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Slide 2: Forward-looking statements
The following information 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," "estimate," "continue," or comparable words. In addition, all statements other tha
Slide 3: Company snapshot
CIA (NYSE) Austin, Texas None, SEC 1987 via Reverse Merger $6.25 || $5.30 to $13.25 31,866,252 817,696 (owned by Harold E. Riley Trust) none $26,000,000 $200 million $3.41 $326 mm $0 mm 20% of primary shares 10% of primary shares KPMG, LLP 100 Symbol : Corporate Headquarters : IPO Date : Stock Price
Slide 4: Characteristics of Our Markets
Ordinary Whole Life Insurance Policies International Markets 35 countries around the world in last 2 years, principally Latin America Offered to top 3% to 5% of wage earners in those countries Domestic Markets Rural markets/Middle Class America Average policy size $25,000 Characteristics of Our Mark
Slide 5: Premium Income by Type and Distribution (2002)
Universal Premium Income by Type (2002) Accident & Health 19.8% Ordinary Life 79.2% Group Life 0.6% Annuity & Life 0.4% Premium Distribution (2002) Domestic 28.8% International 71.2% 5
Slide 6: Growth by Expansion of International and Domestic Marketing
DEVELO + | 2 Growth by Expansion of marae Growth by Expansion of International Marketing Domestic Marketing
Slide 7: Countries with applications in the last two years
Argentina, Uruguay, Colombia, Paraguay, Nicaragua, Ecuador, Venezuela, Costa Rica, Chile, Peru, Brazil, Dominican Republic, Spain, Israel, Japan, Guatemala, Honduras, Taiwan, Switzerland, Italy, Australia, El Salvador, Philippines, Mexico, Bolivia, Germany, Panama, South Africa, Canada, United State
Slide 8: International product portfolio
Portfolio designed exclusively for international markets U.S. dollar-denominated policies All premiums and benefits paid in U.S. dollars on U.S. banks Participating ordinary whole life Terminal illness benefits Special assignment provisions Benefit limitations for certain causes of death Most premiu
Slide 9: Profit loads and lapse rates versus industry
15-20% profit loads vs. industry average of 4-6% Lower lapse rates (5% vs. industry average of 8%) Longer average policy duration (12-15 years vs. industry average of 6-8 years) Annual premium payments 9
Slide 10: International premium and agent growth
Premiums up from $13.5 mm in 1990 to $48.6 mm in 2002 (10% CAGR) Independent agents up from 860 in 1990 to 2,500 in 2002 Applications received from 35 countries in 2002, up from to 15 in 1990 Last several years characterized by economic difficulties in some Latin American markets 10
Slide 11: International growth targets
No. of agents up from 1,000 in 2000 to 2,500 today New markets targeted: Taiwan, China, Brazil Seek to become significant player in international markets Well positioned for an economic rebound in key markets (Argentina, Venezuela) 11
Slide 12: Current states and First Alliance Corporation
Green = current states Yellow = First Alliance Corporation 26 States 12
Slide 13: Domestic product portfolio
Portfolio of Products called Citizens CCAP 2000 Series Whole life products No Load Annuity Ordinary life policies sold through worksite marketing Can be sold on a payroll deduction basis Credit life and A&H Individual and worksite supplemental accident and health policies Terminal illness benefits 1
Slide 14: Domestic Acquisitions
Domestic Acquisitions Numerous opportunities for selective acquisitions Focus on ordinary life companies Fragmented market Internal growth New products Focus on new markets 14
Slide 15: Acquisition history
1987 Continental Investors Life, Inc. 1988 Equities International Life Insurance Company 1989 Continental Investors Life Insurance Company of Alabama 1992 First Centennial Corporation 1995 American Liberty Financial Corporation 1996 Insurance Investors and Holding Company 1997 American Investment Ne
Slide 16: Numerous acquisition opportunities
Numerous acquisition opportunities Large # of target companies of various sizes Fragmentation within industry Current consolidation trend large companies divesting small companies looking for exit strategy 16
Slide 17: Recent and pending all-stock acquisitions
Completed 3 all stock acquisitions in the last 18 months 1 additional candidate pending (Mid- American) all stock Several other candidates currently under review (both large and small) 17
Slide 18: Valuation methodology and synergy potential
Valuation Methodology Each book of business is evaluated separately Value based on type of business, profitability, historical lapse rates, etc. Synergy Potential Elimination of duplicate overhead expenses Benefits from synergies usually achieved 1 year after transaction 18
Slide 19: Theoretical acquisition valuation
Amount Factor Value Capital & Surplus $4,467,627 1.0x $4,467,627 Market Value of Investments - -$902,150 1.0x - -$902,150 Premium Income Ordinary Life $3,569,667 1.0x $3,569,667 Pre-need Life $1,121,333 1.75x $1,962,333 Single Premium Life $309,000 0.25x $77,250 Credit Life $700,000 1.0x Profit $14,
Slide 20: Transaction multiples and accretion
Transaction Multiples Pre-Synergies Projected Post-Synergies Mult. X Book 1.7x 1.7x Mult. X Revenues 2.6x 2.6x Mult. X Net Income 23.0x 7.4x Mult. X EBITDA 12.3x 6.6x Accretion to CIA Year Ended December 31, 2002 Combined Citizens First Alliance Combined w/ Synergies Revenues $83,004 $7,087 $90,091
Slide 21: Equity offering and 2005 goal
Equity dilution through offering leads to significantly accretive increase in earnings power 2005 Goal: Total assets of $500 million + Approach $1.00 per share in EPS Strategy could require up to $100 million of equity in one or more transactions over the next 3-5 years (subject to NYSE and/or share
Slide 22: Selected financial data and 2005 goal
1Adjusted for stock dividends paid in 1999, 2000 and 2002. CIA Goal 1999 2000 2001 2002 2005 Balance Sheet Data (As of Year End) Total Assets $255,485 $267,842 $282,086 $326,291 $500,000 Total Invested Assets 174,339 194,203 206,696 226,009 Total Liabilities 183,218 190,529 199,364 224,499 Stockhold
Slide 23: Investment portfolio versus U.S. life insurers
U.S. Citizen's, Inc. Life Insurers 2002 2001 Government Bonds 82.2% 11.5% Corporate Bonds 7.1% 41.4% Stocks 0.2% 27.8% Mortgages 0.3% 7.5% Real Estate 0.0% 1.0% Policy Loans 10.2% 3.2% Other 0.1% 7.6% * Source: ACLI tabulations of NAIC data * 23
Slide 24: Summary of investment case
Profitable books of whole life business Focusing on niche markets where we can be significant players Successful selected historical acquisition experience Target rich acquisition environment Significant long-term earnings potential 24
Slide 25: Peer company comparison
Historical Projected Price Mkt. Dividend Mult X Mult X Mult X Mult X Mult X Symbol Company 4-Mar Cap 1 Yield Revs 1 EPS Book 2003 E 2004 E CSLI Cotton States Life Insurance $8.99 $57.0 1.8% 1.2x 8.3x 0.7x n/a n/a GFR Great American Financial Resources $14.10 $598.0 0.7% 0.2x 5.8x 0.7x 7.5x 6.8x KCLI
Slide 26: Peer business types and debt/equity
Ticker Types of Business Debt/Equity CSLI 38% Guaranteed/Simplified Issue, 38% Universal Life 0% GFR 80% Annuities 46% KCLI 78% Annuities, 8% Universal Life, and 8% dental 3% NWLIA 85% Annuities 0% FNIN 80% Annuities and Universal Life 25% PLFE 95% Annuities & Universal Life 38% SCT 80% Reinsurance
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