our directors provide the Company with business acumen and a diverse range of perspectives to engage each other and management to effectively address the Company’s evolving needs and represent the best interests of the Company’s shareholders. |
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| Voting Standard: |
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| Director nominees receiving the highest number of votes cast by Class A shareholders in their favor will be elected to the Board. Cumulative voting in the election of directors is not permitted and proxies cannot be voted for a greater number of persons than the number of nominees named herein. Under our Director Resignation Policy, if a director receives more “withhold” votes than “for” votes, such director will be required to submit his or her resignation for Board consideration. |
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| Abstentions and broker non-votes will be disregarded and have no impact on the vote, other than for establishing a quorum. |
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Each of the director nominees has consented to serving as a nominee, being named in this Proxy Statement, and serving on the Board if elected. If for any reason any nominee herein named is not a candidate when the election takes place (which is not expected), the proxy will be voted for the election of a substitute nominee at the meetingdiscretion of the persons named in the proxy.
BOARD SELECTION
Responsibility for Selection of Director Candidates
The Board is responsible for selecting director candidates to stand for election by shareholders. The Board has delegated the screening process for potential directors to the Nominating and Corporate Governance Committee, which identifies, interviews and recruits candidates for the sole purposeBoard. Upon identifying suitable potential Board members, the Nominating and Corporate Governance Committee then recommends individuals qualified to become Board members to the Board for its consideration.
Qualification Standards for Directors
The Nominating and Corporate Governance Committee considers director nominees who are recommended by its members, by other Board members, by management or by shareholders, as well as those identified by third parties known to the members or management. In evaluating potential nominees to the Board, the Nominating and Corporate Governance Committee has adopted standards related to the qualifications of determiningdirectors of the Company (the “Director Standards”). The Director Standards include, without limitation, independence, character and core values, ability to exercise sound judgment, diversity, demonstrated leadership, and relevant skills and experience in the areas of corporate needs of the Company such as insurance regulation, insurance distribution, finance and accounting, and public company experience.
The Board discusses and promotes efforts to enhance diversity in its Board composition. The Board is committed to diversity and in 2021, added two female directors, both with extensive insurance industry experience. The Board views diversity in the context of the following factors: age, race, gender and ethnicity, geographic knowledge, industry experience, board tenure and culture.
Nominations by Shareholders
Our Board has a
quorum.Ifpolicy to consider properly submitted shareholder recommendations for candidates for a quorumdirector position, which candidates must satisfy the Committee Standards. A shareholder wishing to propose a candidate for the Board’s consideration should follow the procedures in our Bylaws pertaining to shareholder nominations and proposals.
BOARD REFRESHMENT
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•3 new directors in 2021 |
•2 legacy directors retired in each of 2022 and 2023 to allow us to reduce the size of the Board |
•2 directors due to step down in 2024 due to tenure and mandatory retirement policies, allowing for additional refreshment |
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The Company is focused on active board refreshment and continually evaluates the composition of the Board to ensure that it has the right balance of skills, experience, perspective, and rigorous oversight through independent judgment.
In order to encourage refreshment, facilitate an orderly transition of legacy board members, increase diversity and expertise / experience in areas of need, the Board adopted a Board Refreshment and Replacement Plan. Pursuant to the plan, Dr. Sloan is retiring as of the 2023 Annual Meeting. The Board also has a mandatory retirement age and maximum tenure policy in order to encourage refreshment.
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The Board does not presentcurrently anticipate filling the vacancy created by Dr. Sloan’s retirement but instead plans to reduce the size of the Board to 8 members as of the date of the 2023 Annual Meeting. The Board believes that the nominees represent a good mix of long-term knowledge of the company and new experience who may bring fresh ideas. The Nominating and Corporate Governance Committee continues to search for members that bring additional diversity to our Board, including racial or represented at the meeting, the shareholders entitled to vote have the power to adjourn or recess the meeting for up to one-hundredethnic diversity.
DIRECTOR INDEPENDENCE
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It is the policy of the Company that the Board consist of a majority of independent directors. The Board determines whether a director or nominee is “independent” in accordance with the NYSE Listed Company Manual, which requires an affirmative determination that each independent director has no material relationship with the Company or its affiliates or any executive officer of the Company or his or her affiliates that in the judgment of the Board would impair their effectiveness or independent judgment as a director.
In addition to the standards contained in the NYSE Listed Company Manual, the Board has determined that in order to be deemed independent, a director may not receive more than $25,000 in consulting fees or other income from the Company, other than director fees (the “Enhanced Independence Standards”). |
The Board has determined that all current Board members and twenty (120) days without notice,nominees, other than announcement atMr. Shields, our Chief Executive Officer, are independent as set forth under the meeting, untilNYSE Listed Company Manual independence requirements and under our Enhanced Independence Standards.
DIRECTOR NOMINEES
The Company’s Board consists of a
quorum is obtained. At a reconvened meetingdiverse group of leaders in their respective fields and almost all have extensive experience in the life insurance industry. In these positions, they have gained broad management and industry experience, including strategic planning, business development, compliance, risk management, and leadership development. In addition, some of our directors have experience serving as executive officers, or on boards of directors, of other public or private companies where
a quorum is obtained, any business may be transacted which mightthey have
been transacted at the meeting as originally noticed.VOTING REQUIREMENTS
For Proposal No. 1 – Electiongained experience in governance and compensation matters. Two of Directors, you may vote “FOR” or “WITHHOLD”our directors are former elected officials who had oversight for each nominee, or “ABSTAIN” from voting. Under Colorado law, director nominees with the highest number of votes cast “FOR”insurance responsibilities in their election will be elected roles, and thus bring unique perspectives to the Board. Cumulative votingThe name, age and other information for each director nominee is not permitted. Because we have directors elected by two classeslisted below.
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| Gerald W. Shields, 65 |
| Citizens’ Chief Executive Officer and President since January 1, 2022; served as Interim Chief Executive Officer and President from August 2020 through December 31, 2021 |
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| Director since 2017; Vice-Chairman of the Board since February 2020 |
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| Other Current Public Boards: 0 |
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| Certifications: FLMI |
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| Education: B.A. - Accounting and Computer Science, Baylor University |
Mr. Shields, our Chief Executive Officer and President, is a seasoned life insurance executive who brings life insurance and information technology experience to our Board. He has more than 30 years’ experience in health insurance management, as well as professional certifications from Harvard University’s Kennedy School of shareholders, Class A director nominees receivingGovernment, Massachusetts Institute of Technology’s Chief Network Officers Program, and Aubrey Daniels International. He has been named twice in CIO Magazine’s Top 100 CIOs of the highest numberYear and has also been the recipient of votes cast “FOR” their election by Class A shareholdersComputerWorld’s Top 100 CIO Award.
Prior to Citizens, Mr. Shields served as Chief Information Officer at FirstCare Health Plans from July 2015 to October 2018, and Class B director nominees receivingas Senior Vice President and Chief Information Officer at American Family Life Assurance Company of New York from 2002 to 2011.
Mr. Shields’ significant technology and insurance experience are instrumental to the highest numberBoard’s oversight as the Company advances its strategic technology objectives. Mr. Shields recently completed the Cyber Security Oversight Certificate from Carnegie Mellon Institute.
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| Christopher W. Claus, 62 Independent Director |
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| Retired executive of USAA of San Antonio |
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| Director since 2017 |
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| Committees: Investment Committee (Chair), Compensation Committee, Executive Committee |
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| Other Current Public Boards: 1 (TrueCar, Inc.) |
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Education: B.A. - Business, University of Minnesota - Duluth M.B.A. – University of St. Thomas |
Mr. Claushad a 20-year career as an executive at USAA of votes cast “FOR” their election by Class B shareholders will be electedSan Antonio, Texas serving in various roles, including Executive Vice President of USAA’s Enterprise Advice Group from 2013 to 2014, President of USAA’s Financial Advice and Solutions Group from 2007 to 2013, and President of USAA’s Investment Management Company from 2001 to 2006.
Mr. Claus is an experienced executive with insurance and asset management expertise critical to the success of our Board. In his role as Chairman of our Investment Committee, Mr. Claus has strengthened the Board’s oversight of the Company’s assets under management. Further, having served as President of USAA’s Investment Management Company, Mr. Claus strengthens the Board’s oversight function of our executive team’s strategic initiatives.
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| Cynthia H. Davis, 57 Independent Director |
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| Life Insurance Underwriter at NFP Corp. / Partners Financial |
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| Director since 2021 |
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| Committees: Executive Committee, Nominating and Corporate Governance Committee |
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| Other Current Public Boards: 0 |
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| Certifications: FLMI, FALU, LOMA certified Associate - Customer Service |
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| Education: B.A. – Economics, University of Georgia |
Ms. Davis is a seasoned executive in the life insurance industry with over 30 years of underwriting in both the carrier and brokerage side. She is currently the Vice President and Senior Underwriting Consultant at NFP/Partners Financial providing underwriting expertise specializing in complex high net worth cases, foreign nationals and offshore insurance. Previously, Ms. Davis was the Chief Underwriter at Financial Industries Corporation (FIC) and Great American. Ms. Davis is also involved with the Texas Wide Underwriting planning board.
Ms. Davis’ brings to the Board deep knowledge of Directors. Votes that are withheld or voted in abstention will be excluded entirely from the voteinsurance industry, which she developed during her long and will have no effect other than for purposes of establishing quorum. According to NYSE Rule 452, as amended, brokers who have not received instructions from their customers in uncontested elections may not vote shares held in street namesuccessful career in the electionlife insurance industry. With significant global experience with both reinsurers and high net worth foreign insureds, she adds valuable and unique expertise to our Board.
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| Jerry D. “Chip” Davis, 72 Independent Director |
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| Retired life insurance company CEO - National Farm Life Insurance Company |
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| Director since 2017; Chairman of the Board since February 2020 |
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| Committees: Compensation Committee (Chair), Executive Committee (Chair), Investment Committee |
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| Other Current Public Boards: 0 |
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| Certifications: FLMI |
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Education: B.S. – Business, Tarleton State Masters – Business Administration – Tarleton State University |
Mr. Davis is a seasoned and proven life insurance executive, having had a 46-year insurance career with National Farm Life Insurance Company (“NFLIC”). Mr. Davis began his career with NFLIC as a Mortgage Loan officer in 1977 and become Senior Vice President and Chief Investment Officer in 1981. He served as President and Chief Executive Officer of directors,NFLIC from 2004 to January 2016. Mr. Davis has served on the board of NFLIC since 2004 and currently serves as chairman.
Mr. Davis’ career as a life insurance executive and service as Chief Investment Officer of a life insurance company brings tremendous experience to our Board and Investment Committee. Specifically, he has experience dealing with state insurance regulators and auditors. His service as as Chief Investment Officer of NFLIC strengthens the investment Committee’s oversight of the Company’s assets under management.
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| Francis A. “Frank” Keating, II, 79 Independent Director |
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| Chairman of the Board of Regents of the University of Oklahoma |
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| Director since 2017 |
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| Committees: Nominating and Corporate Governance Committee |
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| Other Current Public Boards: 1 (BancFirst Corporation) |
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Education: B.A. – History, Georgetown University J.D. – University of Oklahoma College of Law |
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Governor Keating is the former Governor of the State of Oklahoma, a position in certain other matters. However, they can vote shareswhich he served from 1995 to 2003. More recently, he was as a partner at the law firm of Holland & Knight from February 2016 to December 2018. He served as President and Chief Executive Officer of the American Bankers Association from 2011 to 2016, and President and Chief Executive Officer of the American Council of Life Insurers, the trade association for the life insurance and retirement security industry, from 2003 to 2011.
Mr. Keating has held significant leadership positions in street nameboth the public and private sectors, which make him a valuable addition to our Board. In addition to serving as the Governor of Oklahoma, his impressive career included serving as assistant secretary of the Treasury and associate attorney general under President Ronald Reagan. He was later general counsel and acting deputy secretary for the Department of Housing and Urban Development (“HUD”) under President George H.W. Bush. During his tenure at the Treasury Department and HUD, he worked on significant issues affecting insurance, banking, and the financial services industries. In addition to his current public board, Gov. Keating formerly served on the board of Stewart Title Company, a wholly-owned subsidiary of Stewart Information Services Corp., a publicly held title insurance and real estate services company, from 2006 to January 2017, where he chaired the Nominations and Corporate Governance Committee.
Mr. Keating’s impressive legal and public service career further strengthens our Board’s governance and oversight function. Further, his background as Chief Executive Officer of the American Council of Life Insurers, the preeminent advocacy group for life insurance companies, brings life insurance industry experience and connections to our Board.
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| Dr. Terry S. Maness, 74 Independent Director |
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| Former Dean at Baylor University’s Hankamer School of Business |
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| Director since 2011 |
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| Committees: Audit Committee (Chair) |
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| Other Current Public Boards: 0 |
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| Certifications: Certified Cash Manager |
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Education: B.A. and M.S. – Economics, Baylor University M.B.A. and Doctor of Business Administration – Indiana University |
Dr. Maness served as Dean at Baylor University's Hankamer School of Business from 1997 through July 31, 2021, and was named Dean Emeritus upon his retirement. Previously, Dr. Maness served as Acting Dean at Baylor University from 1996 to 1997, Associate Dean for Undergraduate Programs at Baylor University from 1978 to 1981 and Chairman of the Department of Finance, Insurance and Real Estate at Baylor University from 1985 to 1996. Dr. Maness is an owner of Business Value Consultants and has owned such company since 1989. In addition to Citizens, he serves on the board of a privately held bank and some nonprofit boards as a way of serving his community.
Dr. Maness’ background as Dean of one of America’s leading business schools brings a strong academic presence to our board. He has operated effectively at the highest levels in the ratificationacademic and business community. He is the author of auditors. Therefore, regardlessfive books about financial analysis and financial management, and also a contributing author to various publications, such as Journal of Finance, Journal of Banking and Finance, Journal of Financial Education, Journal of Portfolio Management, Journal of Financial and Quantitative Analysis, Journal of Futures Markets, Journal of Cash Management and Corporate Controller.
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| J. Keith Morgan, 72 Independent Director |
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| Retired senior legal executive; Former Chief Legal Officer at TIAA-CREF |
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| Director since 2021 |
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| Committees: Audit Committee, Investment Committee |
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| Other Current Public Boards: 0 |
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Education: B.A. – Economics, Duke University J.D., University of Virginia Law School |
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| Military Veteran |
Mr. Morgan has decades of experience as a senior legal executive, most recently (2015 - 2018) as Chief Legal Officer & Senior Executive VP at TIAA-CREF, a $1 trillion retirement, insurance and asset management company. Mr. Morgan specializes in securities law, financial regulation, international transactions and mergers and acquisitions. Prior to TIAA-CREF, he spent nearly 20 years at GE, serving as general counsel and senior vice president of GE Commercial Finance Ltd. and GE Capital Corporation. Before joining GE, Mr. Morgan served as the managing partner of Gibson, Dunn & Crutcher's London, Paris, and Saudi Arabia offices. Earlier in his career, he served in the U.S. Navy Judge Advocate General's Corps.
Mr. Morgan’s experience as the Chief Legal Officer of major insurance and asset management companies has provided him with a substantive understanding of the risks, including investment risks, related to a highly regulated company such as Citizens.
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| Mary Taylor, 57 Independent Director |
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| Vice President, Operations and Finance at Northeast Ohio Medical University |
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| Director since 2021 |
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| Committees: Audit Committee, Nominating and Corporate Governance Committee |
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| Other Current Public Boards: 0 |
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| Certifications: CPA |
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Education: B.S. – Accounting, University of Akron Master of Taxation, University of Akron |
Ms. Taylor is a Certified Public Accountant and recognized tax and auditing expert with over 30 years of experience in the public and private sector. Since February 2020, she has served as the Vice President, Operations and Finance at Northeast Ohio Medical University. During 2019, she served as Executive Vice President and Chief Financial Officer of Welty Building Company and from August 2019 through March 2020 also served as the Chair of the Finance and Operations Advisory Committee.
She has served in the following elected positions:
•2011 to 2019 - Lieutenant Governor of Ohio
◦Served as the Director of the Ohio Department of Insurance from 2011 to 2017
• 2007 to 2011 - Auditor of State of Ohio
•2003 to 2006 - State Representative in Ohio
◦Served on the Finance, Ways and Means, and Education Committees
Ms. Taylor has extensive experience in transforming operations, implementing automation in insurance and delivering results in complex tax cases with the IRS and the Department of Labor. Her unique mix of experience gives her a valuable perspective and ability to oversee management’s efforts to grow and develop Citizens’ business and its interactions with regulators as well as the ability to enhance shareholder value by leveraging her financial and risk management expertise and deep understanding of the insurance business.
BOARD LEADERSHIP STRUCTURE
| | |
•Separate Chairman and Chief Executive Officer |
The Board believes that the best and most effective leadership structure for Citizens and its shareholders at this time is to have separate chief executive officer and chairman roles. This structure allows our Chief Executive Officer to focus his time and energy on operating and managing the Company while enhancing the Board’s ability to exercise independent oversight of Citizens’ management on behalf of its shareholders.
Jerry D. “Chip” Davis, Jr. has served as the Company’s Chairman since February 2020. The Board elected Mr. Davis to serve as Chairman due to his 40+ years’ experience in the life insurance industry, including as a leader of a life insurance company. Mr. Davis as an Independent Director.
BOARD MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company’s business affairs are conducted under the direction of the Board. The Board met 6 times during 2022, and each director attended or participated in 75% or more of the aggregate of (i) the total number of meetings of the Board held during 2022, and (ii) the total number of meetings held by each committee of the Board on which such director served during 2022. We expect all of our directors to attend our annual meeting of shareholders and all directors serving at the time attended the 2022 annual meeting.
Select officers and employees regularly attend Board meetings to present information on our business and strategy, and Board members have access to our officers and employees outside of Board meetings. Board members are encouraged to make site visits to meet with our employees, and to accept invitations to attend and speak at internal Company meetings.
To promote open discussion, our independent directors hold regularly scheduled executive sessions without management present. These sessions allow the independent directors to review key decisions and discuss matters in a manner independent of management.
To assist it in carrying out its duties, the Board has delegated certain authority to four separately-designated standing committees shown in the table below along with the number of shares you hold or whether you castmeetings held in 2022. All committees are chaired by and consist entirely of independent directors. The Committee Chairs review and approve agendas for all meetings of their respective Committees.
| | | | | | | | | | | | | | |
|
Audit Committee | Compensation Committee |
Investment Committee | Nominating and Corporate Governance Committee |
| 7 meetings | 5 meetings | 6 meetings | 2 meetings |
| Christopher W. Claus | | • | | |
| Cynthia H. Davis | | | | • |
| Jerry D. Davis, Jr. | | | • | |
| Francis A. Keating II | | | | • |
| Dr. Terry S. Maness | | | | |
| J. Keith Morgan | • | | • | |
| Gerald W. Shields (CEO) |
|
| | |
| Dr. Robert B. Sloan, Jr. | | • | | |
| Mary Taylor | • |
| | • |
The primary responsibilities of each of the committees are defined in its charter (other than the Executive Committee, which does not have a vote, providing your properly executed proxycharter) and summarized below. The charters for the Audit, the Compensation and the Nominating and Corporate Governance Committees incorporate the requirements of the U.S. Securities and
Exchange Commission (SEC) and the NYSE to the extent applicable. Current, printable versions of these charters are available on Citizens’ website at https://www.citizensinc.com/investors/#corporate-governance.
Audit Committee
The purpose of the Audit Committee is
very important.Proposal No. 2 -to assist the approval, on a non-binding advisory basisBoard’s oversight and monitoring of:
•the Company’s accounting and financial reporting processes and the audits of its consolidated financial statements;
•the adequacy of the Company’s internal control over financial reporting;
•the integrity of the Company's consolidated financial statements;
•the qualifications and independence of the Company's independent auditor;
•the appointment, retention, performance, and compensation of the Company’s Named Executive OfficersCompany's independent auditor and Proposal No. 3 - the ratificationperformance of the appointment of Ernst & Young LLP as internal audit function;
•the Company’s independent registered public accounting firm for 2016 each require for approvalcompliance with legal and regulatory requirements related to matters within the scope of the Committee’s responsibilities;
•the Company’s enterprise risk management program; and
•any related party transactions.
Audit Committee Financial Expert. The Board has determined that all of the votes cast “FOR”members of the proposal byAudit Committee are “financially literate” within the shares present or represented atmeaning of the meeting, in person or by proxy, entitled to vote thereon, exceedNYSE listing standards. In addition, the votes cast “AGAINST” each proposal.Board has determined that both Dr. Terry S. Maness (Chair) and Mary Taylor qualify as an “audit committee financial expert” within the meaning of applicable SEC regulations. For these votes, abstentions and broker non-votes will be disregarded and will have no impactadditional information on the vote. Because your voteAudit Committee’s role and its oversight of the Independent Auditor during 2022, see “Audit Committee Report” on page 29.
Compensation Committee
The Compensation Committee is responsible for:
•evaluating and approving director and executive officer compensation, is advisory, it will not be binding uponplans and programs;
•reviewing and taking actions with respect to incentive compensation and equity-based plans;
•reviewing market data to assess the Company orcompetitive position of the Board. However,Company’s director and executive compensation;
•retaining a compensation consultant to assist the committee and the Board in evaluating director and executive officer compensation;
•reviewing, discussing and approving the Compensation Discussion and Analysis for inclusion in the Company’s Proxy Statement; and
•evaluating the risks and rewards associated with the Company’s compensation policies and practices.
For additional information about the Compensation Committee, will take into accountsee the outcomesection entitled “Executive Compensation—Compensation Discussion and Analysis” beginning on page 31.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance committee is responsible for:
•identifying, recruiting and recommending candidates for the Board;
•developing, approving, or recommending to the Board for approval, and assessing, corporate governance policies for the Company;
•overseeing the evaluation of the vote whenBoard; and
•apprising the Board of corporate governance developments and practices, considering future executive pay.CONTROL OF THE COMPANY
CONTROLLING SHAREHOLDER
Harold E. Riley, our Founder and Chairman Emeritus, is the beneficial owner of 100% of our Class B common stock, which is held in the namelong-term best interests of the Harold E. Riley Trust (“Trust”),Company’s shareholders.
