24090--3/30/2007--CITIZENS

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{stock, price, share}

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{financial, litigation, operation}

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{stock, price, operating}

{provision, law, control}

{personnel, key, retain}

{loss, insurance, financial}

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{competitive, industry, competition}

{acquisition, growth, future}

{regulation, government, change}

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We may not be able to continue our past strategy of acquiring other U.S. life insurance companies, and we may not realize improvements to our financial results due to past and future acquisitions. Sales of our products may be reduced if we are unable to attract and retain marketing representatives or develop and maintain distribution sources. Policy lapses in excess of those actuarially anticipated would have a negative impact on our financial performance. Our actual claims losses may exceed our reserves for claims that may require us to establish additional reserves, which in turn may materially reduce our earnings, profitability and capital. Our investment portfolio is subject to several risks that may diminish the value of our invested assets and negatively affect profitability. We may be required to accelerate the amortization of deferred acquisition costs and the cost of customer relationships acquired, which would increase our expenses and reduce profitability. We may be required to recognize impairment in the value of our excess of cost over net assets acquired that would increase our expenses and reduce our profitability. Loss of the services of our senior management team would likely hinder development of our operating and marketing programs and our strategy for expanding our business. We are a defendant in lawsuits, which may adversely affect our financial condition and detract from our management s time. Our business is subject to risks related to litigation and regulatory actions We operate in a highly competitive, mature industry within the U.S., which could limit our ability to increase our domestic insurance operations. Our international operations face competition from several sources. We are subject to extensive governmental regulation in the U.S., which increases our costs and could restrict the conduct of our business. We are unable to quantify the effect of foreign regulation of our insurance business if regulation were to be imposed on us, but we believe we could expend substantial amounts of time and incur substantial expense in complying with any foreign regulation, and we may decide to withdraw from the particular market where the regulation was imposed. Changes in U.S. regulation may reduce our profitability and limit our prospective growth. Reinsurers with which we do business with may not honor their obligations, leaving us liable for the reinsured coverage, and our reinsurers could increase their premium rates. The failure to effectively maintain and modernize our information systems could adversely affect our business. To the extent that we fail to maintain our current system of internal controls to an effective level with regard to material weaknesses we may identify, there is a risk that we may not be able to report our financial results accurately. As a result, our business could be harmed, and current and potential investors could lose confidence in our financial reporting, which could have a negative effect on the trading price of our securities. Failure to protect confidential information and privacy could result in the loss of customers, reduction to our profitability and subject us to fines and penalties. The insurance business in which we operate may be subject to periodic negative publicity, which may negatively impact our financial results General economic, financial market and political conditions may adversely affect our results of operations and financial condition. The inability of our subsidiaries to make payments to us in sufficient amounts for us to conduct operations could harm our ability to meet our obligations. The price of our Class A common stock may be volatile and may be affected by market conditions beyond our control. Class A common stockholders will always be minority holders who will not control us, will have a limited ability to influence our business policies and corporate actions, and will not by themselves be able to elect any directors. Our articles of incorporation, bylaws and insurance laws may discourage takeovers and business combinations that our stockholders might consider in their best interests. You should not anticipate receiving cash dividends on your Citizens Class A common stock, because we have not paid any cash dividends and do not anticipate doing so in the foreseeable future. There are a substantial number of shares of our Class A common stock eligible for future sale in the public market. The sale of a large number of these shares could cause the market price of our Class A common stock to fall. Provisions of our Series A Preferred Stock may prevent or make it more difficult for us to raise funds or take certain other actions. Holders of our Series A Preferred Stock may obtain the right to require us to redeem their Series A Preferred Stock and we will be required to redeem any shares of Series A Preferred Stock that remain outstanding on the fifth anniversary of their issuance

Full 10-K form ▸

24090--3/30/2007--CITIZENS_INC