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On Apr 9, the Zacks Investment Research downgraded Citizens Inc. to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Citizens witnessed sharp downward estimate revisions after reporting disappointing fourth-quarter and full-year 2012 results. Shares of this life insurer are likely to continue fluctuating given the absence of any major growth catalyst in the near future.

On Mar 11, Citizens reported nil operating earnings per share for the fourth-quarter 2012, lower than both the Zacks Consensus Estimate of 12 cents and 3 cents recorded in the year-ago quarter.

However, total revenue improved 1% year over year to $54.1 million, driven by 5.1% growth in premiums and 1.1% improvement in net investment income. These were offset by higher benefits and expenses as well as realized investment losses based on lower yields. This also deteriorated the overall portfolio yield to 3.8% at 2012-end from 3.9% at 2011-end.

Citizens’ financials witnessed lower operating net income for all the four quarters of 2012. As a result, the company reported weak fourth-quarter results with a negative earnings surprise of 100%. Citizens delivered negative earnings surprise in 3 out of 4 quarters of 2012 with an average beat of 47.9%.

The Zacks Consensus Estimate for 2013 decreased a penny to 40 cents per share over the last 30 days, with one estimate being revised downward. For 2014, the Zacks Consensus Estimate sunk by 43% to 41 cents per share, over the last 30 days, with no estimate revisions. No upward revisions have been witnessed for both the years.

Meanwhile, the Most Accurate Estimate for Citizens’ 2013 earnings stands at 9 cents a share, resulting in a negative Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of -77.5%.

Other Stocks to Consider

However, not all insurers are performing as poorly as Citizens. Some stocks that are outperforming in the insurance sector include CNO Financial Group Inc. (CNO - Analyst Report), XL Group Plc (XL - Analyst Report) and Everest Re Ltd. (RE - Analyst Report). All of these carry a Zacks Rank #1 (Strong Buy).

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