Investment Committee
The Investment Committee is responsible for:
•overseeing the management of the Company’s investment activities;
•reviewing the performance of management and engaged investment advisors; and
•ensuring conformance of the Company’s investments with the Company’s investment guidelines and relevant regulations.
Executive Committee
In addition to the four committees described above, the Board has formed an Executive Committee, which he serves as Trustee. Citizens’ Class B common stock elects a simple majorityconsists entirely of independent directors and exercises the powers of the Board, as needed, in between regularly scheduled Board meetings. The Board then reviews and receives one-halfratifies the actions of any cash dividends paid, onthe Executive Committee. The Executive Committee met one time in 2022.
SUCCESSION PLANNING
Our Board oversees our Chief Executive Officer succession planning. Gerald W. Shields was appointed Chief Executive Officer, effective January 1, 2022. The Board is in the process of working with Mr. Shields to create a per share basis,Chief Executive Officer succession plan, with the goal of hiring a new Chief Executive Officer at the expiration of Mr. Shield’s Employment Agreement, which is scheduled for December 31, 2023.
BOARD PROCESSES
BOARD AND COMMITTEE EVALUATION PROCESS
The Board and each committee conduct an annual self-assessment. This evaluation is intended to assess whether the Board and the committees are functioning effectively. As part of this self-assessment, the directors are asked to consider the Board’s role, relations with management, composition and meetings. Each committee is asked to consider its role and the responsibilities articulated in the committee’s charter, the composition of the committee and the committee meetings. The self-assessment responses and comments are compiled by the Secretary of the Company and presented to the Class A shares.Nominating and Corporate Governance Committee for initial review. The Class A common stock electsresponses and comments are reviewed with each committee and the remainderfull Board and are utilized by the Board and each committee to improve their operations and processes.
We also conduct individual assessments of each director. Our Board Chair and the Chair of the Board. In accordanceNominating and Corporate Governance Committee participated on each call with Section 303A.00each of the New York Stock Exchange (“NYSE”) Listed Company Manual, Harold E. Riley is deemedother directors. The purpose of these calls was to be the “Controlling Shareholder”get one-on-one feedback of our Company and we are deemed a “controlled company” by the NYSE. Mr. Riley is 87 years old. The Trust documents provide that upon Mr. Riley’s death, the Class B common stock will be transferred from the Trustsuch director’s contributions to the Harold E. Riley Foundation, a charitable organization established under 501(c)(3) of the Internal Revenue Code (the “Foundation”). The Foundation is organized as a public support charity for the benefit of its charitable beneficiaries, Baylor UniversityBoard and the Southwest Baptist Theological Seminary. The Foundation is governed by 11 trustees, five of which are appointed by its sole member, Harold Riley, three of which are appointed by Baylor Universityfollow-up with respect to their Board and three of which are appointed by Southwestern Baptist Theological Seminary. The trustees appointed by Harold E. Riley include himself, Dottie Riley and Rick Riley. In addition, the Trust documents provide that Mr. Riley may at any time transfer the Class B common stock held by the Trust to the Foundation. It is unclear what, if any, changes would occur to our board, management structure, or corporate operating strategies as a result of different ownership of our Class B common stock. Other than the Class B common stock transfer discussed above, we are not aware of any arrangement, including any pledge by any person, of our common stock, the operation of which may at a subsequent date result in a change of control of our Company.Harold Riley, at December 31, 2015, owned (both directly and indirectly) 4.9% of the Citizens, Inc. Class A Common Stock in addition to his 100% of the Class B Shares described above.
committee assessments.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Randall H. Riley was an executive officer of one of our insurance subsidiaries until October 2, 2015, and Ray A. Riley was an employee until May 6, 2015. Both are sons of Harold E. Riley, our Founder and Chairman Emeritus, and brothers of Rick D. Riley, our Chairman and CEO. The compensation totals for these family members individually each exceeded $120,000 in 2015 and are disclosed in our Summary Compensation Table on page 17. Other family members working for the Company, whose compensation totals did not exceed $120,000 in 2015, include Leeann Riley, wife of Rick Riley, Lee Riley, son of Ray Riley and Dottie Riley, wife of Harold Riley. Dottie Riley is Vice President, Employee Relations, and serves on our Board of Directors.
The Company identifies related
partiespersons using known business affiliations, quarterly disclosure meetings and information provided by directors
and executive officers in their annual
conflict of interest questionnaires.
We have
The Company has in place the following process controls to identify and approve transactions with related
parties:persons: •Management discusses related partiespersons and affiliates as a standing agenda item during each quarterly disclosure meeting. Management requires that any new related partyperson or affiliate transactions or changes to previously identified related party transactions be reported.reported;
•Potential related and affiliated party transactions are reviewed and analyzed at the affiliated entity/ subsidiary level (within the Citizens, Inc. holding company structure) and, if deemed to be affiliated transactions, those transactions are eliminatedevaluated for consolidated financial reporting purposes as part of quarterly financial reporting and entry support is provided for each transaction.transaction; and
| • | | Each director/officer completes an annual report (Conflict of Interest) that identifies any related party transactions. These forms are reviewed by the Citizens, Inc. Board of Directors at the following board meeting. Company officers that provide certifications for quarterly and annual SEC reporting review them as well. |
•Each director and executive officer completes an annual questionnaire that identifies any related person transactions. These forms are reviewed by the Company's legal counsel and by the Board.
All related
partyperson transactions must be approved by the Audit Committee in accordance with the Audit Committee charter.
When a related
partyperson transaction is proposed, the Audit Committee reviews: (1) the related person’s name and relationship to the Company; (2) the person’s interest in the transaction with the Company, including the related person’s position or relationship with, or ownership in, a firm, corporation, or other entity that is a party to or has an interest in the transaction; and (3) the approximate dollar value of the amount involved in the transaction, the nature and business purpose of the transaction and the related party’s interest in the transaction.
Other than the compensation paid to certain members of the Riley family disclosed above, we are
The Company is not aware of any transaction, or series of transactions, since January 1, 2015,2022, or any currently proposed transactions to which wethe Company or any of ourits subsidiaries wasis to be a party, in which the amount involved exceeds $120,000 in a single fiscal year and in which any director, nominee for director, executive officer, more than 5% shareholder or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect material interest. For further information regarding
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Jerry D. Davis, Jr., Dr. Robert B. Sloan, Jr. and Christopher W. Claus served as a member of the Compensation Committee during 2022 and currently serves on the Compensation Committee. None of the members of the Compensation Committee is or has been an executive officer of the Company, nor did any of them have any relationships requiring disclosure by the Company under Item 404 of SEC Regulation S-K. None of the Company’s executive officers served as a director or a member of a compensation paidcommittee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as a director of the Company or member of the Compensation Committee during 2022.
COMMUNICATIONS WITH THE BOARD
The Board has established a process to facilitate communication by shareholders and other interested parties with directors. Communications can be addressed to directors in care of the Secretary of the Company at:
Citizens, Inc.
P. O. Box 149151
Austin, TX 78714-9151.
Communications may be distributed to all directors, or to any individual director, as appropriate. At the direction of the Board, all mail received may be opened and screened for security purposes. In addition, items that are unrelated to the
foregoing persons during 2015 see “Named Executive Officer Compensation” located on pages 17duties and
18.SECURITY OWNERSHIP OF MANAGEMENT
responsibilities of the Board shall not be distributed. Such items include but are not limited to: spam; junk mail and mass mailings; product complaints or inquiries; new product suggestions; resumes and other forms of job inquiries; surveys; and business solicitations or advertisements.
In addition, material that is trivial, obscene, unduly hostile, threatening or illegal or similarly unsuitable items will be excluded; however, any communication that is excluded will be made available to any independent, non-employee director upon request.
DIRECTOR COMPENSATION
The following table shows as of April 13, 2016, certain information with regardregarding the compensation earned or paid during 2022 to the beneficial ownership of our common stock:by each of our directors and director nominees,
by eachmembers of the
named executive officersBoard who were not Company employees during 2022. Mr. Shields was an employee during 2022 and thus did not receive any compensation as
identified ina director. Mr. Shields 2022 compensation is reflected on the Summary Compensation Table
found on page
19,44.
| | | | | | | | | | | | | | |
NAME |
Fees Earned or Paid in Cash ($) |
Stock Awards ($) (1) |
All Other Compensation ($) |
TOTAL ($) |
| Christopher W. Claus | 115,000 | 32,499 | — | 147,499 |
| Cynthia H. Davis | 105,000 | 32,499 | — | 137,499 |
| Jerry D. Davis, Jr. | 115,000 | 32,499 | — | 147,499 |
Dr. E. Dean Gage (2) | 45,739 | — | | — | 45,739 |
| Francis A. Keating | 109,318 | 32,499 | — | 141,817 |
| Dr. Terry S. Maness | 115,000 | 32,499 | — | 147,499 |
| J. Keith Morgan | 105,000 | 32,499 | — | 137,499 |
| Dr. Robert B. Sloan, Jr. | 115,000 | 32,499 | — | 147,499 |
| Mary Taylor | 105,000 | 32,499 | — | 137,499 |
(1)The amounts reported in the Stock Awards column reflect the aggregate grant date fair value of awards of RSUs computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”). The grant date fair value is measured based on the closing price of the Company’s Class A common stock on the date of grant. See Note 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K. Each non-employee director who was elected at our June 7, 2022 Annual Meeting of Shareholders received an annual director award valued at $32,500 on that date. Each of the RSUs will vest one year from the date of grant, June 7, 2023. As of December 31, 2022, each such non-employee director held all 8,333 RSUs.
(2)Pursuant to our Board Refreshment Policy, Dr. Gage did not stand for re-election to the Board in 2022. The amount reported in the Fees Earned or Paid in Cash Column reflects the prorated cash retainer and
by all fees for service as director paid until the expiration of our named executive officers,his term on June 7, 2022.
Narrative to the Director Compensation Table
Non-employee directors receive compensation for their service on the Board as follows (amounts are per year, beginning as of the date of election and director nominees as a group.
Unless otherwise specified,paid in 24 equal installments throughout the address for each person listed below was Citizens Inc., 400 East Anderson Lane, Austin, Texas 78752.
year, subject to continued service):
| | | | | | |
NAME OF BENEFICIAL OWNER
Annual cash retainer | | SHARES OWNER AND
NATURE OF OWNERSHIP(1) | | PERCENT OF
CLASS | $105,000 |
Harold E. Riley
| | 2,453,140 Class A(2) | | | 4.9 | % |
| 1,001,714 Class B(2) | | | 100.0 | % |
Rick D. Riley
| | 675,017 Class A(3) | | | 1.3 | % |
Kay E. Osbourn
| | 870 Class A | | | | (4) |
Geoffrey M. Kolander
| | -0- Class A | | | N/A | |
David S. Jorgensen
| | 621 Class A | | | | (4) |
Dottie S. Riley(5)
| | 441,436 Class A | | | | (4) |
Dr. E. Dean Gage
| | 3,024 Class A | | | | (4) |
Dr. Terry S. Maness
| | -0- Class A | | | N/A | |
Steven F. Shelton
| | 3,039 Class A | | | | (4) |
Dr. Robert B. Sloan, Jr.
| | 17,981 Class A | | | | (4) |
Grant G. Teaff
| | 20,207 Class A | | | | (4) |
Timothy T. Timmerman
| | 9,088 Class A | | | | (4) |
All (12) executive officers and directors as a group
| | 3,182,987 Class A | | | 6.4 | % |
| 1,001,714 Class B | | | 100.0 | % |
(1) | Except as otherwise indicated, each person named in the table has sole voting and investment power with respect to all shares beneficially owned. |
(2) | Owns 2,011,704 Class A shares directly (4.1%) and his spouse, Dottie S. Riley, owns 441,436 Class A shares. The Harold E. Riley Trust, of which Mr. Riley is the controlling Trustee, owns allAdditional cash retainer for Chair of the 1,001,714 issuedBoard and outstanding sharesChair of Class B common stock. |
(3) | Owns 535,864 Class A shares directly, 28,687 Class A shares indirectly as trustee for spouse, and 110,466 Class A shares indirectly as trustee for children. |
(4) | Less than one percent (1%). |
(5) | Dottie S. Riley is the wife of Harold E. Riley. The shares stated as owned by Dottie S. Riley are also included in total Class A shares of Harold E. Riley. Mrs. Riley may be deemed the beneficial ownereach committee of the Class A shares held of record by Harold E. Riley, as well as shares over which he exercises voting and dispositive powers. She disclaims beneficial ownership of all such shares.Board (per chair) | $10,000 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table lists certain entities known by Citizens, Inc. to own beneficially more than five percent
Additionally, each non-employee director receives an annual grant of RSUs, which is granted on the date of each annual meeting and vests at the expiration of the outstanding shareselected term (one year). Upon vesting, the Company will deliver
one share of
Citizens, Inc. Class A common stock
as of April 13, 2016. Beneficial ownership is determinedfor each RSU. Based on the Compensation Committee's work in
accordance2021 with
applicable rulesour independent compensation consultants, which evaluated the director compensation program in light of the
SEC.Company's adoption of a new peer group in 2021, the amount of the annual equity grant was increased from $10,500 in 2021 to $32,500 in 2022.
We also provide up to a $5,000 reimbursement to each director for director education. This amount is not reflected in the compensation table above, as we consider it a normal course reimbursement necessary for a director to provide service to the Company. Directors do not receive fees for attending Board or Committee meetings. No other compensation was paid to our non-employee directors.
AUDIT COMMITTEE MATTERS
| | | | | | |
NAME AND ADDRESS
| | AGGREGATE NUMBER OF
SHARES BENEFICIALLY
OWNED | | PERCENT OF
OUTSTANDING
SHARES | |
Galindo, Arias & Lopez (as trustee of four non-U.S. trusts and/or record holder) Ave. Federico Boyd y Calle 51 Este #18
Edificio Scotia Plaza, Piso 9
Panamá City, Panamá
| | 4,589,176 Class A | | | 9.4 | %(1) |
| | |
Blackrock, Inc.
55 East 52nd Street
New York, NY 10055
| | 2,790,512 Class A | | | 5.7 | %(2)PROPOSAL NO. 2: RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
(1) |
The share numbers and the information in this footnote were obtained from a Schedule 13G filed with the SEC on or about January 26, 2016. Galindo, Arias & Lopez is a Panamanian law firm which is the 100% ownerWhat Am I Voting On? |
|
Holders of two trust companies, Gala Trust and Management Services, Inc., formerly known as Gala Management Services, Inc. (“Gala Trust”) and Regal Trust (BVI) Ltd. (“Regal”). The principal business of each of these companies is to act as trustee for two trusts each. The beneficiaries of these trusts are (i) non-U.S. policyholders of a Company insurance subsidiary, CICA Insurance Company of America (“CICA”), who, since 1987, have assigned their life insurance policy dividends, paid and payable by CICA, to two trusts administered by Gala and Regal (one trust each), and (ii) non-U.S. insurance sales associates of CICA who, since 1987, have assigned various life insurance policy sales commissions paid and payable to them to two trusts administered by Gala and Regal (one trust each). The purpose of each trust is to accumulate our Class A common stock are being asked to ratify the appointment of Grant Thornton LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023. |
|
| Voting Recommendation: FOR |
|
Grant Thornton LLP is an independent registered public accounting firm with significant expertise, reasonable fees and appropriately limited ancillary services. The Audit Committee initially appointed Grant Thornton LLP in June 2021 and believes that its beneficiaries. In orderretention continues to join a trust, a policyholder or sales associate must certify that he or she is neither a citizen nor a residentbe in the best interests of the United States. No beneficiary has powerCompany and its shareholders. One or more members of Grant Thornton are expected to directattend the Annual Meeting, will have an opportunity to make a purchase or sale ofstatement if they desire to do so, and will be available to respond to questions at the Class A common stock held byAnnual Meeting. |
|
| Voting Standard: |
|
Proposal No. 2 will be approved if the votes cast FOR the proposal exceed the votes cast AGAINST it. Abstentions and broker non-votes will be disregarded and have no impact on the vote, other than for establishing a trust so long as such beneficiary has not liquidated such beneficiary’s participation in such trust.quorum. |
|
This reporting person named may be deemed to be a group as defined in Rule 13d-5(b) under the Securities Exchange Act of 1934 and, as such a group, may be deemed to beneficially own an aggregate of 4,589,176 shares of Class A common stock (9.4%) of the outstanding Class A common stock.
GAMASE Insured Trust, a trust established under the laws of the Republic of Panama (“GAMASE Insured Trust”), holds 2,814,608 shares of the Class A common stock and may be deemed to beneficially own such shares pursuant to Rule 13d-3 (5.7%) of the outstanding Class A common stock. Gala Trust is the sole trustee of GAMASE Insured Trust and GAMASE Agents Trust, a trust established under the laws of the Republic of Panama (“GAMASE Agents Trust”) and holds 268,571 shares of the Class A common stock (constituting approximately 0.5% of the outstanding Class A common stock) and may be deemed to beneficially own such shares pursuant to Rule 13d-3, and therefore may be deemed to beneficially own 3,083,179 shares of the Class A common stock (constituting approximately 6.3% of the outstanding Class A common stock).
Regal is the sole trustee of CICA Associates Trust, a trust established under the laws of the British Virgin Islands (“Regal Associates Trust”) which holds 247,335 shares of the Class A common stock (constituting approximately 0.5% of the outstanding Class A common stock) and sole trustee of CICA Policyholders Trust, a trust established under the laws of the British Virgin Islands (“Regal Policyholders Trust”) which holds 1,258,662 shares of the Class A common stock (constituting approximately 2.6% of the outstanding Class A common, and may be deemed to beneficially own such shares pursuant to Rule 13d-3, and therefore may be deemed to beneficially own 1,505,997 shares of the Class A common stock (constituting approximately 3.1% of the outstanding Class A common stock).
Galindo, Arias & Lopez owns a 100% interest in each of the Gala Trust and Regal, and therefore may be deemed to beneficially own 4,589,176 shares of the Class A common stock (9.4%) of the outstanding Class A common stock.
(2) | The share numbers were obtained from a Schedule 13G filed with the SEC on or about January 21, 2016. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent shareholders are required to furnish the company with copies of all Section 16(a) reports they file.
Based solely upon a review of such reports and amendments thereto furnished to us and written representations from reporting persons, we believe that its officers, directors, and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to them during 2015, other than the following. For directors Rick D. Riley, Robert B. Sloan, Jr. and Grant G. Teaff, all purchases made through the Citizens, Inc. Stock Investment Plan by monthly payroll deduction during 2015 were inadvertently reported as small acquisitions on Form 5, rather than on Form 4 when the aggregate of the acquisitions crossed the $10,000 reporting threshold. The missed filings would have been the following:
Riley - six Forms 4 on the following dates: 2/4/2015; 5/28/2015; 6/3/2015; 8/5/2015; 10/7/2015; and 12/2/2015;
Sloan - two Forms 4 on the following dates: 6/3/2015 and 12/2/2015;
Teaff - one Form 4 on 11/4/2015.
GOVERNANCE
Our Company has adopted certain corporate governance best practices, including:
Maintaining a majority of independent directors
Key committees chaired by independent directors
Annual director elections
Annual Board and committee self-assessments
Annual review of Code of Business Conduct & Ethics for all board members and employees
Annual distribution of Insider Trading Policy to all board members and employees
Annual Conflict of Interest Questionnaires for board members and officers
Because our Company is a “controlled” company under the rules of the NYSE, we are not required to comply with the following sections of the NYSE Listed Company Manual: (i) Section 303 A.01 - Independent Directors; (ii) Section 303A.04 - Nominating/Corporate Governance Committee; and (iii) Section 303A.05 - Compensation Committee. However, in an effort to establish more rigorous corporate governance practices than we are required to have under the NYSE’s controlled company exception, six of the nine members (a majority) of our Board are considered independent directors under the NYSE rules, and we have a standing Compensation Committee operating in accordance with NYSE rules.
DIRECTOR INDEPENDENCE
Citizens determines whether a director and nominee to be a director is “independent” in accordance with the NYSE requirements for independent directors (Section 303A of the NYSE’s Listed Company Manual). In order to be considered independent, other than in his or her capacity as a member of the Board of Directors or any board committee, a director may not accept any consulting, advisory or other compensation fees from Citizens, and may not be an affiliated person of Citizens or any subsidiary. In addition to compliance with NYSE independence requirements, the Board applies an additional independence standard that requires an affirmative determination that each independent director has no other material relationship with Citizens or its affiliates or any executive officer of Citizens or his or her affiliates that in the judgment of the Board would impair their effectiveness or independent judgment as a director.
Our Board of Directors has determined that directors Gage, Maness, Shelton, Sloan, Teaff, and Timmerman are independent as set forth in the NYSE independence requirements. In addition, our Board of Directors has determined each member of the Audit Committee and the Compensation Committee of our Board of Directors is independent in compliance with the independence requirements of the NYSE.
NOMINATING/CORPORATE GOVERNANCE FUNCTION
Our Board of Directors does not maintain a nominating/corporate governance committee with respect to (i) identifying, evaluating or recommending candidates for our Board of Directors, and (ii) formulating and overseeing our corporate governance. Instead, these functions are performed by the full Board of Directors. Our Board does not maintain a nominating /corporate governance committee for the following reasons:
We are considered to be a “controlled” company, since the majority of the members on our Board of Directors are elected by our Chairman Emeritus, Harold E. Riley through his beneficial ownership of all of our outstanding Class B common shares. In accordance with Section 303A.00 of the NYSE Listed Company Manual, “controlled” companies are not required to maintain a nominating committee.
A majority of the directors on our Board of Directors have been deemed by the Board to be independent. Thus, we believe that the nominating duties and corporate governance rules with respect to the Class A directors can be accomplished in a disinterested manner by our entire Board of Directors.
