Welcome to the Citizens yearend quarter conference call. [Operator Instructions] I would like to now turn the call over to Ms. Osbourn. You may begin.

Thank you Melinda. Good morning. Welcome to our earnings conference call. I am Kay Osbourn, Citizens’ Chief Financial Officer. Joining me on the call today is Rick Riley, our Vice Chairman and President; Geoff Kolander, our Executive Vice President, Corporate Secretary and General Counsel; and Larry Carson, Financial Reporting and Tax. Yesterday we issued our earnings release and filed our 2011 10-K. Both documents are available on our website at citizensinc.com. During today’s call we will discuss the expected performance of Citizens Inc., which will constitute forward-looking information within the meaning of the Private Securities Litigation Act. Actual results may differ materially from any forward-looking information provided in this call, since such information involves significant risk and uncertainties. A complete Safe Harbor disclaimer is included in the Citizens Inc. press release dated March 12, 2012 and is incorporated by reference into this call. We are not responsible for transcripts of this call made by independent third parties. I will now turn the call over to our President, Rick Riley.

Good morning and welcome. We appreciate you joining us on the call today. We would like to highlight 2011 results in the discussions today. Basically we are talking about the strength of our niches and the thing that we have done effectively in terms of building continued premium growth, even though we’ve had some relatively difficult economic conditions and we are looking forward to 2012, so then hopefully we are going to see an improved economic climate that we can operate around. Our investment income was up on an expanded portfolio, largely as a result of the premium growth that we’ve seen. Our book value continues to move up steadily, which we are pleased to see over the last several years of steady continuous growth there. Kay and I in turn will to work to try and provide you a perspective regarding 2011, as well as describe the potential future growth prospects that we have during this call. To do that we will operate in a format where we are working back and forth between our insurance operations, our investment performance and then toward the end of the call we‘ll open it up and take questions should there be any. First, let me look at the life insurance segment. It accounted for about $118.2 million of our 2011 premiums, which represented 88% of the growth that we saw during 2011. Our international business of course is the largest part of that segment. We have been serving foreign clients in the international arena for more than 35 years. We do all of our business here in the United States on U.S. banks and remain focused on guaranteed accumulation products rather than term life or death protection oriented product design. The healthy growth in the 2011 premiums were predominantly a result of…

So in addition to the premium results that Rick has highlighted for you, I’ll give you a few significant factors impacting the life operations. We do show a decrease in portfolio yield, which is impacting investment income for this segment with a yield of 3.89% compared to 4.17% in 2010. This life segment has approximately half of its total holdings in fixed maturity, investments held in U.S. government and government sponsored issues. We also have inception changes in reserves due to lower long-term investment yields, which are resulting in an increase in the reserve liability balance of about 800,000. Our endowment products design has reserving impact that builds up reserves at a faster rate than our traditional whole life products due to the shorter duration. We also noted that we had fewer reported claims in the current year, reflecting a 6.9 decrease in death claims, as well as we also noted that our persistency has improved in the current year. As far as our differed acquisitions costs, we normally set our assumptions for policies issued in 2011 in the fourth quarter and we are reflecting the lower long term investment yield, a lower yield than we had previously anticipated, which is decreasing our DAC asset and increasing amortization by about $1 million in the fourth quarter. This increase in amortization is outweighed by the decrease in amortization that we’ve reflected due to the improved persistency in this block over the levels that we saw in 2010. And with those highlights, I’ll turn it back to Rick for the home service operations highlight.

Let’s look at the home service. Again, in that segment we see a contribution of about $43.2 million in premiums for the year. That’s the remaining 12% of the premium growth that we saw. We had a small assumption of business in a kind of an incremental blocks of business in Louisiana that we are compatible with that block and those acquisitions were made or that particular transaction was effective in August. We closed it finally right after the end of the year, but the results are reflected there in the fourth quarter. But more importantly about that particular book or those couple of different blocks of business there, but those both are providing an opportunity to expand sales into areas not previously contributing to our overall annual growth and we expect an increased or enhanced level there, coming out of those particular opportunities that we’ve picked up there. The home service segment continues to have a steady and positive impact on what we are doing in terms of the live insurance operations or the business. Our life insurance subsidiaries and as far as the property and causality company that we have, that’s a subsidiary of the Security Plan Life operation over in Louisiana and Mississippi and Arkansas where its operating. The Fire Company is a strictly Louisiana only entity, but it performed well this past year as a result of the rate increase. It was effective at the beginning of 2011 and we were pleased with the results out of that particular operation this year. As you would understand, I’m sure the economic conditions do play somewhat into what happens in - this is a lower economic socio income area that we are serving in this particular market niche and as a result, we do have an impact on surrenders and those types of thing and even premium loans again over in this segment where that does occur when the premium is not readily available to be collected. So with that I’ll turn it to Kay and let her give a little more perspective there.

