Citizens Inc. Reports 70% Increase in Earnings.

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--Aug. 14, 2001

Citizens Inc. (AMEX:CIA), reported net income of $1,103,188 or $0.04 per share for the first six months of 2001, a 70.1% increase over $648,442 or $0.03 during the same period in 2000.

An increase in investment income and decline in accident and health benefits during the period contributed to the improvement in 2001 operating results.

Investment income grew 9.4% during the first half of 2001 to $6.6 million through continued expansion of the Company's asset base and the actions taken to change the mix and duration of invested assets. Premium income decreased slightly during the first six months of 2001 to $24.9 million, compared to $25.2 million in 2000. New life insurance premiums during 2001 have increased by 16% over the prior period, offsetting a 29.3% decline in accident and health premiums resulting from management's decision in prior years to cancel a large portion of the Company's individual major medical and group dental blocks of business because of adverse claims experience. Claims and surrenders for the six months ended June 30, 2001 declined to $14.2 million from $15.1 million in 2000 as a result of the cancellation of the accident and health business.

Net income for the three months ended June 30, 2001 was $581,012 or $0.02 per share, compared to net income of $949,114 or $0.04 per share for the same period in 2000. Death claims increased 50.7% from $890,920 in the second quarter of 2000 to $1,342,453 in 2001 due to increased claim volumes and average claim amounts, causing the decline in profit for the quarter.

Revenues for the quarter increased to $16.4 million, compared to $16.3 million for the same period in 2000. International sales of the Company's U.S. dollar denominated whole life insurance products increased by more than 41%, compared to the same period in 2000.

Second quarter 2001 investment income grew 7.7% to $3.3 million from $3.1 million for the same period in 2000. Accident and health premiums declined $700,000 to $1.2 million in 2001 due to the cancellation of the accident and health blocks of business. Premium income decreased slightly during the quarter to $12.9 million, compared to $13.0 million in 2000 as the increased production of new life premium offset the decline in accident and health revenues.

Total assets increased to $273.3 million at June 30, 2001 from $267.8 million at Dec. 31, 2000. Stockholders' equity increased to $79.0 million compared to $77.3 million at Dec. 31, 2000. The income earned in the first six months of 2001 and increases in the market value of the Company's available-for-sale bond portfolio since Dec. 31, 2000 were the reasons for the increase in equity.

About Citizens Inc.

Citizens Inc. is a financial services company listed on the American Stock Exchange under the symbol CIA. Its strategy is to achieve $1 billion in assets, $250 million in revenues and $10 billion of life insurance in force targeting the sale of U.S. whole life dollar insurance in the United States and in international markets around the world, as well as the acquisition of other life insurance companies.

Citizens is included in the Russell 2000(R) Index, as well as the Russell 3000(R) Index, which measures the performance of the 3,000 largest companies in the U.S. stock market, based on market capitalization. Citizens' stock closed at $7.53 on Aug. 13, 2001.

Additional information is available at the Company's Web site: www.citizensinc.com.

Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as "may," "will," "expect," "anticipate" or "continue" or comparable words. In addition, all statements other than statements of historical facts that address activities that the Company expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of the Company, particularly its Form 10-K for the fiscal year ended Dec. 31, 2000, for the meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management.

                             CITIZENS INC.
             COMPARATIVE CONSOLIDATED FINANCIAL HIGHLIGHTS

                         OPERATING STATEMENTS
                         --------------------

                          (Unaudited)              (Unaudited)
                        Six-Months Ended        Three-Months Ended
                            June 30,                 June 30,
                            --------                 --------
                       2001          2000       2001          2000
                       ----          ----       ----          ----
Premiums and Other
 Revenues
  Premium income    $24,927,381  $25,240,025  $12,878,266  $12,986,914
  Net investment
   income             6,620,958    6,053,136    3,312,720    3,076,425
  Other                 287,191      482,679      162,763      257,551
                    -----------  -----------  -----------  -----------
   Total revenues   $31,835,530  $31,775,840  $16,353,749  $16,320,890

Benefits and
 Expenses
  Increase in future
   policy benefit
    reserves         $3,319,024   $2,470,677   $2,124,062   $1,351,673
  Claims and
   surrenders        14,161,037   15,069,980    6,983,040    6,955,112
  Policyholder
   dividends          1,395,753    1,293,358      798,039      742,687
  Commissions         5,969,986    5,604,479    3,273,019    2,740,645
  Underwriting and
   insurance
    expenses          5,365,020    5,286,924    2,814,477    2,783,711
  Net change in
   deferred policy
    acquisition
     costs             (780,199)      95,421     (789,568)    (101,000)
  Other                 956,721    1,205,884      414,668      678,436
                    -----------  -----------  -----------  -----------
   Total benefits
    and expenses     30,387,342   31,026,723   15,617,737   15,151,264
                    -----------  -----------  -----------  -----------

  Income before
   federal income
    tax              $1,448,188     $749,117     $736,012   $1,169,626

  Federal income tax
   expense             $345,000     $100,675     $155,000     $220,512
                    -----------  -----------  -----------  -----------

  Net income         $1,103,188     $648,442     $581,012     $949,114
                    ===========  ===========  ===========  ===========


                           INCOME PER SHARE
                              (UNAUDITED)
                              -----------

  Net income per share    $0.04        $0.03        $0.02        $0.04
                          =====        =====        =====        =====
  Average shares
   outstanding       25,128,158   25,128,158   25,128,158   25,128,158


                            BALANCE SHEETS
                            --------------

                    (Unaudited)  (Unaudited)              (Unaudited)
                      June 30,    March 31,  December 31, September 30,
                       2001         2001        2000          2000
                       ----         ----        ----          ----
Total assets       $273,276,061 $270,633,059 $267,842,364 $261,556,405
Total invested
 assets            $197,071,562 $196,214,529 $194,203,327 $186,896,625
Stockholders'
 equity             $78,991,654  $79,325,947  $77,313,031  $73,836,647

                    (Unaudited)
                      June 30,
                       2000
                       ----
Total assets       $257,095,007
Total invested
 assets            $179,897,155
Stockholders'
 equity             $72,391,383