Our Board does not have a policy with regard to the consideration of diversity in identifying director nominees. Our Board of Directors has a policy to consider properly submitted shareholder recommendations for candidates for a Class A director position. Such individuals should be highly qualified in terms of business experience and be both willing and expressly interested in serving on the Board. At a minimum, an individual proposed by a shareholder for consideration by the Board should possess personal and professional integrity, sound judgment and forthrightness. A shareholder wishing to propose a candidate for the Board’s consideration should forward the candidate’s name and information about the candidate’s qualifications to Citizens, Inc., Board of Directors, 400 East Anderson Lane, Austin, Texas 78752, Attn: Corporate Secretary. Submissions must include sufficient biographical information concerning the recommended individual, including age, employment history for at least the past five years indicating employers’ names and description of the employers’ business, educational background and any other biographical information that would assist the Board in determining the qualifications of the individual.
MEETINGSAPPOINTMENT AND COMMITTEESOVERSIGHT OF THE BOARD OF DIRECTORS
Our business affairs are conducted under the direction of our Board of Directors. The Board of Directors held five (5) meetings during 2015, at which all directors were present for at least 75% of the meetings. We do not have an attendance policy, although our directors are expected to attend Board meetings. To promote open discussion, the independent directors hold regularly scheduled executive sessions at our Board meetings, in which those directors meet without management participation and with only independent directors present. The director chosen to preside at these sessions rotates among independent directors in accordance with a rotation schedule approved in advance by the Board of Directors. In addition, our Board members are encouraged to attend our annual meetings of shareholders, and all but two of our Board members attended our 2015 Annual Meeting of Shareholders.
To assist it in carrying out its duties, the Board has delegated certain authority to three separately-designated standing committees: the Audit Committee, the Compensation Committee and the Executive Committee. As stated above, due to our status as a “controlled company” under NYSE rules, we are not required to maintain a Compensation Committee; however, we do so as a best practice within our Board structure. The specific functions of our committees are described below:
Audit Committee
Members: Directors Gage, Maness and Timmerman
Number of Meetings in 2015: 9
The purpose of the Audit Committee is to assist the Board of Directors’ oversight of:
INDEPENDENT AUDITORthe integrity of the Company’s financial statements;
the Company’s financial reporting process;
the Company’s compliance with legal and regulatory requirements;
the independent auditor’s qualifications and independence; and
the performance of the Company’s internal audit function and independent auditors.
A copy of our Amended and Restated Audit Committee Charter adopted on November 5, 2014 is posted on our website atwww.citizensinc.com. The information is also available in print to any shareholder who makes a request. Please send a written request to the Secretary, Citizens, Inc., P. O. Box 149151, Austin, Texas 78714-9151.
See more about the Audit Committee and the Audit Committee Report beginning on page 13.
Compensation Committee
Members: Directors Teaff, Maness and Shelton
Number of meetings in 2015: 1
Functions:
Assists the full Board in overseeing the management of our personnel including:
establishing, implementing and continually monitoring adherence with our compensation philosophy;
assisting with Chief Executive Officer performance, evaluation and compensation; and
overseeing executive development, succession planning and diversity objectives.
Oversees the evaluation of management.
Reviews, discusses and refines the Compensation Discussion & Analysis (“CD&A”) cooperatively with our senior management. The Compensation Committee then recommends to the full Board of Directors that the CD&A be included in the Proxy Statement or discloses to the full Board of Directors the reasons it cannot make such a recommendation.
A copy of our Amended and Restated Compensation Committee Charter adopted on November 5, 2014 is posted on our website atwww.citizensinc.com. The information is also available in print to any shareholder who makes a request. Please send a written request to the Secretary, Citizens, Inc., P. O. Box 149151, Austin, Texas 78714-9151.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of directors or compensation committee of an unaffiliated entity that has an executive officer serving as a member of the Board or Compensation Committee.
See more about our Compensation Committee and our CD&A beginning on page 19.
Executive Committee
Members: Directors Rick D. Riley, Gage and Sloan
Number of Meetings in 2015: 10
Functions:
Authority to manage our business affairs.
May take action when a majority of all members of the Board is not required by law or by our Articles of Incorporation or Bylaws.
Material actions by the committee are subsequently reviewed by the Board.
All Executive Committee meetings are held by unanimous written consent, due to time and distance constraints and the necessity for timely approval of day-to-day actions.
BOARD LEADERSHIP STRUCTURE AND RISK OVERSIGHT
According to our Bylaws, the Chairman of the Board is required to be the highest ranking officer of our Company. Rick D. Riley serves as our Chairman and CEO. We do not have a lead independent director. We determined our current Board leadership structure is appropriate and helps ensure proper risk oversight for the Company for a number of reasons, the most significant of which are the following:
A combined chairman and chief executive officer role allows for more productive meetings. The chief executive officer’s direct involvement in the Company’s operations makes him best positioned to lead productive board strategic planning sessions and determine the time allocated to each agenda item in discussion of the Company’s short and long-term objectives.
The majority of our Board is comprised of independent directors. At each Board meeting, our independent directors meet in executive sessions without our Chairman or management present. These sessions allow the independent directors to review key decisions and discuss matters in a manner independent of Rick D. Riley and of management.
Our Audit Committee and Compensation Committee are comprised entirely of independent directors and chaired by independent directors.
While it is the job of the CEO and senior management to assess and manage the Company’s risk exposure through its enterprise risk management function (“ERM”), in accordance with NYSE requirements, the Audit Committee of its Board of Directors is charged with discussing guidelines and policies to govern the process by which ERM is handled. The Audit Committee discusseshas the Company’s major financial risk exposuressole authority and the steps management has takenresponsibility to monitorselect, evaluate and, control such exposures.
The categories of risk exposures assessed and managed by senior management include, but are not limited to:
market risk, including credit, interest rate, equity market and foreign exchange;
liquidity and capital requirements of the Company;
insurance risks, including those arising out of catastrophes and acts of terrorism;
legal and compliance risks;
cybersecurity risk; and
any other risk that poses a material threat to the strategic viability of the Company.
Although risk oversight is conducted primarily through committees of the Board, as disclosed in the descriptions of each of the committees beginning on page 10, the full Board has retained responsibility for general oversight of risks. The Board satisfies this responsibility through full reports by each committee chair regarding the committees’ considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.
The Audit Committee meets at least quarterly withif necessary, replace our independent public audit firm, our Internal Auditor and our Chief Financial Officer and receives a comprehensive financial report discussing the Company’s risk exposures and the processes in place to monitor and control such exposures.
In addition to the Audit Committee, the Compensation Committee considers the risks that may be implicated by our executive compensation. For a discussion of the Compensation Committee’s review of our Company’s named executive officer compensation, please see the “Compensation Discussion and Analysis” beginning on page 19 of this Proxy Statement.
CODE OF ETHICS
Our Board of Directors has adopted a Code of Business Conduct and Ethics (“Code”), which we have posted on our website located at www.citizensinc.com. You may also obtain a copy of our Code by requesting one copy in writing addressed to Citizens, Inc. at 400 East Anderson Lane, Austin, Texas 78752, Attn: President or General Counsel, or by calling us at 512-837-7100.
Our Code provides general statements of our expectations regarding ethical standards we expect our directors, officers and employees to adhere to while acting on our behalf. Among other things, the Code provides that:
We will comply with all laws, rules and regulations.
Our directors, officers and employees are to avoid conflicts of interest and are prohibited from competing with us or personally exploiting our corporate opportunities.
Our directors, officers and employees are to protect our assets and maintain our confidentiality;
We are committed to promoting values of integrity and fair dealing.
We are committed to accurately maintaining our accounting records under generally accepted accounting principles and timely filing our periodic reports.
Our Code also contains procedures for our employees to report, anonymously or otherwise, violations of the Code.
ANNUAL CEO CERTIFICATION
Section 303A.12(a) of the NYSE Listed Company Manual requires each listed company CEO to verify each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. In accordance therewith, Rick D. Riley filed his certification with the NYSE on June 24, 2015 and certified, without qualification, that he was not aware of any violation by the Company of NYSE corporate governance listing standards.
AUDIT
AUDIT COMMITTEE
Our Audit Committee reports to and acts on behalf of the Board of Directors by providing oversight of our financial management, independent registered public accounting firm and financial reporting procedures.
Committee Membership:
Timothy T. Timmerman, Chairman
Dr. E. Dean Gage
Dr. Terry S. Maness
firm. Our Class A common stock is listed for trading on the NYSE. Pursuant to NYSE rules, the Audit Committee is comprised of three or more directorshas appointed Grant Thornton LLP (“Grant Thornton”) as determined by the Board of Directors, each of whom is independent. Our Board of Directors has determined that all of the members of the Audit Committee are independent, as defined in the listing standards of the NYSE and the rules of the SEC.
Our Board of Directors has determined Dr. Terry S. Maness is qualified as an “audit committee financial expert” as that term is defined in the rules of the SEC. Dr. Maness has served as Dean of Baylor University’s Hankamer School of Business since 1997. He previously served as Associate Dean for Undergraduate Programs and as Chairman of the Department of Finance, Insurance and Real Estate. He is the author of five books about financial analysis and financial management, and also a contributing author to various publications, such asJournal of Finance,Journal of Banking and Finance,Journal of Financial Education,Journal of Portfolio Management,Journal of Financial and Quantitative Analysis,Journal of Futures Markets,Journal of Cash Management andCorporate Controller. A Certified Cash Manager (CCM), Dr. Maness frequently serves as a consultant for small business valuations.
Primary Responsibilities:
Assists the full Board in fulfilling its oversight responsibilities as they relate to our accounting policies, internal controls, financial reporting practices and legal and regulatory compliance.
Responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm (“Independent Auditor”(the "Independent Auditor").
Monitors to audit our consolidated financial statements for the independence and performance offiscal year ending December 31, 2023. Grant Thornton has been our Independent Auditor since June 2021. They were selected by the Audit Committee to replace Deloitte & Touch LLP ("Deloitte") in June 2021 based on an evaluation of capabilities that would best meet the needs of the Company based on the Company’s size and internal auditors.
Maintains, through regularly scheduled meetings, a line of communication betweenmarket position. Deloitte had served as the Board and our financial management, any internal auditors and ourCompany’s independent registered public accounting firm.
Oversees compliancefirm since 2017 prior to their dismissal. There were no disagreements with our policiesDeloitte on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. Additionally, there were no “reportable events” (as described in Item 304(a)(1)(v) of Regulation S-K).
In 2022 and 2021, Grant Thornton's report on the financial statements of the Company did not contain an adverse opinion nor a disclaimer of opinion, nor was either report qualified or modified as to uncertainty, audit scope, or accounting principles. Prior to Grant Thornton's engagement in June 2021, neither the Company nor anyone on its behalf consulted Grant Thornton with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a "reportable event".
In considering Grant Thornton’s appointment and compensation for conducting business, including ethical business standards.audit and permitted non-audit services, the Audit Committee considered, among other factors:
Oversees our assessment of internal controls
•Grant Thornton’s status as a registered public accounting firm with the Public Company Accounting Oversight Board (United States) (“PCAOB”) as required by the Sarbanes-Oxley Act.
2015 Key Actions:
ReviewedAct of 2002 (“Sarbanes-Oxley”) and the Company’s quarterly and annual results.
Reviewed the activities and findingsRules of the Company’s Internal Audit Department.PCAOB;
Exercised oversight following the Company’s discovery that some life and annuity policies failed to qualify under Sections 7702 and 7702A of the Internal Revenue Code, resulting in public disclosure and late filing of the Company’s consolidated financial statements for fiscal year ended December 31, 2014. Monitored progress on the financial analysis, the implications of the discovery on the Company’s assessment of its internal controls and remediation options.•Grant Thornton’s independence;
Supported analysis and strengthening of the Company’s Anti-Money Laundering Policy and training program, and recommended swift implementation of new restrictions regarding third party payments.
Reviewed its Charter.
Performed a self-assessment.
Recommended reappointment of our Independent Auditor.
How the Audit Committee Functions:
The Audit Committee met nine times during 2015. Regular audit committee meetings generally take place immediately before a Board meeting to maximize interaction with the Board. The Committee also meets before the Company issues its quarterly and annual financial results. The meetings typically include the CEO and CFO, along with other senior management, and the Internal Auditor.
At each regular Committee meeting, the Committee conducts a review session at which senior management provides briefings on current issues, trends and developments, and is briefed by the Chief Financial Officer on the financial results. Following a report by the Internal Auditor, representatives of our independent registered public accounting firm are invited into the meeting to present their findings. The Committee also meets separately with the accounting firm representatives and/or the lead audit partner upon request. The Committee reports regularly to the Board of Directors.
We believe the Audit Committee’s actions and activities over the past year have enabled us to gain a sound appreciation of the risks and challenges faced by the Company, and the adequacy of the actions being taken to address them.
Appointment of the Independent Registered Public Accounting Firm:
In determining each year whether to reappoint the Independent Auditor or engage another firm, the Audit Committee considers, among other things:
the historical and recent performance of the Independent Auditor on the Company’s audit;
•external data relating to theGrant Thornton’s performance, of the Independent Audit firm, including recent Public Company Accounting Oversight Board (PCAOB)PCAOB reports on the Independent AuditorGrant Thornton and its peer firms;
the firm’s tenure as our Independent Auditor and its familiarity with our operations;
•the firm’s capability and expertise in handling the complexity of ourthe Company’s operations;
•the independenceprofessional qualifications and experience of key members of the auditing firm;engagement team, including the lead audit partner, for the audit of the Company’s consolidated financial statements; and
•the appropriateness of the Independent Auditor’s fees, on both an absolute basis and as compared to its peer firms.
Based on analysis of the above criteria and other considerations, the Audit Committee recommended that Ernst & Young, LLC be reappointed as our independent registered public accounting firm for 2016.
AUDIT COMMITTEE REPORT
The members of the Audit Committee
are independent directorsbelieve that the continued retention of Grant Thornton to serve as
definedthe Company’s Independent Auditor is in the
rulesbest interests of the
NYSE. The members ofCompany and its shareholders. Their appointment is being presented to the shareholders for ratification. If the shareholders do not ratify this appointment, the Audit Committee
are not professionally engaged in the practice of auditing or accountingwill consider such results and
are not experts in the fields of accounting or auditing, including auditor independence. The members of the Audit Committee rely without independent verification on the information provideddetermine whether to
themrecommend and
on the representations made by our management and the independent registered public accounting firm.Management is responsible for preparing our financial statements and ourappoint a different independent registered public accounting firm is responsible for auditing those financial statements. The Audit Committee is responsible for overseeing the conduct of these activities by our management and our independent registered public accounting firm. The Audit Committee is also responsible for establishing procedures to address complaints regarding accounting, internal control or auditing issues, as well as the anonymous submission by employees of concerns regarding accounting or auditing matters. In this context, the Audit Committee routinely meets and holds discussions with management and our independent registered public accounting firm. Management represented to the Audit Committeeaudit our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and the Audit Committee has reviewed and discussed the consolidated financial statements with management and our independent registered public accounting firm.
The Committee has discussed with Ernst & Young LLP, our independent registered public accounting firm for our financial statements, the independent registered public accounting firm’s matters required to be discussed by Statement on Auditing Standards No. 114,The Auditor’s Communication with Those Charged with Corporate Governance, as amended, and applicable SEC Rules. In addition, our independent registered public accounting firm provided to the Audit Committee the written disclosures required by Rule 3526 of the Public Company Accounting Oversight Board,Communication with Audit Committees Concerning Independence, and the Committee and our independent registered public accounting firm have discussed their independence from us and our management, including the matters in those written disclosures.
The Committee has discussed with our independent registered public accounting firm its evaluations of our internal accounting controls and the overall quality of our financial reporting.
In reliance on the reviews and discussions with management and our independent registered public accounting firm referred to above, the Audit Committee recommended to the Board of Directors and the Board has approved, the inclusion of the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC.
Principal Accountant Fees and Services
During 2015 and 2014, the following fees were billed to us by our principal accountants:
| | | | | | | | |
AUDIT FEES | | 2015 | | | 2014 | |
Audit Fees | | $ | 747,000 | | | $ | 603,200 | |
Audit-Related Fees | | | 1,500 | | | | 1,500 | |
Tax Fees | | | 178,150 | | | | | |
All Other Fees | | | 15,000 | | | | | |
| | | | | | | | |
TOTAL | | $ | 941,650 | | | $ | 604,700 | |
| | | | | | | | |
future.
AUDIT COMMITTEE PRE-APPROVAL OF SERVICES
To help assure independence of our
independent registered public accounting firm,Independent Auditor, our Audit Committee has established a policy whereby all audit, review, attest and non-audit engagements of the principal accountant or other firms must be approved in advance by the Audit Committee; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules. This policy is set forth in our Audit Committee Charter. Of the fees shown in the table which were billed by our
principal accountantsIndependent Auditors in
20152022 and
2014,2021, 100% were approved by the Audit Committee.
FEES
For the fiscal years ended December 31, 2022 and 2021, the following fees were billed to us by Grant Thornton:
| | | | | | | | |
| 2022 | 2021 |
| Audit Fees | $1,019,480 | $1,030,320 |
| Audit-Related Fees | — | — |
| Tax Fees | — | — |
| All Other Fees | — | — |
| TOTAL | $1,019,480 | $1,030,320 |
For the fiscal year ended December 31, 2021, the following fees were billed to us by Deloitte:
| | | | | |
| 2021 |
| Audit Fees | $278,958 |
| Audit-Related Fees | $20,213 |
| Tax Fees | — | |
| All Other Fees | — | |
| TOTAL | $299,171 |
AUDIT COMMITTEE
Timothy T. Timmerman, Chairman
Dr. E. Dean Gage
AND MEETINGS
In addition to appointing the Independent Auditor, the Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the Company’s financial statements, financial reporting process, internal controls, internal audit function and annual independent audit. In their oversight role, the members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by our management and the Independent Auditor.
The Audit Committee is comprised of all independent directors who meet the financial literacy requirements of the NYSE and additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. The Board has designated each of Dr. Terry S. Maness
COMPENSATION
Our executive compensation is very simple (Chairman) and straightforward,Mary Taylor as we do not utilize incentive based compensation or offer bonuses or stock options. Our compensation consists entirelyan “Audit Committee financial expert” under the SEC rules.
Regular audit committee meetings generally take place immediately before a Board meeting to maximize interaction with the Board. The Audit Committee also meets before the Company issues its quarterly and annual financial results. The meetings typically include the Chief Executive Officer and Chief Financial Officer, along with other members of
salary and a qualified profit-sharing and 401(k) plan, which is provisioned to all qualified employees. The Compensation Committee establishes a salary for each senior
executive based on long-term corporate objectives, competitive industry practices and each executive officer’s contributions.EXECUTIVE OFFICERS
One tenant of good governance is succession planning,management, and the internal auditors.
At each regular committee meeting, the Audit Committee conducts a review session at which senior management provides briefings on current issues, trends and developments, and is briefed by the Chief Financial Officer on the Company's financial results and the Chief Information Security Officer on information security matters. In addition, the internal auditors provide their report. Representatives of the Independent Auditor attend the meeting and present their findings. The Audit Committee also meets separately with the Independent Auditor representatives and/or the lead audit partner upon request. The Audit Committee reports regularly to the Board.
PRIMARY RESPONSIBILITIES AND 2022 ACTIONS
The Audit Committee represents and assists the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s financial statements, financial reporting process and system of internal controls, including the internal audit function. The Audit Committee oversees the Company’s compliance with legal, regulatory and public disclosure requirements, and the Independent Auditor’s qualifications, independence and performance. The Audit Committee also generally oversees the Company’s overall enterprise risk management program and approves any related party transactions.
During 2022, among other things, the Audit Committee:
•Reviewed and discussed with management the Company’s quarterly and annual results;
•Re-appointed Grant Thornton as the Company’s independent auditor;
•Reviewed the activities and findings of the Company’s internal audit function;
•Actively engaged with the Chief Information Security Officer on security and cybersecurity matters and reviewed information security and cybersecurity risks;
•Reviewed compliance risks, including anti-money laundering risks, with the Company’s compliance officer;
•Reviewed the Audit Committee charter;
•Performed a self-assessment; and
•Met independently with the independent auditor.
AUDIT COMMITTEE REPORT
Management is responsible for preparing our consolidated financial statements and the reporting process and Grant Thornton, our Independent Auditor, is responsible for auditing those financial statements in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) (PCAOB). The Audit Committee is responsible for overseeing the conduct of these activities by our management and the Independent Auditor.
The Audit Committee is also responsible for establishing procedures to address complaints regarding accounting, internal control or auditing issues, as well as the anonymous submission by employees of concerns regarding accounting or auditing matters. In this context, the Audit Committee routinely meets and holds discussions with management and the Independent Auditor. Management represented to the Audit Committee that our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and the Audit Committee has executed effectivelyreviewed and discussed the consolidated financial statements with management and the Independent Auditor.
During 2022, the Audit Committee:
•Reviewed and discussed the Company’s audited financial statements with management;
•Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC;
•Received the written disclosures and the letter from the independent accountant required by applicable requirements of the PCAOB regarding the independent accountant's communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant's independence; and
•Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in this regard. These efforts culminated in June 2015 whenthe Company’s Annual Report on Form 10-K for the year ended December 31, 2022, for filing with the SEC.
AUDIT COMMITTEE
Dr. Terry S. Maness (Chair)
J. Keith Morgan
Mary Taylor
EXECUTIVE OFFICERS
The Executive Officers of the Company
underwent a significant leadership transition, appointing a new executive leadership team following Harold E. Riley’s decision to step down as Chairmanare appointed by, and
CEO. The membersserve at the discretion of, the
new leadership team were promoted internally, a testament to the strengthBoard of
the succession plan.Directors. The
Company also increased its bench strength by adding seasoned new executive leadership in accounting and finance.The following table sets forth certain information concerningas of the date of this proxy statement regarding our Executive Officers:
Gerald W. Shields, 65 Chief Executive Officer and President
See the discussion under “Board Nominees” for Mr. Shields’ information.
Jeffery P. Conklin, 53 Vice President, Chief Financial Officer, Treasurer and Chief Investment Officer
Professional Experience: Mr. Conklin joined the Company in May 2017 and has served as Vice President, Chief Financial Officer since September 20, 2019. He has also served as Vice President, Chief Accounting Officer and Treasurer of the Company since September 2017, and Chief Investment Officer since March 2019. Prior to assuming his current positions, Mr. Conklin served as Interim Chief Financial Officer from March 2019 to September 20, 2019, and Vice President, Chief Accounting Officer from May 2017 to September 2017. Mr. Conklin came to the Company with over 20 years of life insurance and financial reporting experience, having worked at American International Group, Inc. from 2004 to 2017 in various capacities, including Vice President of Financial Reporting and Vice President of Special Projects. In addition to financial reporting, Mr. Conklin brings the Company expertise in budgeting, financial analysis and implementation of strategic accounting initiatives.