Thank you, Rick. Our net investment income in this segment is driven by a portfolio yield of 4.47% for the current year compared to 4.65% in 2010. The investment portfolio of this segment has relatively even distribution of fixed maturity investments in the US government and government sponsored issues, corporate securities and also municipal bonds. We also noted that debt claims decreased by 7.6% from the prior year reported amount. We also have in our IBNR estimate; we are reflecting a 600,000 decrease due to favorable development. Our estimates is impacted by hurricane Katrina experience from 2005, which is working its way out of the claim development. We also review our expense allocations annually and we are reporting a decrease in this segment relating to our expenses of $1.5 million compared to prior year levels. This allocation change increases the life segment by the same amount. Our overall general expenses are down in the current year, totaling $26.9 million compared to $27.1 million in 2010 and $28.4 million in 2009 respectively, as we continued to manage our operating cost. The amortization of deferred acquisition cost in this segment increased in the current year due to the higher lapse rate so noted by Rick previously and also due to assumption setting for policies issued in the current year that increase for the assumption setting resulted in about a 400,000 increase to deck amortization. We typically lock in our assumptions for new business issued in the fourth quarter of each year. With that, I’ll turn it back to Rick.

Let’s talk a little bit about the investments and where we are in terms of the investment activities. We were able to grow investment income despite the lower interest rate environment that we found ourselves in. While we were in the end of the third quarter I think we talked a little bit about bottoming out our yield. It appeared that we were headed in that direction. Then in behind that we got the announced intention to keep rates low and I’m sure that’s going to likely have an average yield impact continuing to depress those going forward. Although as we close the fourth quarter, we actually saw some indication of that bottoming and potential inflection of rate, but while we saw the positive improvement, I would tell that what we see on an ongoing basis has continued to be a challenging environment to maintain or secure short term yields of any magnitude and even longer term yields we are seeing are continued to be depressed during this period of time and that causes us frankly to keep as much of the investments shorter term, which means we will necessarily continue to see this compressed investment income that we have seen over the last year or year and a half and two years and we anticipate that that continued pattern will be there, although we are confinable that we have seen the majority of the movement in that regard has pretty well taken place. We are not sure how to predict exactly what this loan - how long the low interest rates are going to go and what the overall long-term impact will be. What we’ll be doing is continuing to make sales and develop the premium income and we’ll keep trying to grow the investment portfolio and investment income out of the growth of the portfolio. Overall, like you've seen here in this fourth quarter. We continue to see or lately have seen some reinvestment in our step, government step type instruments beginning to give an indication that rates are moving up slightly, but again it’s not anything particularly material, but we are encouraged to see some of the entry level points getting up beyond the 1% level and even moving 1.5% to 2% of late, so that gives us encouragement there. We want to emphasize again that the predominate design and development of our products that we have targeted at these niche markets are priced for profitability in and of themselves. They are not solely dependent upon spread and therefore we expect that we will be able to continue to grow the investment portfolio and our organization from this advantage niche position that we worked out for quite a number of years. Kay, if you want to wrap up there.

All right, we saw lower realized gains on investment securities in this year relative to 2010 and 2009. We primarily sold securities in order to benefit from tax planning strategies in all three of the years and just to a lesser extent in this year. We did record one other than temporary impairment of $70,000 in the fourth quarter of 2011, related to one American Airlines bond that was due to mature in 2012. As you know American Airlines filed bankruptcy, Chapter 11 reorganization. In addition we wrote down a real-estate property holding in Arkansas that is classified as held for investment based upon a current appraisal and impairment review. This write down totaled 561,000 and is reflected in the current quarter. In addition, in our 10-K we also disclosed the adoption of a issue 2010, 2006, which is the new guidance relative to differed accusation costs, and the successful efforts accounting application. We are anticipating a reduction in the DAC asset of approximately $10.5 million and this will also impact our pretax earnings positively by an estimated 500,000 due to the projected lower amortization in those upcoming year financial. So that information is disclosed in the 10-K and we encourage you to look at that disclosure if you are interested in more information relative to that topic. With that I think that’s all the highlights that I have and I think we will turn it back to Melinda to open us up for questions.