Education: B. A. – Business / Accounting, Olivet College
Sheryl Kinlaw, 54 Vice President, Chief Legal Officer and Secretary
Professional Experience:Ms. Kinlaw was appointed as Vice President, Chief Legal Officer and Secretary of the Company in July 2021. She previously served as Interim Chief Legal Officer from April 2021 until her appointment in July 2021 and has provided outside counsel services to the Company since March 2020. Prior to joining Citizens as Chief Legal Officer, Ms. Kinlaw was principal of her own law firm since 2013 where she provided dedicated outsourced general counsel and specialized legal counsel services. Clients included both insurance carriers and independent marketing organizations that distribute insurance products. Prior to forming her own law firm, Ms. Kinlaw served as a partner and the securities practice chair at Culhane Meadows, PLLC, and senior level counsel for two public companies– FIC Insurance Group (Austin) and THQ (Los Angeles). Ms. Kinlaw is licensed to practice law in Colorado and Texas.
Education: B.A. – Economics / International Studies, University of California, Los Angeles (UCLA)
J.D. – University of Texas School of Law
Robert M. Mauldin, III, 62 Vice President, Chief Marketing Officer
Professional Experience:Mr. Mauldin has served as Vice President, Chief Marketing Officer of the Company since joining the Company in July 2017. Mr. Mauldin came to the Company with over 25 years of experience in marketing, product management and innovation and implementing numerous industry-first initiatives that continue to shape the financial services industry today. Prior to joining the Company, Mr. Mauldin served as Senior Vice President, Operations at USI Inc. from September 2015 to July 2017 and Senior Vice President, Marketing at Bank of America from 1992 to September 2015. Mr. Mauldin brings expertise in product development, project management, change management, process improvement, strategic planning and innovation to the Company.
Education: B. A. – Political Science, University of North Carolina, Chapel Hill
Harvey J. L. Waite, 62 Vice President, Chief Actuary
Professional Experience: Mr. Waite has served as Vice President, Chief Actuary of the Company since April 2020. Prior to assuming his current position, Mr. Waite served as Interim Chief Actuary from August 2018 to April 2020 and Pricing Actuary Consultant from November 2017 to July 2018. Mr. Waite came to the Company with over 20 years of actuarial, product and financial experience, including life insurance company experience. Previously, Mr. Waite worked at Bank of America from 2006 to 2017 in various capacities, including Senior Vice President, Actuarial Risk Executive, and Senior Vice President, Credit Risk Executive. Prior to that, Mr. Waite served as Vice President, Actuary at Fleet Credit Card Services (which was acquired by Bank of America in 2004) from 2000 to 2006. Mr. Waite also served in various capacities at Academy Life Insurance Company (an AEGON company) from 1996 to 2000, including Vice President and Chief Actuary and Assistant Vice President and Actuary.
Education: HBSc – Mathematics / Actuarial Science, University of Western Ontario
Professional Designations: FSA, MAAA
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PROPOSAL NO. 3: ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION (“Say-on-Pay”) |
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| What Am I Voting On? |
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Holders of Class A common stock are being asked to approve, on an advisory basis, the compensation of our Named Executive Officers as described in the Executive Compensation section of this proxy statement. |
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| Voting Recommendation: FOR |
| Our Compensation Committee provides independent oversight of our executive compensation with the assistance of an independent compensation consultant. We believe our executive compensation program is working effectively and is aligned with our business goals and strategy and demonstrates a strong link between pay and performance. |
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| Voting Standard: |
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Proposal No. 3 will be approved if the votes cast FOR the proposal exceed the votes cast AGAINST it. Abstentions and broker non-votes will be disregarded and have no impact on the vote, other than for establishing a quorum. |
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Because your vote is advisory, it will not be binding upon the Company or the Board. However, the Compensation Committee will consider the outcome of the vote when considering future executive pay. |
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis discusses the compensation of our named executive officers (“Named Executive Officers”). As a smaller reporting company, we are not required to disclose the information required by Item 402(b) of Regulation S-K; nevertheless, we believe it is important that we provide investors material information that is necessary to an understanding of our compensation policies and decisions regarding our Named Executive Officers.
Our Named Executive Officers in 2022 were:
•Gerald W. Shields, Chief Executive Officer and President
•Jeffery P. Conklin, Vice President, Chief Financial Officer, Treasurer and Chief Investment Officer
•Sheryl Kinlaw, Vice President, Chief Legal Officer and Secretary
•Robert M. Mauldin III, Vice President, Chief Marketing Officer
•Harvey J. L. Waite, Vice President, Chief Actuary
EXECUTIVE SUMMARY
| | | | | | | | |
| Through 2016 | | Throughout most of our history, the Company was led and controlled by our founder Harold E. Riley and his family members. Mr. Riley’s compensation philosophy was to pay only cash compensation to the executive officers and historically, Citizens did not include performance-based incentives or equity awards in its executive compensation program. |
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| Cash Compensation only | |
| (non-performance based) | |
| | | | | | | | |
| 2017 | | In 2017, after the appointment of Geoffrey Kolander as Chief Executive Officer, the Company engaged an independent compensation consultant for the first time and following its compensation review, the Compensation Committee implemented pay-for-performance elements in the executive compensation program.
In 2017, our shareholders approved our first equity incentive plan, which allowed us to incorporate long-term equity as a component of our executive compensation program. |
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•Added pay-for-performance elements for first time | |
◦Cash incentive-based bonuses | |
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•Shareholders approved our first equity incentive plan | |
As illustrated below, we have made progress with our executive compensation program since 2017. We have listened to our shareholders, engaged outside compensation consultants as strategic partners with respect to our compensation program, and revised our peer group to better reflect our company, industry and financial size.
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| 2018 |
•Added equity - based incentive compensation to enhance alignment of executives and shareholders |
◦RSUs with 2-year time-based vesting terms |
| | |
| 2020 |
| Based on negative say-on-pay vote at 2019 Annual Meeting of Shareholders, implemented formulaic scorecard to assess and measure performance for annual incentives |
| | |
| 2021 |
•Incorporated more quantifiable financial and operating metrics in annual incentive program to give less discretion in awarding bonuses |
•Awarded RSUs based on achievement of performance goals and once received, lengthened vesting period to 3 years |
•In December 2021, entered into new CEO agreement (effective January 1, 2022) with market-based compensation below the median of our peer group and standard double trigger severance provisions |
Based on changes, in 2021 we received a favorable say-on-pay vote, with 76% of our shareholders supporting our executive compensation program.
| | |
| 2022 |
•Changes to our Chief Executive Officer Compensation led to 97% of our shareholders supporting our say-on-pay proposal |
Mr. Shields was appointed as our Chief Executive Officer, effective January 1, 2022, and entered into an Employment Agreement with the Company (the “Shields Employment Agreement”, as further described on page 45). During the search for a permanent Chief Executive Officer, the Compensation Committee worked extensively with the Company’s external compensation consultant to structure a market compensation package. The Shields Employment Agreement reflects this structure and provides the following:
Base salary: $775,000
Short-term cash incentive opportunity: target of $600,000
Long-term equity incentive opportunity: target of $250,000
Relocation payment: $15,000
Additionally, the Shields Employment Agreement contains a standard, double-trigger severance payment in the event he is terminated in connection with a change-in-control of the Company, with pay limited to two times the sum of Mr. Shield's base salary at the time of termination and Mr. Shields' most recent annual bonus. The initial term of the Shields Employment Agreement is two years.
The chart below compares the compensation in 2019 and 2020 of our former CEO, Geoffrey Kolander (the compensation that received the negative say-on-pay vote) to the compensation offered to Mr. Shields pursuant to his Employment Agreement.
| | | | | |
| Base Salary: |
| Kolander: | $1,000,000 |
| Shields: | $775,000 |
| |
| Non-Performance Based Compensation: |
| Kolander: | $300,000 cash retention bonus and $1,000,000 fully vested RSUs |
| Shields: | $0 |
| |
| Short-Term Incentive Target Compensation (cash): |
| Kolander | $1,200,000 |
| Shields: | $600,000 |
| |
| Long-Term Incentive Target Compensation (equity): |
| Kolander: | $1,200,000 |
| Shields: | $250,000 |
EXECUTIVE COMPENSATION POLICIES AND PRACTICES
We have adopted the following compensation policies and practices to help achieve our compensation philosophy and objectives:
| | | | | |
| Pay for Performance | A substantial portion of compensation for our Named Executive Officers is performance-based and aligned with creation of shareholder value through an annual incentive cash bonus and long-term equity grants that are only awarded if pre-approved performance goals are achieved. |
| No pension or other special benefits | We do not provide pensions or supplemental executive retirement, health or insurance benefits. |
| Limited perquisites | We provide very limited perquisites to our Named Executive Officers. |
| Stock Ownership Guidelines | We require our Named Executive Officers to hold a certain amount of the Company’s Class A common stock. |
| Prohibition on hedging, pledging and short sales | We prohibit short sales, transactions in derivatives, hedging and pledging of our securities by our Named Executive Officers. |
| Development of Peer Group | We seek to align our Named Executive Officers’ compensation so that it is competitive with our industry peers. |
| Independent Compensation Committee | Our Compensation Committee is comprised of 100% independent members. |
| Independent compensation consultant | The Compensation Committee has directly retained an independent compensation consultant. |
WHAT GUIDES OUR PROGRAM
Our Compensation Philosophy and Objectives
Our executive compensation program is designed to attract, retain and motivate high-performing executive officers and rewards them for achieving strategic goals that enhance shareholder value. We are guided by the following philosophy and objectives:
•Compensation should be competitive. Our total compensation should be competitive with our peer companies to enable us to attract and retain the best executive talent possible. In developing competitive compensation programs, we review compensation from companies in our peer group companies and also use survey sources which include compensation data of executive officers of financial services and insurance companies.
•Compensation should be tied to performance. In order to align our executive compensation program with our strategic business goals, we pay for performance. Annual incentive bonus opportunities consisting of cash and equity grants in the form of performance-based RSUs are evaluated annually based on achievement of pre-set milestones that are established based on the Company's highest priorities.
•Compensation should focus on creating enduring value for our shareholders. We believe that the use of long-term equity incentives serves to retain our executive officers and encourage them to focus on the Company’s long-term performance and success, and aligns executive compensation with the interests of our shareholders. Accordingly, we grant our executive officers RSUs that once earned, vest over three years.
Key Elements of Executive Compensation
The key elements of our executive compensation program include an annual base salary and an annual bonus opportunity that consists of both cash and equity.
•Base Salary. This is fixed compensation and is measured primarily by individual experience and knowledge brought to such position. The purpose is to compensate executive officers fairly for the responsibility of the position held.
•Annual Bonus Opportunity. This is variable compensation and is measured primarily by corporate performance.
◦Cash Incentive Bonus. Purpose is to motivate and reward executive officers for achieving our short-term business objectives.
◦Equity Incentive Bonus. Purposes are to: (1) motivate executive officers by linking incentives to the achievement of our annual performance goals and the performance of our Class A common stock over the long term; and (2) reinforce the link between the interests of our executive officers and shareholders.
The Compensation Committee’s goal is to create a competitive compensation package for each Named Executive Officer using the Competitive Compensation Data (as described below in the section titled “Peer Company Data”) to help determine each element of our executive pay.
THE DECISION-MAKING PROCESS
The Role of the Compensation Committee. Our executive compensation program is administered by the Compensation Committee, which is composed entirely of independent directors. The Compensation Committee is responsible for designing our executive compensation program, including each element of the program, and determining and approving total executive compensation. Each year, the Compensation Committee reviews a competitive analysis and assessment of our executive compensation and approves executive compensation based on this review. The Compensation Committee’s decisions with respect to our executive officers’ compensation are then reviewed and approved by the independent members of the Board.
The Role of the Chief Executive Officer. At the Compensation Committee’s request, the Chief Executive Officer provides input regarding the performance and appropriate compensation of the other Named Executive Officers. The Compensation Committee considers the Chief Executive Officer’s evaluation and his direct knowledge of each executive officer’s performance and contributions when making compensation decisions. The Chief Executive Officer does not participate in the voting or deliberations by the Compensation Committee regarding his own compensation.
The Role of the Compensation Consultant.The Compensation Committee is responsible for selecting, retaining and reviewing the performance of the Company's independent compensation consultant. In 2022, the Compensation Committee replacedPearl Meyer with Meridian Compensation Partners ("Meridian") as its independent compensation consultant as a result of the departure of the Pearl Meyer partner with whom the Compensation Committee had worked.
In retaining and reviewing the compensation consultant's performance, the Compensation Committee considers the independence of the compensation consultant in accordance with SEC rules. During 2022, neither Pearl Meyer nor Meridian provided services to the Company other than services for the Compensation Committee. The Compensation Committee therefore concluded that no conflict of interest existed that would prevent Pearl Meyer (prior to their replacement) or Meridian, from serving as an independent consultant to the Compensation Committee.
Peer Company Data. The use of compensation data from a peer group of public companies that are comparable in industry, size (e.g., assets, market capitalization) and performance (the “Peer Company Data”) is an important aspect of determining our executive compensation. Since we compete for executive talent with comparable companies, utilizing the Peer Company Data helps us create a competitive compensation program that is structured to be compatible with our pay-for-performance compensation philosophy.
As disclosed in our 2022 Proxy Statement, in setting executive officer compensation for 2022, the Compensation Committee used Peer Company Data from the following comparable companies (the “Peer Group”):
| | | | | | | | |
| Company (in order of assets) | Primary Industry | Total Assets* ($M) |
| PRA Group, Inc. | Consumer Finance | $4,279 |
| United Insurance Holdings Corp. | Property and Casualty Insurance | $2,803 |
| Maiden Holdings, Ltd. | Reinsurance | $2,703 |
| Consumer Portfolio Services, Inc. | Consumer Finance | $2,096 |
| Safety Insurance Group, Inc. | Property and Casualty Insurance | $2,046 |
| Stewart Information Services Corporation | Property and Casualty Insurance | $2,043 |
| Heritage Insurance Holdings, Inc. | Property and Casualty Insurance | $2,015 |
| Global Indemnity Group, LLC | Property and Casualty Insurance | $1,898 |
| Medallion Financial Corp. | Consumer Finance | $1,689 |
| AMERISAFE, Inc. | Property and Casualty Insurance | $1,495 |
| CURO Group Holdings Corp. | Consumer Finance | $1,408 |
| FedNat Holding Company | Property and Casualty Insurance | $1,286 |
| EZCORP, Inc. | Consumer Finance | $1,196 |
| Independence Holding Company** | Life and Health Insurance | $1,125 |
| Regional Management Corp. | Consumer Finance | $1,098 |
| HCI Group, Inc. | Property and Casualty Insurance | $1,017 |
| World Acceptance Corporation | Consumer Finance | $954 |
| | |
75th Percentile | | $2,046 |
50th Percentile | | $1,689 |
25th Percentile | | $1,196 |
| | |
| Citizens, Inc. | Life and Health Insurance | $1,782 |
| Percentile | | 53% |
* Total Assets as of June 7, 2021, based on publicly disclosed information as of such date.
** Independence Holding Company was acquired in 2022 and thus will no longer a member of the record datePeer Group, but remains on this chart as it was considered for Peer Company Data in setting 2022 compensation.
Information We Use to Determine Executive Compensation
As mentioned above, the use of Peer Company Data plays an important role in determining our executive compensation. In addition we use data sourced from LOMA, an international trade association for the Meeting. Our executivesinsurance and financial services industry (with the Peer Company Data, collectively, the “Competitive Compensation Data”).
We review the Competitive Compensation Data as a reference point in setting our executive officers’ base salaries and annual incentive bonus opportunities to ensure that we are elected annually byoffering competitive compensation packages to our named executive officers. The Compensation Committee considered the BoardCompetitive Compensation Data in setting executive officer compensation for 2022, and in determining competitive compensation packages for newly hired or promoted executive officers.
2022 EXECUTIVE COMPENSATION DECISIONS IN DETAIL
Components of Directors at the first meetingTotal Compensation
Annual Base Salary
Annual base salary is a customary, fixed element of compensation intended to attract and retain executive officers. Base salaries are set when an executive officer is hired or promoted into his or her position and may be modified based on each executive officer’s experience, responsibilities, market demand and consideration of the BoardCompetitive Compensation Data.
Mr. Shields base salary was determined based on his experience and using the Competitive Compensation Data. The Compensation Committee did not make any increases to the base salary levels of any of the Company’s named executive officers in 2022. Our Named Executive Officers were paid the following base salaries for 2022:
| | | | | |
| Named Executive Officers | 2022 |
| Gerald W. Shields | $775,000 |
| Jeffery P. Conklin | $430,000 |
| Sheryl Kinlaw | $300,000 |
| Robert M. Mauldin III | $350,000 |
| Harvey J. L. Waite | $340,000 |
Annual Bonus Opportunity
Our executive officers are eligible to earn annually a bonus that consists of a cash incentive (the “Cash Bonus”) and an equity incentive (the “Equity Bonus” and collectively with the Cash Bonus, the “Annual Bonus”). The Annual Bonus is designed to place at risk a portion of each annual meetingofficer’s total direct compensation and pay for performance delivered during the year.
There are three stepsto establishing the Annual Bonus opportunity.
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| Establish Performance Objectives ("Milestones") |
At the beginning of
shareholders:the year, the Compensation Committee, with input from the Chief Executive Officer, establishes the performance objectives for the year. The goal of the performance objectives is to tie the Annual Bonus opportunity to achievement of the Company’s highest priorities (short-term goals) within our strategic initiatives (longer-term goals).
In 2022, the performance objectives (the “2022 Milestones”) were: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Year Sales Increase | | Improve Policy Retention | | Roadmap Execution | | Financials & Expense Discipline | |
| | | | | | | | |
| | | | | | | | |
| Achieve first year sales of $x million annualized premium.
Specific targets for payout were established for our international sales and for our Home Service Insurance segment sales, at 80% of goal, 100% of goal and 120% of goal for each. | | Goal: Improve policy lapses and surrenders to improve in-force revenue while maintaining an established first year persistency level.
Targets are established for international business retention and Home Service Insurance segment retention, with specific targets for payout at 80% of retention goal, 100% of retention goal and 120% retention goal for each, along with a minimum persistency level for each.
| | Maintain and execute on the approved 5 Quarter Roadmap:
•Implement solution to minimize grey market impact •Complete Home Services transformation •Execute on LDTI to successfully meet schedule and budget •Deliver as per approved roadmap to improve sales and service across the 3 markets and 3 sales levers (product, promotion, and process) •Complete Claims Reengineering efforts to improve claims payment time | |
•120 % Payout Stretch Goal: Positive Net Pre-tax income
•100% Payout Goal: Break even Net Pre-tax income
•80% Payout goal: Achieve budgeted Net Pre-tax income | |
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NAME
| | AGE | | POSITION
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| Setting the Annual Bonus Opportunity |
The Annual Bonus opportunity for each Named Executive Officer is set by the Compensation Committee, based on Competitive Compensation Data and in the case of Mr. Shields, as reflected in the Shields Employment Agreement. Total Annual Bonus opportunity is set to bring each named executive officer close to the median total opportunity of the Competitive Compensation Data.
The 2022 target Annual Bonus opportunity for each Named Executive Officer was:
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Named Executive Officers |
Base Salary | Cash Bonus Target Value |
Equity Bonus Target Value |
TOTAL ANNUAL BONUS OPPORTUNITY (% of Salary) |
| Gerald W. Shields | $775,000 | $600,000 | $250,000 | 110% |
| Jeffery P. Conklin | $430,000 | $170,000 | $116,960 | 67% |
| Sheryl Kinlaw | $300,000 | $135,000 | $100,000 | 78% |
| Robert M. Mauldin III | $350,000 | $150,000 | $150,000 | 86% |
| Harvey J. L. Waite | $340,000 | $125,000 | $90,000 | 63% |
| | | | | |
| Tying the Annual Bonus Opportunity to the Milestones |
As discussed above, over the last few years, the Compensation Committee has continued to refine our executive compensation program. In 2021, as we became a non-controlled Company for the first time in over 30 years, the Compensation Committee incorporated more quantifiable financial and operating metrics in our performance objectives in order to have less discretion in awarding the Annual Bonus to our Named Executive Officers. This allows the Compensation Committee to tie a percentage of each Named Executive Officer’s Annual Bonus opportunity to the milestone(s) that such person is responsible for driving. We believe that this step provides clear objectives to motivate the Company’s leadership to meet high standards of values-driven leadership in addition to delivering strong financial results.
In 2022, the Compensation Committee weighed the milestones as follows:
| | | | | | | | | | | | | | |
| Named Executive Officers | Milestone 1-
First Year Sales Increase | Milestone 2- Improved Policy Retention | Milestone 3- Roadmap Execution | Milestone 4- Financials & Expense Discipline |
| Gerald W. Shields | 40% | 20% | 30% | 10% |
| Jeffery P. Conklin | 15% | 20% | 25% | 40% |
| Sheryl Kinlaw | 20% | 10% | 35% | 35% |
| Robert M. Mauldin III | 40% | 20% | 30% | 10% |
| Harvey J. L. Waite | 25% | 20% | 35% | 20% |
| | | | | | | | |
| First Year Sales Increase | |
| | |
Rick D. Riley(1)
| | 62 | | Chairman and Chief Executive Officer |
Kay E. Osbourn(2)
| Achieve first year sales of $x million annualized premium.
Specific targets for payout were established for our international sales and for our Home Service Insurance segment sales, at 80% of goal, 100% of goal and 120% of goal for each. | 49 | | President and Chief Corporate Officer |
Geoffrey M. Kolander(3)
| | 40 | | Senior Vice President, Chief Legal Officer and Corporate Strategy |
David S. Jorgensen(4)
| | 52 |
| | | | | | | | | | | | | | | | | | | | |
| MILESTONE 1 | | |
| Weight | x | 80% | = | Payout | |
| INTERNATIONAL | 50% | | 0.8 | | 0.4 | |
| HOME SERVICE | 50% | | 0.8 | | 0.4 | |
| | | | | | |
| Weight | x | 100% | = | Payout | |
| INTERNATIONAL | 50% | | 1 | | 0.5 | |
| HOME SERVICE | 50% | | 1 | | 0.5 | |
| | | | | | |
| Weight | x | 120% | = | Payout | |
| INTERNATIONAL | 50% | | 1.2 | | 0.6 | |
| HOME SERVICE | 50% | | 1.2 | | 0.6 | |
The threshold amount that a Named Executive Officer could earn for this Milestone (other than $0 for no achievement) would be 80% achievement of either International or Home Service, which would result in a 40% payout for Milestone 1. The maximum amount that a Named Executive Officer could earn for this Milestone would be achievement of 120% of both revenue goals, which would result in a 120% payout for Milestone 1. |
| | Vice President, Chief Financial Officer and Treasurer | | | | | | |
Cheri D. Duncan(5)
| Improve Policy Retention | 67 |
| | Corporate Secretary |
| | |
| Goal: Improve policy lapses and surrenders to improve in-force revenue while maintaining an established first year persistency level.
Targets are established for international business retention and Home Service Insurance segment retention, with specific targets for payout at 80% of retention goal, 100% of retention goal and 120% retention goal for each, along with a minimum persistency level for each.
| |
| |
| | |
| | | | | | | | | | | | | | | | | | | | |
| MILESTONE 2 | | |
| Weight | x | 80% | = | Payout | |
| INTERNATIONAL | 50% | | 0.8 | | 0.4 | |
| HOME SERVICE | 50% | | 0.8 | | 0.4 | |
| | | | | | |
| Weight | x | 100% | = | Payout | |
| INTERNATIONAL | 50% | | 1 | | 0.5 | |
| HOME SERVICE | 50% | | 1 | | 0.5 | |
| | | | | | |
| Weight | x | 120% | = | Payout | |
| INTERNATIONAL | 50% | | 1.2 | | 0.6 | |
| HOME SERVICE | 50% | | 1.2 | | 0.6 | |
The threshold amount that a Named Executive Officer could earn for this Milestone (other than $0 for no achievement) would be 80% achievement of either International or Home Service, which would result in a 40% payout for Milestone 2. The maximum amount that a Named Executive Officer could earn for this Milestone would be achievement of 120% of both retention goals, which would result in a 120% payout for Milestone 2. |
(1) | Rick D. Riley was elected Chairman | | | | | | | |
| Roadmap Execution | |
| | |
| | |
| Maintain and Chief Executive Officer in June 2015. He has served Citizens in various full-time capacities since 1976,execute on the approved 5 Quarter Roadmap:
•Implement solution to minimize grey market impact •Complete Home Services transformation •Execute on LDTI to successfully meet schedule and servedbudget •Deliver as Citizens’ Vice Chairman, Presidentper approved roadmap to improve sales and Chief Corporate Officer from 2007 until his appointment as Chairmanservice across the 3 markets and CEO.3 sales levers (product, promotion, and process) •Complete Claims Reengineering efforts to improve claims payment time | |
| |
| | |
| | | | | | | | | | | | | | | | | | | | |
| MILESTONE 3 | | |
| Weight | x | 80% | = | Payout | |
| 100% | | 0.8 | | 0.8 | |
| | | | | | |
| Weight | x | 100% | = | Payout | |
| 100% | | 1 | | 1.0 | |
| | | | | | |
| Weight | x | 120% | = | Payout | |
| 100% | | 1.2 | | 1.2 | |
The threshold amount that a Named Executive Officer could earn for this Milestone (other than $0 for no achievement) would be 80% achievement of roadmap execution, which would result in an 80% payout for Milestone 3. The maximum amount that a Named Executive Officer could earn for this Milestone would be achievement of 120% of roadmap execution, which would result in a 120% payout for Milestone 3. |
(2) | Kay E. Osbourn was elected President and Chief Corporate Officer in June 2015. She joined us as Vice President, Internal Audit, in April 2008. On March 23, 2009, she became our Vice President, Treasurer and Chief Financial Officer, and was appointed Executive Vice President in January 2010. She continued her role as Treasurer and Chief Financial Officer until such time as a successor was appointed in the fourth quarter of 2015. Prior to joining us, Ms. Osbourn served as Vice President, Assistant Treasurer and Controller for National Western Life Insurance Company from 2002 to 2008. | | | | | | | |
| Financials & Expense Discipline | |
| | |
| | |
|
•120 % Payout Stretch Goal: Positive Net Pre-tax income
•100% Payout Goal: Break even Net Pre-tax income
•80% Payout goal: Achieve budgeted Net Pre-tax income | |
| |
| | |
| | | | | | | | | | | | | | | | | | | | |
| MILESTONE 4 | | |
| Weight | x | 80% | = | Payout | |
| 100% | | 0.8 | | 0.8 | |
| | | | | | |
| Weight | x | 100% | = | Payout | |
| 100% | | 1 | | 1.0 | |
| | | | | | |
| Weight | x | 120% | = | Payout | |
| 100% | | 1.2 | | 1.2 | |
| The threshold amount that a Named Executive Officer could earn for this Milestone (other than $0 for no achievement) would be 80% achievement of financials & expense discipline, which would result in an 80% payout for Milestone 4. The maximum amount that a Named Executive Officer could earn for this Milestone would be achievement of 120% of financials & expense discipline, which would result in a 120% payout for Milestone 4. |
Thus, the overall Annual Bonus opportunity for each named Executive Officer is as follows:
| | | | | | | | | | | |
| Threshold Achievement of each Milestone(1) | Target (100% Achievement of each Milestone) | 120% Achievement of each Milestone |
| Gerald W. Shields | $476,000 | $850,000 | $1,020,000 |
| Jeffery P. Conklin | $189,394 | $286,960 | $344,352 |
| Sheryl Kinlaw | $159,800 | $235,000 | $282,000 |
| Robert M. Mauldin III | $168,000 | $300,000 | $360,000 |
| Harvey J. L. Waite | $133,300 | $215,000 | $258,000 |
(1)Calculated for each Named Executive Officer by (a) multiplying (i) the minimum threshold achievement percentage needed for a payout as set forth above (40% for each of Milestones 1 and 2, and 80% for each of Milestones 3 and 4), times (ii) the weighting for each officers as set forth on page 38 above, then (b) adding all 4 factors, which would result in the following percentages:
(3) | Geoffrey | | | | |
| Named Executive Officers | Threshold Achievement Multiplier* |
| Gerald W. Shields | 56% |
| Jeffery P. Conklin | 66% |
| Sheryl Kinlaw | 68% |
Robert M. Kolander was elected Senior Vice President, Chief Legal Officer and Corporate Strategy in June 2015. He joined Citizens in 2006 as Vice President and General Counsel of the Company, and was appointed Corporate Secretary in 2007 and Executive Vice President in January 2010. Mr. Kolander is a licensed attorney in Colorado, New York and Texas.Mauldin III | 56% |
| Harvey J. L. Waite | 62% |
* Rounded to nearest tenth of a percent.
Calculating the 2022 Annual Bonus
Because the calculation of the Annual Bonus opportunity is formulaic, following conclusion of the 2022 fiscal year, the Compensation Committee only had to determine the achievement of each of the 2022 Milestones in order to calculate the 2022 Annual Bonus amount for each Named Executive Officer.
(4) | David S. Jorgensen, CPA was elected Vice President, Chief | | | | | | | |
| 2022 Milestone | Percentage of Milestone Achieved | 2021 Key Accomplishments/Results |
| First Year Sales Growth | 80% | •Achieved 80% of first year sales growth for international sales and Home Services Insurance segment sales
|
| Retention Improvement | 90% | •Achieved 100% goal for international life insurance and 80% goal for Home Services Insurance segment |
| Roadmap Execution | 120% | •Delivered above plan on 5-quarter roadmap, which included deliveries of: ◦New and enhanced products ◦Quarterly portal releases and numerous infrastructure and service-related projects •LDTI project implementation met timeline •Home Services Insurance transformation continued on plan |
Financial Officer and Treasurer on November 16, 2015. Prior to joining Citizens, he served in various positions with American International Group, Inc. from 2003 to 2015, including Senior Vice President/ControllerExpense Discipline | 80% | •Achieved budgeted and Senior Vice President/Financial Reporting - AIG Life & Retirement, Vice President/Controller - VALIC & Western National Life, and Vice President/Financial Reporting - American General Life.Plan Net Pre-tax income |
(5) | Cheri D. Duncan was elected Corporate Secretary in June 2015. She served as Assistant Corporate Secretary of Citizens’ subsidiaries since 2010 and in various related capacities for Citizens since 2004. |
Once the achievement percentages are set for each milestone, the Annual Bonus was calculated for each Named Executive Officer by multiplying the percentage achieved for each milestone by such Named Executive Officer’s weighting for each such milestone to determine the bonus multiplier.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | First Year Sales Growth | = | Retention Improve-ment | = | Roadmap Execution | = | Financial & Expense Discipline | = | TOTAL |
| Gerald W. Shields | .4 x .8 | 0.32 | .20 x .9 | 0.18 | .30 x 1.2 | .36 | .10 x .80 | .08 | 94% |
| Jeffery P. Conklin | .15 x .8 | 0.12 | .2 x .9 | 0.18 | .25 x 1.2 | 0.3 | .40 x .80 | 0.32 | 92% |
| Sheryl Kinlaw | .20 x .8 | 0.16 | .10 x .9 | 0.09 | .35 x 1.2 | 0.42 | .35 x .80 | 0.28 | 95% |
| Robert M. Mauldin III | .40 x .8 | 0.32 | .20 x .9 | 0.18 | .30 x 1.2 | 0.36 | .10 x .80 | 0.08 | 94% |
| Harvey J. L. Waite | .25 x 8 | 0.2 | .20 x .9 | 0.18 | .35 x 1.2 | 0.42 | .20 x .80 | 0.16 | 96% |
The total (bonus multiplier) is then multiplied by each Named Executive Officer’s target Annual Bonus opportunity to determine the Annual Bonus earned. The Cash Bonus amounts paid to the Named Executive Officers are reported under “Non-equity Incentive Plan Compensation” in the Summary Compensation Table on page 44NAMED EXECUTIVE OFFICER.
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officers | Cash Bonus Target Value | x | Cash Bonus Paid | Equity Bonus Target Value | x | Equity Bonus Granted |
| Gerald W. Shields | $600,000 | .94 | $564,000 | $250,000 | .94 | $235,000 |
| Jeffery P. Conklin | $170,000 | .92 | $156,400 | $116,960 | .92 | $107,603 |
| Sheryl Kinlaw | $135,000 | .95 | $128,250 | $100,000 | .95 | $95,000 |
| Robert M. Mauldin III | $150,000 | .94 | $141,000 | $150,000 | .94 | $141,000 |
| Harvey J. L. Waite | $125,000 | .96 | $120,000 | $90,000 | .96 | $86,400 |
| | | | | | |
| TOTAL | $1,180,000 | | $1,109,650 | $706,960 | | $665,003 |
The Equity Bonus is calculated by dividing the Equity Bonus Granted amount set forth in the table above by the closing price of our Class A common stock on March 31, 2023, the payout date for the Annual Bonus. The Equity Bonus was paid in the form of a grant of Restricted Stock Units (RSUs), which vest over a 3-year period following the date of payment. Thus, our Equity Bonus component has both a performance-based component, i.e., the RSUs aren’t granted unless the established milestones are achieved, and a time-based component, i.e., once the performance goals are achieved, a Named Executive Officer receives the stock over the following three years, subject to continued service with the Company. We believe this component of pay thus aligns the interests of our executives with shareholders’ interests in creating long-term shareholder value and promoting the stability and retention of the executive team over longer periods.
OTHER COMPENSATION
PRACTICES POLICIES AND GUIDELINES
Inducement Equity Grants
In order to attract and retain talent, from time-to-time we offer inducement equity awards that vest over 3-year terms. We believe that such awards allow us to recruit talent and incentivize employees to remain at Citizens in order to help drive our strategic goals. No inducement equity grants were made to Named Executive Officers in 2022; Ms. Kinlaw received an inducement grant in 2021.
RSU Retirement Policy
On June 7, 2022, the Board adopted a RSU retirement policy in order to define how unvested RSUs are to be handed for individuals retiring from the Company. This policy allows employees who have unvested RSUs at the time of Retirement to continue vesting without penalty or forfeiture if the employee is retiring on a voluntary basis and has had favorable annual performance reviews over the prior 3 years. "Retirement" for the purposes of this policy equals the Early Retirement Age as defined by the Social Security Administration (currently age 62); provided, however, an employee must have a minimum of 5 years of employment with the Company to be eligible for the continued vesting benefit. The Board believes that this policy allows for a process to be followed consistently and help the Company recruit and retain staff through retirement in order to ensure continuity of leadership of employees who are considering retiring from Citizens.
Compensation Clawback
The terms of all outstanding RSU awards held by our Named Executive Officers allow us to recoup “excess compensation” that may be paid in respect of RSUs in the event the Company is required to restate its audited financial statements for any of the prior three fiscal years as a result of material noncompliance with financial reporting requirements under federal securities laws. “Excess compensation” means the excess of (i) the actual amount of performance-based compensation received by an individual over (ii) the compensation that would have been received based on the restated financial results during such period.
Prohibition on Hedging, Pledging and Short Sales
The Company prohibits all directors and officers from engaging in (i) any transactions in derivatives of the Company’s securities, including the use of financial instruments such as prepaid variable forward contracts, equity swaps, collars, and exchange funds, or any other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities, (ii) pledging of the Company securities as collateral and (iii) short sales of the Company’s securities.
Other Benefits
Our Named Executive Officers are eligible to participate in other benefits on the same basis as other employees, including our health, dental and vision insurance plans, our 401(k) Retirement Plan and paid time off plan. Additionally, Robert Mauldin and Harvey Waite live outside of Texas and we reimbursed these executives for travel expenses incurred in commuting between their principal residence and our executive offices, as well as lodging expenses.
Pursuant to the Shields Consulting Agreement, Mr. Shields received a relocation bonus of $15,000. Mr. Mauldin and Mr. Waite were reimbursed for travel expenses from their homes outside of Texas to our headquarters in Austin, Texas. Other than these amounts, no perquisites or personal benefits exceeded $10,000 for any of our other Named Executive Officers.
Risk Considerations
In establishing and reviewing the Company’s executive compensation program, the Compensation Committee considers whether the program encourages unnecessary or excessive risk-taking. Additional risk considerations are discussed above under “Board Matters – Board’s Roles and Responsibilities - Risk Oversight.”
Severance Arrangements
The Shields Employment Agreement provides for cash severance and other benefits in connection with a qualifying termination following a Change in Control.
Potential payments and benefits provided pursuant to the Change in Leadership Agreements and a more detailed description of the agreements are set forth below in the section entitled “Potential Payments Upon Termination or Change in Control” beginning on page 47.
As of December 31, 2022, the Company did not have any other severance arrangements in place with any of its executive officers.
COMPENSATION TABLES
The following tables, footnotes and narrative discuss the compensation of each of our Named Executive Officers for 2022 and 2021, as required by the rules for a smaller reporting company.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position |
Year |
Salary ($) (1) |
Stock Awards ($) (2) |
Non-Equity Incentive Plan Compensation ($) (3) |
All Other Compensation ($) | |
Total ($) |
| Gerald W. Shields | 2022 | 775,000 | — | 564,000 | 15,000 | (5) | 1,354,000 |
Chief Executive Officer and President | 2021 | 822,945 | 10,499 | 606,667 | 18,176 | (5) | 1,458,287 |
| | | | | | | |
| Jeffery P. Conklin | 2022 | 430,000 | 99,805 | 156,400 | 12,200 | (4) | 698,405 |
Vice President, Chief Financial Officer, Chief Investment Officer and Treasurer | 2021 | 430,000 | 214,460 | 149,334 | 10,012 | (4) | 803,806 |
| | | | | | |
| | | | | | | |
| Sheryl Kinlaw | 2022 | 300,000 | 40,335 | 128,250 | 12,194 | (4) | 480,779 |
Vice President, Chief Legal Officer and Secretary | 2021 | 150,000 | 130,320 | 54,853 | 115,485 | (4)(6) | 450,658 |
| | | | | | | |
| Robert M. Mauldin III | 2022 | 350,000 | 78,699 | 141,000 | 19,100 | (4)(7) | 588,799 |
Vice President, Chief Marketing Officer | 2021 | 350,000 | 205,670 | 118,048 | 7,761 | (4) | 681,479 |
| | | | | | | |
| Harvey J. L. Waite | 2022 | 340,000 | 72,351 | 120,000 | 32,695 | (4)(7) | 565,046 |
Vice President, Chief Actuary | 2021 | 340,000 | 48,963 | 108,528 | 10,458 | (4) | 507,949 |
| | | | | | | |
(1)The 2021 salary for Mr. Shields reflects the consulting fees paid to him for his service as Interim Chief Executive Officer and President of the Company (as an independent contractor and not an employee). Mr. Shields was appointed Interim Chief Executive Officer and President effective August 5, 2020 and held that position through December 31, 2021.
The 2021 salary for Ms. Kinlaw reflects the prorated salary based on her 6 months of service in the role of Vice President, Chief Legal Officer and Secretary of the Company effective July 1, 2021.
(2)The amounts listed in Stock Awards reflect the aggregate grant date fair value of awards of RSUs granted under the Citizens, Inc. Omnibus Incentive Plan and do not reflect compensation actually received. The aggregate grant date fair value is computed in accordance with FASB ASC Topic 718, based on the closing price of the Company’s Class A common stock on the date of grant. Assumptions used in the calculation of these amounts are included in Footnote 11 to the Company’s audited financial statements for the fiscal year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K.
2022 - The 2022 RSU awards were granted on March 31, 2022 for achievement of 2021 performance goals and have three year vesting terms, subject to acceleration under certain circumstances as described herein.
2021 - The 2021 RSU awards granted to Mr. Conklin, Mr. Mauldin and Mr. Waite were granted on January 29, 2021 for achievement of 2020 performance goals. The RSUs granted to Ms. Kinlaw represent an inducement grant made to Ms. Kinlaw on her employment start date. All of these RSUs vest equally over three years from the date of grant. The RSUs granted to Mr. Shields in 2021 were granted for his service as a non-employee director are time-based RSUs with a one year vesting term.
(3)The amounts reflect the performance-based cash incentive bonus earned by each Named Executive Officer in each year in recognition of achievement of the relevant performance measure satisfied during such year, although not payable until the following fiscal year. For example, the amount reflected in the 2022 column was earned for the goals achieved for 2022, even though not paid until 2023. See “Annual Bonus Opportunity” starting on page 37 for additional discussion on achievement and payout of the 2022 non-equity incentive plan compensation.
(4)Includes the Company’s contributions to the respective Named Executive Officer’s defined contribution plan.
(5)2022 - Reflects a $15,000 relocation payment paid to Mr. Shields pursuant to the Shields Employment Agreement.
2021 – This amount reflects perquisites paid to Mr. Shields under his consulting agreement when he was acting as Interim Chief Financial Officer, which primarily consisted of travel and lodging from his home to the Company’s headquarters in Austin, Texas.
(6)Includes the amount paid to Ms. Kinlaw as outside counsel prior to April 1, 2021 and as Interim Chief Legal Officer (as a consultant) from April 1, 2021 through June 30, 2021.
(7)Includes reimbursement for travel to our headquarters in Austin, Texas, from their homes outside of Texas in the amount of $15,423 for Mr. Mauldin and $21,921 for Mr. Waite and for both, a $125 payment (plus tax gross up) for a wellness plan benefit.
The amounts in the salary, bonus, and non-equity incentive plan compensation columns of the “Summary Compensation Table” reflect actual amounts earned in the relevant years (even if paid in a subsequent year), while the amounts in the stock awards column reflect the fair market values of equity granted during the year and not actual amounts paid. The tables entitled “Outstanding Equity Awards at 2022 Year-End” and “Stock Vested” provide further information on the Named Executive Officers’ potential realizable value and actual value realized with respect to their RSU awards. The “Summary Compensation Table” should be read in conjunction with the Compensation Discussion and Analysis and the subsequent tables and narrative descriptions.
Narrative Disclosure to Summary Compensation Table
Shields Employment Agreement
On January 1, 2022, Gerald W. Shields was appointed as the Company's Chief Executive Officer, after serving as the Interim Chief Executive Officer and President of the Company since August 5, 2020. In connection with Mr. Shields’ appointment as the Company’s Chief Executive Officer, the Company and Mr. Shields entered into an Executive Employment Agreement, which was effective on January 1, 2022 (the "Shields Employment Agreement").
Below is a summary of the material terms of the Shields Employment Agreement. Capitalized terms used but not defined below have the meanings set forth in the Shields Employment Agreement.
Term. The Shields Employment Agreement has an initial term of two (2) years and will automatically renew for an additional one year on each anniversary of the effective date unless either Citizens or Mr. Shields provides at least 90 days’ notice not to renew.
Base Salary. The Employment Agreement establishes an annual base salary of $775,000.
Short-Term Incentive. Mr. Shields will be eligible to receive an annual cash bonus of up to $600,000 (subject to annual review by the Board or Compensation Committee, who may increase or decrease such bonus opportunity). The amount of the actual cash or equity bonus awarded each year, if any, shall be determined by the Board of the Company’s Compensation Committee based on the achievement of annual performance objectives established by the Board or the Compensation Committee from time to time and in their sole discretion.
Long-Term Incentive. Mr. Shields will be eligible to earn additional incentive compensation in an amount up to $250,000 per year, in the form of restricted stock units or performance stock units, or other equity grants available under the Company’s equity incentive plan (the “LTI”). If the initial term of employment is not renewed for an additional one-year term, all unvested restricted stock units granted during the initial term shall automatically vest at the end of the initial term.
Relocation Payment. Mr. Shields relocated to Austin, Texas and was paid a relocation payment in the amount of $15,000.