[Operator Instructions]. Our first question comes from Ed Shields.

So I wanted to talk about the assumption changes for the new policies that you mentioned in the press release and as well as in your prepared comments, cause the 800,000 increase in reserves. Can you go through what the changes were? I think it’s really just for investment yield, but any changes related to persistency or mortality or any other moving parts there.

No Ed, you are exactly right. It’s relative to the long-term yield.

Okay and can you disclose where you've moved that assumption to and where it’s moved from or just the delta between the two.

Let me let our actuary speak to that. Jonathan Pollio is also here in the room with us and he can take that question.

Hi, this is Jonathan Pollio, Vice President, Chief Actuary. We dropped the interest rate on the short-term side by about 20 basis points and we dropped it on the long-term side by about 70 basis point. It’s kind of an up-word slow, which is now pretty standard in the industry.

Great, that’s useful. Any idea or guessing or thoughts about if this low interest rate environment persists through 2012 and 2013 with the guidance that’s come out where the government is not going to raise rates until mid 2013 or 2014. If there is going to be further assumption changes going forward or are you pretty confident where you are at right now.

We expect these to be -- I do a best estimate assumption and we put it in the path to handle any uncertainties and I’m fairly certain that path should handle any uncertainties.

We don’t anticipate changing it for those future current upcoming yields.

Yes, if there were any changes it would be in the fourth quarter next year, right.

Correct.

Okay, so that’s one item. Was new money being put to work in the low interest rate environment? Obviously you mentioned some of the government securities are 1%, 1.5%, 2% yields. Any thoughts about going for a little bit more yield in other areas? I know you don’t price your products for investments spread or you don’t need investment spread for the profitability of products, but every little bit helps in this environment. So is there any kind of reassessment of investments in this environment?

Ed really what I was trying to communicate with those particular, those are generally step type instruments that keep us short in the short term. We don’t really accept those, we are not really committing to anything in that step arena, that if we end up needing to hold it, that yields us anything less than 4.6% thus far. I’m not saying that we wouldn’t take a 4.5, but at this point we really haven’t taken anything on a longer-term basis. It’s less than the 4.6 rate and those are really entry-level rates, not necessarily what you would guess. What I’m really trying to communicate in that respect is the fact that the interest rates that we are utilizing are really more short term geared and we are anticipating this low 2% environment over a very short period of time and we are willing to take the shorter term turnover of the funds and the lower yield during that period. We did make some investments in the latter part of last year in some bond mutual funds that are generating yields north of 2%, even approaching 4% and I think even one of the funds may actually be north of 4%. But we are not out chasing yields. I don’t want to misrepresent the approach that we take, because even… We are a very conservative investment oriented operation and we are more concerned about the return of our money than the return on our money, and particularly during this unusual economic period of time. We are happy to get additional yield. We are doing so that through municipal securities. We are in the non-life companies. We are actually using some non-taxable munis, which give us better overall yields. So we are continuing to get good decent yields. Matter of fact, like I say, in the fourth quarter we saw improvement in the overall yield rate, even though I am not sure that its bottomed out, I am happy that with what we are seeing, we are getting a better yield that what the market and the condition of the market actually implies we should be getting.

Right. I guess one of the areas I was thinking of is most of your life insurance peers invest for example in commercial mortgage loans. Industry average is roughly 10% of the investment portfolios in that asset class and if I’m not mistaken, you all don’t have a lot there.

That’s correct, we do not. It’s just an area that we do not make a lot of -- I’m not saying we wouldn’t make one in that environment. It’s just that we generally steer clear of that. You got to also appreciate the fact that our international cliental are very strongly interested in the U.S. dollar and the U.S. government backed instruments. So you will see in our life insurance segment, you will see a fairy strong concentration of investments in that arena primarily for that purpose. We branched out of that this last year or last couple of years into some munis, which we clearly don’t have the full faith in credit of the U.S. government but are also U.S. based and strong alternatives we believe to that particular market and that’s why we do it primarily for our constituency and our customer base that’s interested in that strong US dollar based investment.

Right, and that’s useful and I wasn’t trying to suggest anything else there either, by the way.

No again, we are familiar with some of the other things. We are just pretty risk averse and particularly in this climate we’ve just maintained our conservatism through the process.