Termination Payments. In the event that Mr. Shields' employment is terminated for one of the reasons stated below, he shall be paid as described below. For purposes of the Termination Payments:
"Accrued Amounts" means a cash payment equal to (i) earned but unpaid Base Salary, plus (ii) accrued but unused PTO, plus (iii) earned, but unpaid Annual Bonus, if any, which was earned for the previous fiscal year, plus (iv) reimbursement of reasonable business expenses and disbursements incurred and documented prior to the date of termination.
"Benefits Continuation" means payment by the Company of the cost of Mr. Shields' participation in the Company's group health plan (as elected as of the date of termination) for the number of months left in the Term.
"Pro-Rated Annual Bonus" means a pro-rated Annual Bonus for the year of termination, based on the degree to which performance metrics for the fiscal year of termination are satisfied (paid at the same time as bonuses are paid to similarly situated executives).
"Severance Period" means the number of months remaining in the Term following the date of termination.
Death or Disability (other than within one year following a Change in Control). A cash payment equal to (i) the Accrued Amounts, plus (ii) a Pro-Rated Annual Bonus.
Without Cause or For Good Reason (other than a Termination in Anticipation of a Change of Control or within one year following a Change in Control). A cash payment equal to (i) the Accrued Amounts, plus (ii) 50% of the Pro-Rated Annual Bonus, plus (iii) 50% of the Base Salary during the Severance Term, payable in equal installments over such period, plus (iv) immediate vesting of all unvested Long-Term Incentive awards, plus (v) Benefits Continuation. Payments under this provision are subject to Mr. Shields' execution of a valid general release and waiver containing the Restricted Covenants.
Without Cause, For Good Reason, or Death or Disability Following a Change in Control or a Termination in Anticipation of a Change in Control. A cash payment equal to (i) the Accrued Amounts, plus (ii) 50% of the Pro-Rated Annual Bonus, plus (iii) two times the Base Salary at time of termination (paid over the remaining Severance Period), plus (iv) two times the most recent Annual Bonus (paid over the remaining Severance Period), plus (v) immediate vesting of all unvested Long-Term Incentive awards, plus (vi) Benefits Continuation. Payments under this provision are subject to Mr. Shields' compliance with the Conditions.
Any other reason. The Accrued Amounts.
The foregoing summary of the Shields Employment Agreement is not complete and is subject to, and qualified by reference to, (i) the full text of the Shields Employment Agreement filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 21, 2021.
No other Named Executive Officer has an employment agreement.
Material Terms of Stock Awards and Non-Equity Incentive Plan Awards
The material terms of each RSU grant and non-equity incentive plan awards made to our named executive officers during the last completed fiscal year are described starting on page 37, "Compensation Discussion and Analysis - Annual Bonus Opportunity."
OUTSTANDING EQUITY AWARDS AT 2022 YEAR-END
The following table presentsshows information regarding the aggregateoutstanding equity awards held by each of the Named Executive Officers as of December 31, 2022. All equity awards are granted in the form of Restricted Stock Units (RSUs). Mr. Shields did not have any outstanding equity awards as of such date.
| | | | | | | | | | | |
| Name | Grant Date | Number of Shares
or Units of Stock
That Have Not
Vested
(#) | Market Value of
Shares or Units of
Stock That Have
Not Vested (1)
($) |
| Jeffery P. Conklin | 1/29/2021 (2) | 23,632 | 50,336 |
| 3/31/2022 (3) | 23,539 | 50,138 |
|
| Sheryl Kinlaw | 7/1/2021 (4) | 16,000 | 34,080 |
| 3/31/2022 (3) | 9,513 | 20,263 |
|
| Robert M. Mauldin III | 1/29/2021 (2) | 22,663 | 48,273 |
| 3/31/2022 (3) | 18,561 | 39,535 |
|
| Harvey J. L. Waite | 1/29/2021 (2) | 5,395 | 11,492 |
| 3/31/2022 (3) | 17,064 | 36,346 |
|
(1)The dollar amounts are determined by multiplying the number of RSUs by $2.13, the closing price of the Company’s Class A common stock on December 30, 2022, the last trading day of the Company’s fiscal year.
(2)One-half of the RSUs vested subsequent to December 31, 2022, on January 29, 2023 (the second anniversary of the date of the grant). The remaining one-half are scheduled to vest on January 29, 2024 (the third anniversary of the date of grant), provided that the Named Executive Officer continues to be employed with the Company through the vesting date or otherwise qualifies for accelerated vesting pursuant to the Company's RSU Retirement Policy. .
(3)One-third of the RSUs vested subsequent to December 31, 2022, on March 31, 2023 (the first anniversary of the date of the grant). One-third of the RSUs are scheduled to vest on March 31, 2024 (the second anniversary of the date of the grant) and the remaining one-third are scheduled to vest on March 31, 2025 (the third anniversary of the date of grant), provided that the Named Executive Officer continues to be employed with the Company through the vesting date or otherwise qualifies for accelerated vesting pursuant to the Company's RSU Retirement Policy.
(4)Represents remaining two-thirds of RSUs from equity inducement grant awarded to Ms. Kinlaw on her start date.
STOCK VESTED
The following table shows information regarding the vesting of RSUs during 2022 that were granted to the Named Executive Officers prior to 2022.
| | | | | | | | |
| Stock Awards |
| Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) |
| Gerald W. Shields | 2,023 | $ | 6,757 | |
| Jeffery P. Conklin | 40,870 | $ | 179,423 | |
| Sheryl Kinlaw | 8,000 | $ | 33,120 | |
| Robert M. Mauldin III | 34,981 | $ | 154,118 | |
| Harvey J. L. Waite | 2,698 | $ | 12,706 | |
(1)The dollar amounts are determined by multiplying the number of shares that vested by the per share closing price of the Company’s Class A common stock on each applicable vesting date.
POTENTIAL PAYMENTS UPON TERMINATION
At December 31, 2022, the following agreements contain provisions whereby a Named Executive Officer may receive a payment following termination of employment or a change in control of the Company:
•Shields Employment Agreement
•RSU Agreements
Shields Employment Agreement
The following table shows the estimated Termination Payment Mr. Shields would have become entitled to under the terms of the Shields Employment Agreement had his employment terminated on December 31, 2022. For purposes of this table:
Accrued Amounts = $89,423. Reflects cash payment equal to the paid time out accrued but not used as of 12/31/2022. No other Accrued Amounts would be due because: (i) earned but unpaid Base Salary = $0 as full Base Salary for 2022 was paid as of December 30, 2022 (the last business day of fiscal year); and (ii) Annual Bonus for the previous fiscal year (2021) was paid in April 2022.
Base Salary = $775,000
Annual Bonus = $600,000; Pro-Rated Annual Bonus = $600,000
Assumes business expenses had been fully reimbursed.
Benefits Continuation = $1,192 / month
| | | | | |
| Termination Reason | Amount |
Death or Disability (1) | $689,423 |
Without Cause or For Good Reason (2) | $791,227 |
| Without Cause, For Good Reason, or Death or Disability Following a Change in Control or a Termination in Anticipation of a Change in Control (3) | $3,167,061 |
| Any other reason | $0 |
(1)Other than within one year following a Change in Control. Payment reflects (1) the Pro-Rated Annual Bonus calculated as if 100% of Annual Bonus was earned and paid out; and (ii) Accrued Amounts..
(2)Other than a Termination in Anticipation of a Change in Control or within one year following a Change in Control. Payment reflects (i) Accrued Amounts; (ii) 50% of the Pro-Rated Annual Bonus, calculated as if 100% of Annual Bonus was earned and paid out, (iii) 50% of the remaining Base Salary due, (iv) immediate vesting of Long-Term Incentive Awards ($0) and (v) Benefits Continuation for 12 months. Assumes Mr. Shields signed the Release.
(3) Payment reflects: (i) Accrued Amounts; (ii) 50% of the Pro-Rated Annual Bonus, plus (iii) two times the Base Salary at time of termination (paid over the remaining Severance Period), plus (iv) two times the most recent Annual Bonus (paid over the remaining Severance Period), plus (v) immediate vesting of all unvested Long-Term Incentive awards, plus (vi) Benefits Continuation for 12 months. Assumes Mr. Shields signed the Release.
RSU Agreements
Pursuant to the terms of the award agreements for RSUs granted to all recipients under our Omnibus Incentive Plan, unvested RSUs shall become 100% vested on an accelerated basis in the following circumstances:
(a)Death or Disability (as Disability is defined in §22(e)(3) of the Internal Revenue Code); or
(b)Change in Control
Change in Control– 100% vested if “Termination of Employment or Service in Connection with a Change of Control”
“Termination of Employment or Service in Connection with a Change of Control” means a termination of employment within the one-year period beginning on the date of a Change in Control:
•by the Company for any reason other than Cause; or
•by the recipient for Good Reason
“Good Reason” generally means a material reduction in base salary or wage rate or target incentive opportunity; or the relocation of the principal place of employment to a location more than fifty miles from the Named Executive Officer’s principal place of employment as of immediately prior to the Change of Control (subject to certain cure rights).
A “Change of Control” generally occurs when:
•we sell or otherwise dispose of all or substantially all of our assets;
•we consummate a merger or consolidation of the Company with or into another corporation where our shareholders do not continue to hold at least a majority of the surviving entity;
•any person, entity or group (other than the Company) becomes a beneficial owner of, or shall have obtained voting control over, more than a certain percentage of the outstanding shares of the Class A common stock
•under certain circumstances, our directors cease to constitute a majority of the Board; or
• our shareholders approve a plan of complete liquidation or dissolution of the Company.
The following table shows the amounts that each of the Named Executive Officers would have become entitled to under the terms of their RSU grant agreements had their employment or service been terminated on December 31, 2022.
| | | | | |
|
($) (1) |
| Gerald W. Shields | 0 |
| Jeffery P. Conklin | 100,474 |
| Sheryl Kinlaw | 54,343 |
| Robert M. Mauldin III | 87,808 |
| Harvey J. L. Waite | 47,838 |
(1) The dollar amounts are determined by multiplying the number of shares outstanding at 2022 year end as reflected in table above (which are subject to acceleration) by $2.13, the closing price of the Company’s Class A common stock on December 31, 2022.
The foregoing summary is not complete and is subject to, and qualified by reference to, the full text of the Form of Citizens, Inc. Employee Restricted Stock Unit Agreement filed as Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2018. .
PAY VERSUS PERFORMANCE
We are providing the following information pursuant to the new SEC pay versus performance disclosure requirements set forth for Smaller Reporting Companies in Item 402(v) of Regulation S-K (the "Pay Versus Performance Rule"), which requires disclosure of certain information about the relationships between our performance and the compensation earned byof our principal executive officer,Chief Executive Officer and the average compensation of our principal financial officer and our most highly compensated executive officers for 2015. There has been noother non-CEO Named Executive Officers, as well as the “Compensation Actually Paid” as calculated in accordance with the Pay Versus Performance Rule. The amounts reported as “Compensation Actually Paid” do not reflect the actual amount of compensation awarded to, earned by or paid to our Chief Executive Officer or our non-CEO Name Executive Officers and differ from the compensation amounts disclosed elsewhere in this proxy statement. For a discussion of our executive compensation program and philosophy, please refer to our “Compensation Discussion and Analysis” section.
| | | | | | | | | | | | | | | | | | | | | | | |
(a) Year (1) | (b) Summary compensation table total for CEO ($) | (c) Compensation actually paid to CEO (2) ($) | (d) Average summary compensation table total for non-CEO named executive officers ($) | (e) Average compensation actually paid to non-CEO named executive officers (3) ($) | (f) Value of initial fixed $100 investment based on Total Shareholder Return (4) | (e)
Net Income (loss)
($,
(in thousands) | (f)
Adjusted Operating Income (loss) ($, (in thousands) (5) |
|
| 2022 | 1,354,000 | 1,350,015 | 583,257 | 473,173 | $37.17 | (6,638) | 3,224 |
| 2021 | 1,458,287 | 1,450,021 | 610,973 | 573,360 | $92.67 | 36,787 | (5,055) |
(1)Gerald W. Shields was the CEO in 2022 and 2021.The other named executive officers in both years were: Jeffery P. Conklin, Sheryl Kinlaw, Robert M. Mauldin III, and Harvey J.L. Waite.
(2)Compensation Actually Paid to Mr. Shields in each applicable year is calculated as follows:
| | | | | | | | | | | | | | | | | | | | |
Year | Summary compensation table total for CEO | LESS Grant Date Fair Value of Equity Awards Granted During Applicable Year (as reflected in Summary Compensation Table) | PLUS Year-End Fair Value of Equity Awards Granted During Applicable Year that are Outstanding and Unvested at end of Applicable Year | PLUS Change in Fair Value as of Year-End of Any Prior-Year Awards that Remain Unvested as of Year-End | PLUS Change in Fair Value as of the Vesting Date from the End of the Prior Fiscal year of Any Prior Year Awards that Vested During Applicable Year | EQUALS Compensation Actually Paid |
| 2022 | 1,354,000 | $— | $— | $— | $(3,985) | $1,350,015 |
| 2021 | 1,458,287 | $10,499 | $10,742 | $— | $(8,509) | $1,450,021 |
(3)The Average Compensation Actually Paid to the four non-CEO named executive officers in each applicable year is calculated as follows:
| | | | | | | | | | | | | | | | | | | | |
Year | Average summary compensation table total for non-CEO named executive officers | LESS Average of Grant Date Fair Value of Equity Awards Granted During Applicable Year (as reflected in Summary Compensation Table) | PLUS Average of Year-End Fair Value of Equity Awards Granted During Applicable Year that are Outstanding and Unvested at end of Applicable Year | PLUS Average of Change in Fair Value as of Year-End of Any Prior-Year Awards that Remain Unvested as of Year-End | PLUS Average of Change in Fair Value as of the Vesting Date from the End of the Prior Fiscal year of Any Prior Year Awards that Vested During Applicable Year | EQUALS Average of Compensation Actually Paid |
| 2022 | $583,257 | $72,790 | $36,571 | $(53,814) | $(20,051) | $473,173 |
| 2021 | $610,973 | $149,853 | $134,789 | $(5,534) | $(17,015) | $573,360 |
(4)Calculated by determining the number of shares that $100 would have purchased on December 31, 2020 ($100 divided by $5.73, which was the closing price of our Class A Common Stock on such date) and then multiplying that share amount by the closing price in each of the applicable years to determine the value of the $100 investment at the end of each applicable year.
(5) Adjusted Operating Income (loss) is a non-GAAP measure that is computed as pre-tax GAAP operating income, excluding net investment related gains (losses) and unusual one-time items. Management believes that this metric is meaningful, as it allows investors to evaluate underlying profitability and enhances comparability across periods, by excluding items that are heavily impacted by investment market fluctuations and other economic factors and are not indicative of operating trends. Management believes that the pre-tax metric is a more useful comparison than the post-tax metric, as the Company’s effective tax rate can fluctuate significantly from quarter-to-quarter. Adjusted Operating Income is calculated as follows:
| | | | | | | | | | | | | | | | | | | | |
| |
| For the periods ended | |
| Unaudited (In thousands) | 2022 | | 2021 |
| | | |
| Adjusted Operating Income | | | |
| Income (loss) before federal income tax | $ | (7,067) | | | $ | (6,688) | |
| Less: | | | |
| Excluded investment related gains (losses) | (10,291) | | | 10,991 | |
| Excluding goodwill impairment | — | | | (12,624) | |
| Total adjustments | (10,291) | | | (1,633) | |
Adjusted income (loss) before federal income tax | $ | 3,224 | | | $ | (5,055) | |
Relationship Between Compensation Actually Paid and our Total Shareholder Return
Our stock price performance is not one of the elements used in determining Compensation Actually Paid to our Named Executive Officers. However, the amount of Compensation Actually Paid to our Named Executive Officers aligns with the Company's Total Shareholder Return (TSR) due to the fact that a portion of the compensation paid to our Named Executive Officers is comprised of equity awards. In both 2021 and 2022, the amount of Compensation Actually Paid to our Named Executive Officers was less than the Summary Compensation Table total for the Named Executive Officers due to the declining stock price and TSR.
| | | | | | | | | | | | | | |
Year | Value of initial fixed $100 investment based on Total Shareholder Return | Summary compensation table total for all Named Executive Officers ($) | Compensation actually paid to Named Executive Officers ($) | Difference |
| 2021 | $92.67 | 2,069,260 | 2,023,381 | $(45,879) |
| 2022 | $37.17 | 1,937,257 | 1,823,188 | $(114,069) |
Relationship Between Compensation Actually Paid and our Net Income (Loss) (GAAP and Non-GAAP)
GAAP and non-GAAP net income (Adjusted Operating Income) are measures of our overall profitability that we believe are factors that can drive our stock price performance. However, Compensation Actually Paid is less sensitive to our annual GAAP income (loss) because management and our Board of Directors do not believe that our GAAP income (loss) is a meaningful number in allowing investors to evaluate underlying profitability. Rather, we believe that Adjusted Operating Income is a better tool to allow investors to evaluate profitability and enhance comparability across periods. Accordingly, pre-tax income is one of the four elements of the Annual Bonus Opportunity (described above in Compensation Discussion and Analysis). The increase in Adjusted Operating Income from 2021 to 2022, is one of the reasons that the non-equity incentive plan compensation paid to the Named Executive Officers was generally higher in 2022 than 2021.
CEO PAY RATIO
| | | | | | | | | | | | | | | | | |
Name | Salary ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
| Gerald W. Shields | 775,000 | 0 | 564,000 | 15,000 | 1,354,000 |
CEO Pay Ratio:approximately 23 to 1
The total annual compensation of Mr. Shields for 2022 ($1,354,000) was 23 times the median annual total compensation of all of our employees ($60,036).
Calculation of Mr. Shields total annual compensation:
As disclosed in the Summary Compensation Table of this Proxy Statement on page 44, Mr. Shields had annual total compensation of $1,354,000 in 2022.
Calculation of median annual total compensation of all our employees:
We identified our median employee by examining the total cash compensation for all of the 215 employees who were employed by us on December 31, 2021. Mr. Shields was not an employee as of such date.
We believe the use of total cash compensation for all employees is a consistently applied compensation measure that reasonably reflects the annual compensation of our employees. We included all employees, whether employed on a full-time or part-time basis and did not exclude any employee requirednon-U.S. employees. We did not make any assumptions, adjustments or estimates with respect to total cash compensation (except for the fact that we annualized the compensation for any full-time or part-time employees who were not employed by us for all of 2021).
STOCK OWNERSHIP INFORMATION
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table provides information as of April 11, 2023, on the beneficial ownership of our Class A common stock by (1) each of our directors and nominees, (2) each of the other named executive officers and (3) all of our directors and executive officers as a group.
Each person listed below has sole voting and investment power for all shares held by such person.
The address for each person listed below is: Citizens, Inc., 11815 Alterra Parkway, Suite 1500, Austin, Texas 78758.
| | | | | | | | |
| NAME OF BENEFICIAL OWNER |
CLASS A SHARES OWNED |
PERCENT OF CLASS (1) |
| Directors and Nominees | | |
| Christopher W. Claus | 15,934 | * |
| Cynthia H. Davis | 2,486 | * |
| Jerry D. Davis, Jr. | 13,072 | * |
| Francis A. Keating II | 10,319 | * |
| Dr. Terry S. Maness | 6,614 | * |
| J. Keith Morgan | 33,162 | * |
| Gerald W. Shields | 85,171 | * |
| Dr. Robert B. Sloan, Jr. | 53,094 | * |
| Mary Taylor | 2,930 | * |
|
| Jeffery P. Conklin | 101,782 | * |
| Sheryl Kinlaw | 11,677 | * |
| Robert M. Mauldin III | 75,339 | * |
| Harvey J. L. Waite | 25,752 | * |
| Directors and executive officers as a group |
| (13 individuals) | 437,332 | * |
*Less than one percent (1%).
(1)Based on 49,856,895 shares of Class A common stock outstanding as of April 11, 2023.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as otherwise noted, the following table provides information as of April 11, 2023, with respect to the number of shares of our Class A common stock owned by each person known by the Company to be reported in any table or column in any fiscal year, otherthe beneficial owner of more than what is5 percent of our Class A common stock.
| | | | | | | | |
| NAME OF BENEFICIAL OWNER | CLASS A SHARES OWNED | PERCENT OF CLASS (1) |
Galindo, Arias & Lopez (as trustee of four non-U.S. trusts and/or record holder) c/o Gala Trust and Management Services, Inc., Scotia Plaza, 9th Floor, Federico Boyd Avenue 18 and 51 Street, Panama 5 Republic of Panama
| 4,121,765 | 8.3% (2) |
(1)Based on 49,856,895 shares of Class A common stock outstanding as of April 11, 2023. The ownership percentages set forth in the table below.SUMMARY COMPENSATION TABLE
Annual Compensation
| | | | | | | | | | | | | | | | |
NAME AND PRINCIPAL POSITION | | YEAR | | | SALARY | | | ALL OTHER
COMPENSATION
(1) | | | TOTAL | |
| | | | |
PEO - Principal Executive Officer | | | 2015 | | | $ | 539,588 | | | $ | 51,383 | | | $ | 590,971 | |
Rick D. Riley (2) | | | 2014 | | | | 525,000 | | | | 134,699 | | | | 659,699 | |
Chairman and Chief Executive Officer | | | 2013 | | | | 500,004 | | | | 55,975 | | | | 555,979 | |
| | | | |
Harold E. Riley (3), | | | 2015 | | | | 481,139 | | | | 6,776 | | | | 487,915 | |
Chairman Emeritus | | | 2014 | | | | 1,000,008 | | | | 81,830 | | | | 1,081,838 | |
| | | 2013 | | | | 1,000,008 | | | | 36,003 | | | | 1,036,011 | |
| | | | |
PFO -Principal Financial Officer | | | 2015 | | | | 43,751 | | | | 300 | | | | 44,051 | |
David S. Jorgensen (4), | | | | | | | | | | | | | | | | |
Vice President, Chief Financial Officer and Treasurer | | | | | | | | | | | | | | | | |
| | | | |
Kay E. Osbourn | | | 2015 | | | | 379,173 | | | | 8,098 | | | | 387,271 | |
President and Chief Corporate Officer | | | 2014 | | | | 340,008 | | | | 9,469 | | | | 349,477 | |
| | | 2013 | | | | 315,000 | | | | 7,795 | | | | 322,795 | |
| | | | |
Geoffrey M. Kolander, | | | 2015 | | | | 379,173 | | | | 496 | | | | 379,669 | |
Senior Vice President, Chief Legal Officer | | | 2014 | | | | 340,008 | | | | 5,574 | | | | 345,582 | |
and Corporate Strategy | | | 2013 | | | | 315,000 | | | | 2,437 | | | | 317,437 | |
| | | | |
Robert E. Rainey, Jr. (5) | | | 2015 | | | | 285,000 | | | | 18,024 | | | | 303,024 | |
| | | 2014 | | | | 255,000 | | | | 82,596 | | | | 337,596 | |
| | | 2013 | | | | 242,004 | | | | 38,980 | | | | 280,984 | |
| | | | |
Randall H. Riley, (6) | | | 2015 | | | | 297,924 | | | | 13,205 | | | | 311,129 | |
| | | 2014 | | | | 310,008 | | | | 23,332 | | | | 333,340 | |
| | | 2013 | | | | 290,004 | | | | 5,932 | | | | 295,936 | |
| | | | |
Ray A. Riley,(7) | | | 2015 | | | | 132,919 | | | | 24,000 | | | | 156,919 | |
| | | 2014 | | | | 290,004 | | | | 66,236 | | | | 356,240 | |
| | | 2013 | | | | 281,267 | | | | 25,875 | | | | 307,142 | |
(1) | This amount includes payment for unused vacation exceeding ten (10) days, a de minimis Christmas gift and any applicable allocation of a Company contribution to its qualified profit-sharing plan (the “Profit-Sharing Plan”), along with allocated amounts from forfeitures and investment earnings from the Profit-Sharing Plan. For Rick D. Riley, this amount includes
|
| $8,341 for personal use of a Company-owned automobile and $14,600 for personal use of Company-owned housing located at the Company’s training facility. For Harold E. Riley, this amount includes personal use of a Company-owned automobile, which is fully depreciated. The amounts reported for personal use of Company-owned assetsthis column are based on the incremental cost to the Company of providing the benefit. For Ray A. Riley the amount reported in this column also includes a severance package, which paid his salary through May 15, 2015 and allowed him continued use of Company housing in Donaldsonville, Louisiana through December 31, 2015. |
(2) | Rick D. Riley became Chairman and Chief Executive Officer of the Company on June 2, 2015, having previously served as Vice Chairman and President. |
(3) | Harold E. Riley became Chairman Emeritus of the Company on June 2, 2015, having previously served as Chairman and Chief Executive Officer. His annual salary has been reduced to $120,000. |
(4) | David S. Jorgensen became Vice President, Chief Financial Officer and Treasurer on November 16, 2015, replacing Kay E. Osbourn in the role. |
(5) | Robert E. Rainey, Jr. is Vice President, Information Technology in our life insurance subsidiaries and President of Computing Technology, Inc., one of our non-life subsidiaries. His base salary and profit sharing benefit placed him among the most highly paid during 2015. |
(6) | As of October 2015, Randall H. Riley was no longer an employee of Citizens, Inc. or any of its subsidiaries. Randall Riley was paid through November 30, 2015 as part of his severance package. He is included in this table due to his 2015 base salary of $297,924 prior to his separation from the Company, and his familial relationship as son of Harold E. Riley. Please see “Certain Relationships and Related Party Transactions” located on page 7. |
(7) | As of May 2015, Ray A. Riley was no longer an employee of Citizens, Inc. or any of its subsidiaries. He is included in this table due to his 2015 base salary of $290,004 prior to his separation from the Company and his familial relationship as son of Harold E. Riley. Please see “Certain Relationships and Related Party Transactions” located on page 7. |
Our employees are covered under our qualified profit-sharing plan (the “Profit-Sharing Plan”), unless the subsidiary they are operating under has not adopted the Profit-Sharing Plan. Under the terms of the Profit-Sharing Plan, eligible employees who have completed one year of service are qualified to participate. Vesting begins following completion of two years of service and employees become fully vested after six years of service. Contributions are discretionary and are determined by the Board of Directors based on the profitabilityassumption that each of the Company. We contributed $1,000,000 for fiscal year 2013,beneficial owners continued to own the number of shares reflected in the table above on such date.
(2)The information is based on a Schedule 13G/A filed by Galindo, Arias & Lopez (“GA&L”), Gala Trust and for fiscal year 2014 no contribution was made. Messrs. Harold E. Riley, Rick D. RileyManagement Services, Inc. (“Gala Management”) and Randall H. Riley had an estimated $619,699, $1,115,272,GAMASE Insureds Trust (“Gamase,” and $61,091, respectively, vested undertogether with GA&L and Gala Management, the Profit-Sharing Plan“GALA”) with the SEC on February 4, 2019, reporting beneficial ownership as of December 31, 2015. Ray A. Riley had $225,634 vested under2018. GALA has not filed a Schedule 13G/A with the Profit-Sharing Plan, which he withdrew before December 31, 2015.For additional information on executive compensation, see the “Compensation Discussion and Analysis” beginning on page 19.
DIRECTOR COMPENSATION
The following table sets forth all compensation we paid to our directors in 2015.
| | | | |
NAME OF DIRECTOR | | FEES EARNED OR
PAID IN CASH ($) | |
Harold E. Riley | | $ | 0 | |
Rick D. Riley | | $ | 0 | |
Dottie S. Riley | | $ | 0 | |
Dr. E. Dean Gage | | $ | 49,383 | |
Dr. Terry S. Maness | | $ | 49,983 | |
Steven F. Shelton | | $ | 45,183 | |
Dr. Robert B. Sloan, Jr. | | $ | 44,583 | |
Grant G. Teaff | | $ | 45,183 | |
Timothy T. Timmerman | | $ | 48,783 | |
From January through May 2015, we paid each non-employee director $30,000 per year plus committee fees, and reimbursed directors for travel expenses to Board meetings. Whereas Executive Management and the Compensation Committee recognized the growing responsibilities and time commitment requiredSEC regarding ownership of the independent directors, and wished to provide opportunities forCompany’s stock since such date. As of such date, the board members to remain educated on their duties and fiduciary responsibilities to the Company, the Committee authorized and approved $55,000 annual compensation per year for all non-employee directors, plus an educational reimbursement of $5,000 per calendar year, effective June 1, 2015. Each non-employee director also receives $600 for each committee meeting attended, either in person or via teleconference, except for Executive Committee meetings. Directors who are also our employees receive no separate or additional compensation for service on the Board or its committees, but rather receive compensation only in connection with their employment by us. No other compensation, such as stock options or profit sharing, is paid to our outside directors.
COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
The following Compensation Discussion and Analysis (“CD&A”) describes the material elements of compensation for executive officers identified in the Summary Compensation Table.
Compensation Philosophy. The Compensation Committee, composed of three independent directors, is responsible for implementing our compensation philosophy for directors, executive officers and employees. Our goal is to ensure we employ qualified, experienced executive officers who are dedicated to managing our business in the best interests of our shareholders. Because we do not believe a systematic pattern exists between executive compensation and performance, our compensation philosophy is not structured to “motivate” managerial behaviors through incentive-based cash or equity compensation. Rather, our primary objective is to acquire and retain people of integrity who take pride in delivering positive results without the distraction of bonus incentives.
Overview of Compensation Program. Since we do not utilize incentive-based compensation, nor offer bonuses or stock options, our compensation setting process is very simple and straightforward. Our compensation consists entirely of salary and a qualified profit-sharing plan, which is provisioned to all qualified employees. The Compensation Committee establishes a salary for each senior executive based on long-term corporate objectives, competitive industry practices and each executive officer’s contributions. The Compensation Committee seeks to ensure executive compensation is reasonable, fair and competitive. In order to make this determination, toward the end of each calendar year, the Compensation Committee generally evaluates the Company’s performance relative to its business plan, and then conducts a similar exercisereporting persons reported that GA&L has shared dispositive power with respect to a group4,121,765 shares of comparable companies.
“Say-on-Pay” and “Say-on-Frequency.” We believe our compensation philosophy and structure is a model for our peers. Shareholders will not find complex compensation formulas or golden parachute contracts to evaluate and approve. Our straightforward and simplified approach to executive compensation insulates our shareholders from the types of corporate excesses which led to the enactment of “Say-on-Pay” and “Say-on-Frequency.” As such, the Compensation Committee welcomes a yearly shareholder advisory vote on the compensation of our Named Executive Officers andClass A common stock, Gala Management has taken it into account in consideration of our executive compensation. We believe our compensation solution favorably serves our shareholders on matters of executive pay.
Compensation Performance Analysis. Our executive management team is led by Rick D. Riley. Rick D. Riley and all of our executive officers are employed on an “at-will” basis.
The Compensation Committee conducted a review of the performance of Rick D. Riley, as well as the other executive officers, for the year 2015 and was encouraged by executive management’s demonstrated leadership and commitment to the Company and the shareholders. This review included an evaluation of the progress made towards the attainment of our corporate objectives and the role these individuals played to that end. The review also included a broad-based comparison of salaries with senior executives of other publicly traded life insurance companies who are typically identified as comparable to us.
Compensation Comparables. To assist in establishing the compensation for 2016, the Compensation Committee utilized independent sources to identify “comparables” within our industry. We believe a comparable is a point of reference for measurement, but not the determinative factor for our executives’ compensation. Because the comparative compensation information is one of several analytic tools used in setting executive compensation, the Compensation Committee has discretion in determining the manner and extent of its use.
Three comparables were selected for discussion of 2016 salaries. These comparables were: Independence Holding Company (“IHC”), Kansas City Life Insurance Company (“KCLIC”), and National Western Life Insurance Company (“NWL”). Data obtained on each comparable company included total assets, debt, revenue and net income. Compensation data found on these comparables was limited to only those individuals for whom compensation information was disclosed publicly. As a result, the data typically included only the five most highly compensated officers at each company as of their latest public filing. Generally, this data correlated to the Chairman/CEO, Vice Chairman, President and the individuals who are executive vice presidents or the equivalent with us.
Comparative Compensation Analysis. The overall results of the comparables study provided additional information for the Compensation Committee to consider. As noted above, the Compensation Committee reviewed a number of factors within the comparable companies; however, due to the simplicity of our compensation structure, the focus of attention was on base salary compensation.
NWL reported assets, revenues and net income of $11,515,294,000, $303,108,000 and $50,184,000, respectively, through the six months ended June 30, 2015. Although NWL’s assets, revenues and net income are larger, it is a publicly traded insurance company located in Austin, Texas with international marketing operations similar to Citizens. Of the three, IHC and KCLIC were closest to us in assets and revenue. Through the six months ended June 30, 2014, IHC reported assets, revenues and net income of $1,203,203,000, $267,370,000, and $10,251,000, respectively, and KCLIC reported assets, revenues and net income of $4,538,327,000, $219,678,000 and $730,085,000, respectively.
Following Harold E. Riley’s decision to step down as Chairman and CEO in June 2015, and at his request, his annual salary was changed from $1,000,008 to less than $120,000 per year as Chairman Emeritus. In accordance with the Company’s succession plan, Rick D. Riley stepped into the role of Chairman and CEO from his previous position as President and received a $25,000 annual base salary increase to $550,000 for the remainder of the year. Also in June 2015, Kay E. Osbourn was promoted to President and Chief Corporate Officer and the Compensation Committee increased her base annual salary to $400,000.
Based on the Compensation Committee’s analysis, the recommended 2015 compensation of Rick D. Riley, our Chairman and Chief Executive Officer, was determined to be reasonable and appropriate by the Compensation Committee. This amount was significantly lower than the total compensation of $4,040,739 (base of $1,900,030) for the NWL Chairman/CEO. Since NWL reported assets through June 30, 2015 over $11.5 billion and revenues of approximately $303 million, as opposed to Citizens’ less than $1.5 billion in assets and approximately $116 million in revenue, this difference is understandable. Mr. Riley’s total compensation is also significantly lower than the $3,589,720 received in total compensation for the CEO at KCLIC, and lower than the $1,958,120 total compensation for the CEO at IHC. In analyzing these factors, among others, the Compensation Committee concluded that the salary changes made in June 2015 for our Chairman and Chief Executive Officer and other members of our executive team were appropriate based upon the size of the Company, our compensation philosophy and their tenure and experience.
Given the Company’s desire to increase its bench strength in the area of executive leadership, the committee decided to leave the 2016 salaries of the executive team as they were approved in June 2015, and also approve a salary allotment for a Vice President, CFO & Treasurer position, which was filled subsequent to the meeting.
The Compensation Committee followed a similar, albeit less elaborate, processshared dispositive power with respect to comparing2,787,731 shares of Class A common stock and Gamase has shared dispositive power with respect to 2,526,980 shares of Class A common stock.
To our knowledge, GA&L is the compensationsole owner of Gala Management and Regal Trust (BVI) Ltd. (“Regal”), who serves as trustee for trusts that hold shares of the Company’s Class A common stock. Gala Management serves as trustee of Gamase, which holds 2,526,980 shares, and as trustee of an additional trust that holds 260,751 shares of our other senior executives. These salaries were not objectively determined, but instead reflectClass A common stock, making Gala Management the levels the Compensation Committee concludes were appropriate based upon our compensation philosophyindirect beneficial owner of 2,787,731 shares. Regal serves as trustee of two trusts, one of which holds 1,101,321 shares of Class A common stock and the experienceother of which holds 232,713 shares, making Regal the indirect beneficial owner of 1,334,034 shares. As sole owner of Gala Management and tenureRegal, GA&L is deemed to beneficially own all shares beneficially owned by them, or a total of 4,121,765 shares of the Company’s outstanding Class A common stock.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
ANNUAL MEETING
The Annual Meeting will be held at the Company’s principal executive office at 11815 Alterra Parkway, Suite 1500, Austin, Texas 78758 on Tuesday, June 6, 2023, at 10:00 a.m. Central Daylight Time.
ATTENDING THE ANNUAL MEETING
If you plan on attending the Annual Meeting in person, you will be required to present a valid, government-issued photo identification (e.g., driver’s license or passport) to enter the Annual Meeting. If you are a shareholder of record, your ownership of Common Stock will be verified against the list of shareholders of record as of the Record Date prior to being allowed to enter the Annual Meeting. If you are a beneficial owner and hold your shares of Common Stock in “street name” (i.e., your shares of Common Stock are held in a brokerage account or by a bank or other nominee), you will need to provide evidence of beneficial ownership as of the Record Date, such as an account statement or letter from the shareholder of record (i.e., your broker, bank or other nominee), and a copy of the voting instruction form provided by the shareholder of record.
Seating at the Annual Meeting will begin at 9:50 a.m. (Central Time) on June 6, 2023. The health and safety of our
shareholders and other
senior executives.participants at the Annual Meeting is of the utmost importance. In
addition,light of public health concerns related to the
Compensation Committee,coronavirus (COVID-19), we intend to institute safety precautions at the Annual Meeting consistent with applicable guidelines of public health authorities, which will include appropriate social distancing and may include seating shareholders in
conjunctiona separate room from the presenters, with
senior executive management, performedfull opportunity to hear the presenters, vote and participate in any discussion, and may take other actions as necessary to protect all attendees from undue risk of exposure to the virus. We suggest arriving at least 30 minutes early to the Annual Meeting to allow sufficient time to complete the admission process. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. Admission will close ten minutes before the Annual Meeting begins. If you do not provide a
review of proposed compensation for allvalid, government-issued photo identification or do not comply with the other
management personnel.COMPENSATION COMMITTEE REPORT
procedures described above, you will not be admitted to the Annual Meeting. The Board of Directors discussedCompany reserves the Compensation Committee’s recommended 2016 compensationright to remove from the Annual Meeting persons who disrupt the Annual Meeting or who do not comply with the rules and adopted the recommendations as proposed. A similar process was conductedprocedures for the 2015 salaries and reported in our 2015 Proxy Statement.
The Compensation Committeeconduct of the Company has reviewed and discussedAnnual Meeting.
PROXY MATERIALS
The proxy materials for the Compensation Discussion and Analysis required by Item 402(b)Annual Meeting include the Notice of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board the Compensation Discussion and Analysis be included inAnnual Meeting, this Proxy Statement and the Company’s 2015our Annual Report on Form 10-K,10-K. If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction form.
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
We are furnishing proxy materials to our shareholders primarily via “Notice and Access” delivery pursuant to SEC rules. On or about April 24, 2023, we mailed to our shareholders (other than those who previously requested a printed set) a “Notice Regarding the Availability of Proxy Materials” (the “notice”) containing instructions on how to access the proxy materials via the Internet. Utilizing this method of proxy delivery expedites receipt of proxy materials by our shareholders and reduces our cost of producing and mailing the full set of proxy materials. If you receive a notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the notice instructs you on how to access the proxy materials and vote over the Internet. If you received a notice by mail and would like to receive paper copies of our proxy materials in the mail, you may follow the instructions in the notice for making this request. The notice also contains instructions on how you may request to receive an electronic copy of our proxy materials by e-mail.
Our proxy materials are also available on our website at www.citizensinc.com. If you vote by Internet, simply go to www.envisionreports.com/cia and follow the prompts regarding electronic distribution consent on that site.
PROXY SOLICITATION
We bear all expenses incurred in connection with the solicitation of proxies. We have engaged Alliance Advisors, LLC to assist with the solicitation of proxies for a fee of $8,500, plus expenses. Our directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. We will reimburse banking institutions, brokerage firms, custodians, nominees and fiduciaries for their costs in forwarding proxy materials to beneficial owners of our Class A common stock.
VOTING
Each share of the Company’s Class A common stock may cast one vote on each matter. Only shareholders of record at the close of business on April 11, 2023 are entitled to vote at the Annual Meeting. As of the Record Date, we had 49,856,895 shares of Class A common stock outstanding and entitled to vote and 0 shares of Class B common stock outstanding and entitled to vote. Our Class B common stock is classified as authorized but unissued stock and will not be voted at any shareholder meeting while it is classified in such status. If your shares are registered directly in your name with the Company’s registrar and transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered a shareholder of record with respect to those shares. If your shares are held in a bank or brokerage account, you are considered the “Beneficial Owner” of those shares and shouldrespond to the communication you receive from the holder of record as soon as possible so your shares can be represented at the Annual Meeting.
VOTING PROCEDURES
Shareholders of record may vote using any of the methods listed below. If you vote in advance (methods 1, 2 or 3, we must receive your vote by 11:59 p.m. Eastern Daylight Time on June 5, 2023.
1. BY MAIL: If you requested printed copies of the proxy materials by mail, you will receive a proxy card, and you may vote by marking, signing and dating your proxy card and returning it in the postage-paid envelope provided. The named proxies will vote your stock according to your directions. If you submit a signed proxy card without indicating your vote, the person voting the proxy will vote your stock in favor of the proposals.
2. BY TELEPHONE:Call toll-free (800) 652-VOTE (8683).
• Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
• Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions the recorded message provides you.
3. ONLINE: http://www.envisionreports.com/cia OR use the QR code on your proxy card.
• Use the Internet to vote your proxy 24 hours a day, 7 days a week.
• Please have your proxy card and the last four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to obtain your records and create an electronic ballot.
4. IN PERSON: You may vote in person at the Annual Meeting. If your stock is held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, to be able to vote at the Annual Meeting.
If your shares are held in a bank or brokerage account, your bank or broker will provide you with materials and instructions for voting your shares. Please check with your bank or broker and follow the voting procedures they provide to vote your shares.
If you have any questions or require assistance with voting your shares, you may also contact Alliance Advisors, LLC at 200 Broadacres Drive, Bloomfield, New Jersey 07003. Shareholders may call toll free: 800-574-5928.
REVOCATION OF PROXIES
A shareholder may revoke his or her proxy at any time before it is voted at the Annual Meeting by:
•giving written notice of revocation to the Secretary of the Company;
◦if before the commencement of the Annual Meeting to the person serving as Secretary at the Annual Meeting site; or
◦if delivered before the date of the Annual Meeting, the Secretary of the Company at Citizens’ offices at P. O. Box 149151, Austin, Texas 78714-9151;
• delivering no later than the commencement of the Annual Meeting a properly-executed, later-dated proxy; or
• voting in person at the Annual Meeting.
CITIZENS, INC. STOCK INVESTMENT PLAN PARTICIPANTS
Citizens Stock Investment Plan (“SIP”) participants are shareholders of record and thus have the right to vote all shares of Class A common stock credited to their SIP account in person or by proxy. Each SIP participant’s proxy card includes the participant’s whole or fractional shares of the Company’s Class A common stock which such participant has the Board approved unanimously.COMPENSATION COMMITTEE
Grant G. Teaff, Chairman
Dr. Terry Maness
Steven F. Shelton
right to vote. A participant’s shares will not be voted unless a participant or the participant’s proxy votes them. As described below, the SIP administrator may submit a participant’s unvoted shares at a shareholder meeting, solely for purposes of establishing a quorum, unless the participant objects by notifying us in writing. For more information about the SIP, please see the SIP prospectus contained in the
Company’s Registration Statement on Form S-3PROPOSALSPROPOSAL NO. 1
ELECTION OF DIRECTORS
(Registration No. 333-260955) filed with the SEC.
QUORUM
At the Annual Meeting, a quorum will require the presence, in person or by proxy, of the holders of a majority of the voting power represented by our shares of Class A common stock entitled to vote. Proxies received but marked as abstentions and broker non-votes are counted as present for purposes of determining quorum. Additionally, unless a SIP participant notifies the Company in writing that it elects to withhold the SIP administrator’s authority, the plan administrator is deemed to have the written authorization to appear in person or by proxy at any annual or special meeting of shareholders of the Company and to submit the participant’s unvoted shares at the meeting for the sole purpose of determining a quorum. If a quorum is not present or represented at the meeting, the shareholders entitled to vote have the power to adjourn or recess the meeting without notice, other than announcement at the meeting, until a quorum is obtained. At a reconvened meeting where a quorum is obtained, any business may be transacted which might have been transacted at the meeting as originally noticed.