So let’s shift gears a little bit to kind of distribution. During your comments I think you mentioned that North Carolina and Georgia where looking a little bit interesting and parts of Texas in the U.S. business. Could you just develop or expand on any initiatives you may have in place on distribution or your looking to enter new states in the U.S. and then also if you could comment on distribution on the international market. Are there any developments there for increasing agencies or independent agents or new markets or anything of that sort?

Yes, I wish I had brought some details with me about where all we got production last year. We get production out of a number of different states each year and what I really was commenting on is I’ve seen some positive development going on in these areas and I don’t mean to particularly focus on any of those states as being dominate states or predominate states by any stretch. We just see that there has been activities there and some growth in terms of the volume of premium that we see coming from that particular venue, but it’s not… In terms of an overall nationwide expansion, we are working in a rather concentrated mode, building and developing predominantly here in the state of Texas. We are encouraging and working with other distribution networks that express an interest in our product base, that they are interested in working with us and we typically will build off of that expression of interest on behalf of the distributors.

And on the international side?

On the international side, in terms of the expansion and the growth I still think that Latin America continues to be an area where we will, I don’t want to say be dominant or will continue to see expansion and growth there. I think in the Asian market, it’s been disappointing honestly to see the time when these pull back, but I think a lot of that had to do with just the conditions in that particular country and the way that they are dealing with their world, but over in China, Vietnam and down through the Asian continent in the third world countries there, we’ve got opportunities. I don’t have anything to point to as far as a predominate producer or network that’s operating there. We just believe that with the strong foot hold that we got there in Taiwan, we’ll be able to continue to work out from there and continue to develop in that Asian market.

Okay, and then my last one, I would be remiss if I didn’t ask about what you are seeing in the M&A environment in the market place to any increase in properties or items being brought to you or anything related to the economy, anything there?

I appreciate you. I actually had that in my conclusion comments here to kind of wrap-up. But we do - we have not seen an extremely large volume. We are not seeing a large opportunities. We are seeing a number of small opportunities. We are expecting to continue to build and develop our company and our growth in the same manner that we have historically through acquisitions. So I think what I’ve seen more and more than not, Ed is the fact that the increased regulatory scrutiny environment and attention, I know the new holding company act that’s coming out, that the NAIC is promoting relative to holding companies structures, the model act that they’ve designed seems to be lighting up particularly smaller operations who have multiple businesses operating under that one umbrella, but yet the insurance holding company world is kind of imposing upon them in a way that they may not care to be influenced. So I think the opportunity to quite possibly pick up some of those companies that are tied up in those kinds so structures is going to be more prolific going forward, particularly as the NAIC is successful in putting in this new - I mean it's not, the holding company laws are not new, but the newer provisions of the model act open the door primarily for intrusion into all of the related businesses and these business owners are just not going to accept that. So I think you will see some of the divestures of some of those small company opportunities that are out there and frankly they are going to hope that we expect to be positioned to actively operate in that particularly arena.

When do you expect that model act to be implemented?

Well the state of Texas passed it, as is, I think last year. I know that Louisiana is currently contemplating it in its upcoming legislative session. I don’t know where - I haven’t monitored across all those states where that’s going, but the Louisiana one in particular is where I’ve gotten some of my insights and a particular perspective on the imposition on some of those business units that are operating over there in that stay.

Right, so would it be fare to characterize potential M&A activity more along the lines of the small blocks that you picked up in Louisiana earlier this year, well I guess in 2011.

Its fare to characterize, that’s what I’ve seen more of, of late. I don’t know that there is not going to be a larger opportunity on a - I think again the low interest rate environment is another contributor to that. I think that that low interest rate environment is hurting some companies and there are probably going to be some that are going to be available for sale as a result of the economic conditions that we are in, because since many of those do live off a spread and not like we. They don’t function like we do and therefore I believe there are going to be opportunities even in other arenas, besides just these small company arenas as well. Is there other questions?

No sir, there are no further questions coming from the phone lines at this time.

Did you have something you wanted to add? Okay. All right, we appreciate again your time and we are looking forward to the future in 2012 with a positive outlook of the company being able to continue to do what it’s been doing very well for a number of years. The niche markets work well for us and we continue to expect to work down that path and even though we’ve had an unstable economic environment, we are encouraged by where yields have tracked to, although we are cautiously optimistic about where that will play. We do expect to be active in the acquisition market and we look forward to having those opportunities. But again, we appreciate you joining us on the call today and we thank you for your time.

Thank you. This does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.