VOTING REQUIREMENTS
For Proposal No. 1 (Election of Directors), you may vote “FOR” or “WITHHOLD” for each nominee, or “ABSTAIN” from voting. Under the Company’s Bylaws, as permitted by Colorado law, director nominees with the highest number of votes cast “FOR” their election will be elected to the Board. Cumulative voting is not permitted. Director nominees receiving the highest number of votes cast “FOR” their election by Class Athe shareholders in their favor will be elected to the Board of Directors. Cumulative votingVotes that are withheld or voted in abstention will be excluded entirely from the vote and will have no effect other than for purposes of establishing quorum. According to NYSE Rule 452, as amended, brokers who have not received instructions from their customers in uncontested elections may not vote shares held in street name in the election of directors, and in certain other matters. Therefore, regardless of the number of shares you hold or whether you cast a vote, providing your properly executed proxy is not permitted. If for any reason any nominee herein named is notvery important.
Under our Director Resignation Policy, if a candidate when the election takes place (which is not expected), the proxydirector receives more “withhold” votes than “for” votes, such director will be votedrequired to submit his or her resignation for the election of a substitute nominee at the discretionBoard consideration.
For Proposal No. 2(Ratification of the persons named inappointment of Grant Thornton LLP as the proxy.Listed below areCompany’s independent registered public accounting firm for 2022)
, you may vote “FOR” or “AGAINST” such proposal or “ABSTAIN” from voting. Such proposal requires for approval that the persons whovotes cast “FOR” the proposal exceed the votes cast “AGAINST” the proposal. For these votes, abstentions and broker non-votes will be disregarded and will have been nominated for election as Class A directors to serve for one year until the next annual meeting of shareholders, or until their respective successors are duly elected and qualified. Class A shareholders will voteno impact on the nominees indicated below for election by Class A shareholders.Nominees for Election by Class A Shareholders
| | | | | | |
NAME | | AGE | | PRINCIPAL OCCUPATION | | DIRECTOR
SINCE |
Dr. E. Dean Gage | | 73 | | Retired University executive; Former President & Provost Emeritus, Texas A&M University, College Station, TX | | 2000 |
| | | |
Steven F. Shelton | | 60 | | Farmer/Rancher
Principal owner of Prairie Wind Energy, Lamar, CO | | 1993 |
| | | |
Dr. Robert B. Sloan | | 67 | | President and Chief Executive Officer
Houston Baptist University, Houston, TX | | 2007 |
| | | |
Timothy T. Timmerman | | 55 | | President, Commerce Properties of Texas,
Austin, TX | | 1989 |
The biographies of each Class A director nominees are below and contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, as well as the experience, qualifications, attributes or skills that caused the Board to determine the person should serve as a director of the Company.
Dr. E. Dean Gage, Retired University executive, 2009 to present; Executive Director and Bridges Endowed Chair, Center for Executive Leadership, Texas A&M University, College Station, Texas, 2001 to 2009; President and CEO of Men’s Leadership Ministries, Dallas, Texas, 1996 to 2001; Executive Director of Center for Executive Leadership, Mays School of Business, Texas A&M University, College Station, Texas, 1994 to 1996; President, Texas A&M University, College Station, Texas, 1993 to 1994; Executive Vice President and Provost, Texas A&M University, College Station, Texas, 1989 to 1993.
Dr. Gage has substantial executive leadership expertise stemming from his executive roles at one of the largest public universities in America. Dr. Gage’s extensive background in education, finance and administration provides our Board with leadership and consensus building skillsvote.
For Proposal No. 3(Approval, on a varietynon-binding advisory basis of matters, including governanceexecutive compensation), you may vote “FOR” or “AGAINST” each proposal or “ABSTAIN” from voting. Each proposal requires for approval that the votes cast “FOR” the proposal exceed the votes cast “AGAINST” the proposal. For these votes, abstentions and executive decision making.Steven F. Shelton, Rancher/Farmer from 1974 to present; Director, First Centennial Corporation, from January to October 1989 and August 1990 to 1992. Principal owner of Shelton Property Investments; Principal owner of Prairie Wind Energy, a wind energy development company formed in 2004; Owner and president of Five S, Inc., a farming and ranching corporation formed in 1986; Secretary/Treasurer of Prowers County Soil Conservation Board; Judicial Nominating Board for Fifteenth Judicial District of Colorado.
Mr. Shelton’s independent business experience and practical approach to business challenges have made him a valued contributor to our Board over his 23 years of service. Mr. Shelton’s appreciation of the practical aspects of operating a business provides our Board with a valuable resource as it manages through the current economic environment and plans for the future.
Dr. Robert B. Sloan, Jr., President and Chief Executive Officer, Houston Baptist University from 2006 to present; Chancellor, Baylor University, 2005 to 2006; President and Chief Executive Officer, Baylor University from 1995 to 2005.
Dr. Sloan has served as CEO of two major academic institutions and has valuable insight into organizational structure, executive decision-making, financial operations and leadership. His executive management skills and extensive experience with organization strategy and governance provide invaluable insight and guidance to our Board’s oversight function.
Timothy T. Timmerman, Real estate investor/developer and owner of Commerce Texas Properties, Inc. from 1990 to present; Real Estate Broker and retired Certified Public Accountant in the State of Texas; Chairman of the Lower Colorado River Authority.
Mr. Timmerman has functioned with significant business skill in operating his Austin-based real estate company. He brings to our Board extensive knowledge of commercial real estate and related investment and financing activities. His CPA credentials and financial acumen provide our Board with exceptional financial and risk management expertise.
None of our directors is a director of any other company with a class of securities registered under the Securities Exchange Act of 1934 or any investment company registered under the Investment Company Act of 1940.
Your Board of Directors Recommends a VoteFOR the election of each Class A Nominee. Proxies solicited by the Board of Directorsbroker non-votes will be votedFOR the nominees as indicated above unless instructions are given to the contrary.
Class B nominees receiving the highest number of votes cast by Class B shareholders in their favordisregarded and will be elected to the Board of Directors. Harold E. Riley has advised us that he intends to vote all of his Class A shares in favor of the Class A nominees and all of the Class B shares held by the Harold E. Riley Trust in favor of the Class B nominees. The Class B nominees will be elected as directors upon the affirmative vote of the sole Class B shareholder, Harold E. Riley as Trustee of the Harold E. Riley Trust.
Listed below are the persons who have been nominated for election as Class B directors by our sole Class B shareholder, Harold E. Riley. Class B directors will serve for one year until the next annual meeting of shareholders, or until their respective successors are duly elected and qualified.
Nominees for Election by Class B Shareholders
| | | | | | |
NAME | | AGE | | PRINCIPAL OCCUPATION | | DIRECTOR
SINCE |
Harold E. Riley** | | 87 | | Chairman Emeritus
Austin, TX | | 1987 |
| | | |
Rick D. Riley** | | 62 | | Chairman of the Board and Chief Executive Officer
Austin, TX | | 1989 |
| | | |
Dottie S. Riley** | | 80 | | Vice President, Employee Relations for the Company
Austin, TX | | 2008 |
| | | |
Terry S. Maness | | 68 | | Dean, Hankamer School of Business, Baylor University
Waco, TX | | 2011 |
| | | |
Grant G. Teaff | | 82 | | Executive Director Emeritus, American Football Coaches Association
Waco, TX | | 2004 |
** | Harold E. Riley is the husband of Dottie S. Riley and father of Rick D. Riley. There are no other family relationships between or among the nominees to our Board and our executive officers. |
The biographies of each Class B director nominees are below and contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, as well as the experience, qualifications, attributes or skills that caused the Board to determine the person should serve as a director of the Company.
Harold E. Riley, Founder, controlling stockholder; Chairman Emeritus, and Chairman of the Board and CEO from 1969 to June 2015.
Mr. Riley has more than 50 years’ experience in the life insurance business, almost exclusively in top management positions, and has directly led the building of three life insurance companies. He has been responsible for the acquisition of more than 30 life insurance companies and designed marketing programs that have produced millions of dollars of guaranteed cash value whole life insurance. He is our founder and Trustee of the Harold E. Riley Trust, the sole Class B “controlling shareholder.” He started our Company (through a predecessor company) with $2.5 million of personal funds and has built it to over $1 billion of admitted and non-admitted assets and close to $5 billion of insurance in-force. His foresight and industry experience are the reasons our Company has successfully maneuvered recent economic downturns. Mr. Riley’s leadership and intimate knowledge of our unique corporate structure and our operations, provide our Board with industry-specific experience, expertise and leadership.
Rick D. Riley, Chairman and Chief Executive Officer since June 2015; President and Chief Corporate Officer since 2007; our Vice Chairman since 2000; Vice Chairman and CEO from October 2000 to July 2005; and various other leadership positions with our Company’s subsidiaries and affiliates from the late 1970’s to present, including Chairman of the Board of Directors, President, Chief Executive Officer, Chief Administrative Officer, Secretary, and Executive Vice President.
Rick Riley has faithfully served our Company with integrity and commitment over the past thirty-nine plus years, throughout which time he has developed broad industry expertise and operational/systems experience within our Company. Rick Riley brings to our Board an in-depth understanding of our Company’s business, systems capabilities, history and operations, as well as extensive leadership and management expertise. Mr. Riley has served on various insurance industry association committees and boards throughout his career.
Dottie S. Riley, Director, Vice President, Employee Relations; various positions within the Company since 1997, including Human Resources and Vice President, Administrative Services. Previously, Mrs. Riley was employed by University Savings Bank / Nations Bank in Austin, Texas from 1972 to 1991, where she served as Vice President for several years.
Mrs. Riley has operated in the client and employee relations areas of financial companies for well over thirty years. She brings a customer-centric perspective to our Board, as well as a deep understanding of our Company’s business, history and operations.
Dr. Terry S. Maness, Dean of Baylor University’s Hankamer School of Business since 1997; Acting Dean, Baylor University, 1996 to 1997; owner of Business Value Consultants, 1989 to present; previously served as Associate Dean for Undergraduate Programs and as Chairman of the Department of Finance, Insurance and Real Estate, Baylor University.
Dr. Maness’ background as Dean of one of America’s leading business schools brings another strong academic presence to our board. He has operated effectively at the highest levels in the academic and business community. He is the author of five books about financial analysis and financial management, and also a contributing author to various publications, such asJournal of Finance,Journal of Banking and Finance,Journal of Financial Education,Journal of Portfolio Management,Journal of Financial and Quantitative Analysis,Journal of Futures Markets,Journal of Cash Management andCorporate Controller.
Grant G. Teaff, Executive Director Emeritus, American Football Coaches Association from 1994 to present; Author: “I Believe,” “Winning,” “Seasons of Glory,” “Coaching in the Classroom” and “Grant Teaff with Master Coaches’; 30 years as a head college football coach, 21 of which were spent as the head football coach at Baylor University.
Mr. Teaff is a highly acclaimed speaker on business leadership and integrity. He brings our Company extensive organizational leadership experience from his tenure as a college football coach and his role as Executive Director of the American Football Coaches Association. His management skills and extensive experience with team development and motivational inspiration provide the Board with a valuable resource for business management and planning corporate strategy.
PROPOSAL NO. 2
ADVISORY VOTE ON THE COMPENSATION OF
THE COMPANY’S NAMED EXECUTIVE OFFICERS
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Board of Directors provides shareholders with the opportunity to cast an annual advisory voteno impact on the compensation of the Company’s Named Executive Officers. This non-binding advisory shareholder vote, commonly known as “Say-on-Pay,” gives you, as a shareholder, the opportunity to endorse or not endorse our executive pay program and policies. As explained in our CD&A, we do not believe a systematic pattern exists betweenvote. Because your votes on executive compensation and performance. Our compensation philosophy is not structured to “motivate” managerial behaviors through incentive compensation. Rather, our primary objective is to acquire and retain people of integrity who take pride in delivering positive results without the distraction of bonus incentives. We believe our compensation structure is a model structure for our peers and alleviates the very concerns that “Say-on-Pay” is attempting to address. As such, our compensation structure is something you, as a shareholder, should approve.
Because your vote isare advisory, itthey will not be binding upon the Company or the Board. However, the Compensation Committee will take into accountconsider the outcome of the votevotes when considering future executive pay. Accordingly, we are providing you the opportunity to cast a non-binding advisory vote on the compensation of the Company’s Named Executive Officers contained in this proxy, through the following resolution:
RESOLVED, that the compensation of the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the related disclosures contained in this Proxy Statement is herebyAPPROVED.
Proposal No. 2 will be approved if the votes castFOR the proposal exceed the votes castAGAINST it. Abstentions and broker non-votes will be disregarded and have no impact on the vote, other than for establishing a quorum.
Your Board of Directors recommends that you vote FOR Proposal No 2- approval of the compensation of our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, included in the Compensation Discussion and Analysis, the compensation tables and the related disclosures contained in this proxy statement.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Our Audit Committee Charter provides the Audit Committee shall have the sole authority and responsibility to select, evaluate and, if necessary, replace our independent registered public accounting firm.
Our Audit Committee has retained Ernst & Young LLP as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2016.
We are requesting our shareholders ratify the appointment of Ernst & Young LLP by our Audit Committee as our independent registered public accounting firm for the fiscal year ending December 31, 2016. If the shareholders do not ratify this appointment, the Audit Committee will consider such results and determine whether to recommend and appoint a different independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2016.
One or more members of the firm of Ernst & Young LLP are expected to attend the Meeting, will have an opportunity to make a statement if they desire to do so, and will be available to answer appropriate questions.
Proposal No. 3 will be approved if the votes castFOR the proposal exceed the votes castAGAINST it. Abstentions and broker non-votes will be disregarded and have no impact on the vote, other than for establishing a quorum.
The Board recommends a voteFOR Proposal No. 3.
OTHER INFORMATION
ADDITIONAL SHAREHOLDER MATTERS
OTHER BUSINESS
Citizens, Inc.’s bylaws
Our Bylaws require shareholders to give advance notice of any proposal intended to be presented at the annual meeting. The deadline for this notice has passed and
Citizens, Inc.the Company has not received any such notice. If any other matter properly comes before the shareholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
MATERIALS
ANNUAL REPORT AND OTHER MATERIALS
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on June 7, 2016:The Proxy Statement and Annual Report to Shareholders are available at www.edocumentview.com/cia. The report of the Compensation Committee and the Audit Committee of the Board of Directors are in this Proxy Statement.No part of our Annual Report to Shareholders is incorporated herein and no part thereof is to be considered proxy soliciting material.
We file our proxy statements and other information with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). You can inspect and obtain a copy of our proxy statement and other information filed with the SEC at the offices of the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet site at http://www.sec.gov/ where you can obtain most of our SEC filings. We also make available, free of charge, on our website atwww.citizensinc.com our proxy statements filed with the SEC pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC.
SHAREHOLDER PROPOSALS
FOR 2023 ANNUAL MEETING OF SHAREHOLDER AND NOMINATIONS
A shareholder who intends to have a shareholder proposal included in our
proxy statementProxy Statement for our
20172024 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the
Securities Exchange Act
of 1934 must submit the proposal so that it is received by
our Corporatethe Secretary
of the Company at the mailing address below no later than December
29, 2016.27, 2024. Any submission must comply with all
of the requirements of Rule 14a-8 applicable to shareholder proposals.
A
The Company’s Bylaws generally require advance written notice from a shareholder
who wishesseeking to
nominate a candidatepresent any nominations for election to the Board
of Directors or
intends to present aany other proposal,
not for inclusion in next year’s proxy statement but directly at
our 2017the 2024 Annual Meeting
that would not be included in our proxy statement for the 2017 Annual Meeting must deliver notice to us no later than March 14, 2017, unless a different date is prescribed by our bylaws.A notice that a shareholder intends to nominate a director candidate must set forth the following, unless other requirements are prescribed by our bylaws: (a) the name and address of the shareholder who intends to make the nomination and the name, age, business address, residence address and principal occupation of the nominee, (b) a representation that the shareholder is a holder of record of the Company’s common stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the nominee specified in the notice, (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming, such person or persons) relatingShareholders. Pursuant to the nomination, (d)Bylaws, notice must be received by the class and number of sharesSecretary of the Company that are beneficially owned by such shareholder andat the person to be nominated as of the date of such shareholder’s notice and by any other shareholder known by such shareholder to be supporting such nominee as of the date of such shareholder’s notice, (e) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC and (f) the consent of each nominee to serve as a director of the Company if so elected.
All proposals or nominations should be sent to the attention of our Secretary atmailing address for our principal executive offices at 400 East Anderson Lane,Citizens, Inc., P.O. Box 149151, Austin, Texas 78752.
78714-9151 no earlier than the close of business on February 7, 2024, and no later than the close of business on March 8, 2024. The notice must include all of the information required by the Company’s Bylaws.
The mailing address to send a shareholder proposal or nomination for election to the Board is:
Citizens, Inc.
Attn: Secretary / Chief Legal Officer
11815 Alterra Parkway, Floor 15,
Austin, TX 78758
In order to curtail controversy as to the date on which a proposal was received by us, it is suggested proponents submit their proposals by certified mail-return receipt requested.
SHAREHOLDER COMMUNICATIONS
Any communication from
ANNUAL REPORT ON FORM 10-K
The Annual Report, which includes our Form 10-K and accompanies this Proxy Statement, is not considered a part of the proxy solicitation material. We will furnish to any shareholder, or interested partywithout charge, a copy of our Annual Report, as filed with the SEC. A request for the report can be made in writing to the BoardSecretary of Directors may be mailed to:the Company at Citizens, Inc.
Attn: Board of Directors (or committee name or director’s name as appropriate)
400 East Anderson Lane
, P. O. Box 149151, Austin, Texas 78752
It should be clearly noted on78714-915. The
Form 10-K and other public filings are also available through the mailing envelope that the letter is a “Board of Directors Communication.” All such communications should identify the author as a shareholder or interested partySEC’s website at www.sec.gov and clearly state whether the intended recipients are all members of the Board of Directors or certain specified individual directors. This procedure for communicating with the Board of Directors is also posted on our website at www.citizensinc.com. | | | | |
Austin, Texas | | | | By Order of the Board of Directors |
April 28, 2016 | | | | Cheri D. Duncan, Secretary |
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Using a black inkpen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas. | | x | | |
Electronic Voting Instructions
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Available 24 hours a day, 7 days a week!
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Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. |
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
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Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on June 6, 2016.
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| | Vote by Internet
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| • Go towww.envisionreports.com/cia
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| • Or scan the QR code with your smartphone
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| • Follow the steps outlined on the secure website
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Vote
HOUSEHOLDING
The SEC rules allow us, subject to certain conditions, to send only one Proxy Statement and Annual Report or Notice to two or more shareholders who share the same last name and address. This “householding” rule provides greater convenience for our shareholders and cost savings for us by
telephone | • | | Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone |
| • | | Follow the instructions provided by the recorded message |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
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A | | Proposals — | | The Board of Directors recommends a voteFOR all the Class A Director nominees listed,FOR on Proposal 2 andFOR on Proposal 3. | | | | | | | | | | |
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1. | | Election of Class A Directors to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified. | | | | 
|
| | | | For
| | Withhold
| | Abstain | | | | | | | | | | For | | Withhold | | Abstain | | | | | | | | | | |
| | 01 - Dr. E. Dean Gage
| | ¨
| | ¨
| | ¨
| | 02 - Steven F. Shelton
| | ¨
| | ¨
| | ¨
| | | | | | | | | | | | |
| | 03 - Timothy T. Timmerman
| | ¨
| | ¨
| | ¨
| | 04 - Dr. Robert B. Sloan, Jr.
| | ¨
| | ¨
| | ¨
| | | | | | | | | | | | |
| | | | | | | | | | | | For
| | Against
| | Abstain
| | | | | | | | | | | | For
| | Against
| | Abstain
| | |
2.
| | Say on Pay — To approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the proxy statement.
| | | | ¨
| | ¨
| | ¨
| | | | 3. To ratify the appointment of Ernst & Young LLP as the Company’s registered independent public accounting firm for 2016.
| | | | ¨
| | ¨
| | ¨
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4.
| | To transact such other business as may properly come before the meeting or any adjournment thereof.
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B | | Non-Voting Items | | | | | | | | | | | | | | | | | | | | |
Change of Address — Please print new address below. | | | | | | | | |
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C | | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.
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| | | | | | | | |
Date (mm/dd/yyyy) — Please print date below. | | Signature 1 — Please keep signature within the box. | | Signature 2 — Please keep signature within the box. |
/ / | | | | | | | | |
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
Proxy — Citizens, Inc.
Notice of Annual Meeting of Shareholders of Citizens, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of Citizens, Inc. will be held Tuesday, June 7, 2016, at 10:00 a.m., Central Daylight Time, at400 E. Anderson Lane, Austin, TX 78752, for the purposes stated on the reverse side of this proxy.
The undersigned hereby appoints the President and Secretary of Citizens, Inc. (the “Proxies”), each of them, with full power of substitution, as proxies to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the 2016 Annual Meeting of Shareholders of Citizens, Inc., to be held on June 7, 2016 or at any postponement or adjournment thereof. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
Shares represented by properly executed proxies received by us prior to the Meeting will be voted as specified thereon. If a proxy fails to specify how it is to be voted on any proposal it will be votedFOR all the Class A Director nominees listed,FOR on Proposal 2 andFOR on Proposal 3.
It is important, regardless ofreducing the number of sharesduplicate documents that households receive. Also, this allows us to be more environmentally friendly by reducing the unnecessary use of materials. Please note that each shareholder will continue to receive a separate proxy card, which will allow each individual to vote independently.
If you are a Citizens, Inc. shareholder who resides in the same household with another Citizens, Inc. shareholder with the same last name, or if you hold thatmore than one account with Computershare registered in your stock be representedname at the Meetingsame address and wish to receive a separate or single proxy statement and annual report or notice for each account, please contact our transfer agent, Computershare.
Computershare Investor Services
P. O. Box 505000
Louisville, KY 40233-5000
Shareholder Services Number(s): 877-785-9659 (toll free within the USA, US territories & Canada) or
1-781-575-4621 (International Direct Dial). Investor Centre™ portal: www.computershare.com/investor.
You may revoke your consent at any time by
a signed proxy card or personal attendance.(Items to be voted appear on reverse side.)
Executive Offices: 400 East Anderson Lane, Austin, Texas 78752
contacting Computershare using the same contact information as set forth above.
Citizens, Inc. 2023 Proxy Statement
