Citizens Inc – ‘424B4’ on 2/15/02

On:  Friday, 2/15/02   ·   Accession #:  950134-2-1401   ·   File #:  333-76926

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Prospectus   —   Rule 424(b)(4)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus - File No. 333-76926                      156    564K 

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                                                Filed Pursuant to Rule 424(b)(4)
                                          Registration No. 333-76926

COMBINED UNDERWRITERS LIFE INSURANCE COMPANY
 NOTICE OF SPECIAL SHAREHOLDERS' MEETING

WHAT:             Special Shareholders' Meeting                                 

WHEN:             Tuesday, March 19, 2002, 10:00 a.m. Central Standard Time     

WHERE:            307 North Glenwood Boulevard, Tyler, Texas                    

We are having a Special Shareholders' Meeting of Combined Underwriters Life     
Insurance Company ("Combined") to:                                              

        o  Vote on an exchange of our common stock for Class A common stock of
Citizens, Inc. ("Citizens"); and                                                

  o  Transact any other business that may properly come before the
meeting or any adjournment.                                                     

IF THE COMBINED EXCHANGE IS APPROVED                                            

o  Combined shareholders will exchange their shares for Citizens Class A common 
stock as described in the accompanying document.                                

o  Combined will become a subsidiary of Citizens, Inc.                          

WHO CAN VOTE                                                                    

o  Only Combined shareholders at the close of business on February 11, 2002, may
vote at the meeting.                                                            

RIGHT TO DISSENT

If you disagree with the Combined Exchange, you may seek payment for your 
Combined shares by strictly following the procedures described in Appendix C. 

      Shareholders are cordially invited to attend the meeting. Whether or
not you plan to attend the meeting, please fill in, date, sign, and return      
promptly the enclosed proxy card in the enclosed postage- prepaid envelope. With
your proxy, your shares will be voted at the meeting as instructed if you cannot
attend in person. Even if you send in your proxy, you may reclaim your right to 
vote in person when you attend the meeting.                                     

                                              By Order of the Board of Directors

                                   Gary C. Cole, President
Tyler, Texas                                                                    
February 14, 2002                                                               

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LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY
 NOTICE OF SPECIAL SHAREHOLDERS' MEETING

WHAT:             Special Shareholders' Meeting                                 

WHEN:             Tuesday, March 19, 2002, 11:00 a.m. Central Standard Time     

WHERE:            307 North Glenwood Boulevard, Tyler, Texas                    

We are having a Special Shareholders' Meeting of Lifeline Underwriters Life     
Insurance Company ("Lifeline") to:                                              

        o  Vote on an exchange of our common stock for Class A common stock of
Citizens, Inc. ("Citizens"); and                                                

  o  Transact any other business that may properly come before the
meeting or any adjournment.                                                     

IF THE LIFELINE EXCHANGE IS APPROVED                                            

o  Lifeline shareholders will exchange their shares for Citizens Class A common 
stock as described in the accompanying document.                                

o  Lifeline will become a subsidiary of Citizens, Inc.                          

WHO CAN VOTE                                                                    

o  Only Lifeline shareholders at the close of business on February 11, 2002, may
vote at the meeting.                                                            

RIGHT TO DISSENT

If you disagree with the Lifeline Exchange, you may seek payment for your       
Lifeline shares by strictly following the procedures described in Appendix C.   

      Shareholders are cordially invited to attend the meeting. Whether or
not you plan to attend the meeting, please fill in, date, sign, and return      
promptly the enclosed proxy card in the enclosed postage- prepaid envelope. With
your proxy, your shares will be voted at the meeting as instructed if you cannot
attend in person. Even if you send in your proxy, you may reclaim your right to 
vote in person when you attend the meeting.                                     

                                              By Order of the Board of Directors

                                   Gary C. Cole, President
Tyler, Texas                                                                    
February 14, 2002                                                               

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COMBINED UNDERWRITERS LIFE INSURANCE COMPANY
 PROXY STATEMENT FOR SPECIAL SHAREHOLDERS' MEETING
 TO BE HELD MARCH 19, 2002

LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY
 PROXY STATEMENT FOR SPECIAL SHAREHOLDERS' MEETING
 TO BE HELD MARCH 19, 2002

[CITIZENS LOGO] 

 CITIZENS, INC. PROSPECTUS
CLASS A COMMON STOCK, NO PAR
 VALUE
UP TO 1,220,000 SHARES

This document:                                                                  

o        is furnished by the Board of Directors of Combined Underwriters Life   
   Insurance Company ("Combined") to request a proxy for voting your
   Combined common stock on the Plan and Agreement of Exchange dated
        November 20, 2001 (the "Combined Exchange Agreement") between Combined
and Citizens; and                                             

o        is furnished by the Board of Directors of Lifeline Underwriters Life   
   Insurance Company ("Lifeline") to request a proxy for voting your
   Lifeline common stock on the Plan and Agreement of Exchange dated
        November 20, 2001 (the "Lifeline Exchange Agreement") between Lifeline
and Citizens, Inc. ("Citizens"); and                          

o        registers the shares of Class A common stock of Citizens to be issued  
   in exchange for Combined shares if the Combined Exchange for each
         company occurs. Citizens Class A common stock is traded on the American
  Stock Exchange under the symbol "CIA." On February 11, 2002, the
      closing price of Citizens Class A common stock was $10.05 per share;
and                                                           

o        registers the shares of Class A common stock of Citizens to be issued  
   in exchange for Lifeline shares if the Lifeline Exchange for each
         company occurs. Citizens Class A common stock is traded on the American
  Stock Exchange under the symbol "CIA." On February 11, 2002, the
      closing price of Citizens Class A common stock was $10.05 per share.

----------

THE COMBINED EXCHANGE                                         

         If the Combined Exchange occurs, you will receive a number of shares of
         Citizens Class A common stock having an aggregate market value equal to
       the agreed value of the shares of Combined common stock owned by you.
        The per share market value of Citizens Class A common stock will equal
      its average closing price as reported on the American Stock Exchange
         for the 20 trading days immediately preceding the effective date of the
    Combined Exchange. The Combined Board of Directors has agreed to a
    value of your Combined common stock of $8.64 per share. Fractional
        shares will be rounded up to the nearest whole share of Citizens Class
         A common stock. If the Combined Exchange occurs, Combined will mail you
       instructions for exchanging your Combined shares for Citizens Class A
common stock.                                                 

The Combined Board Of Directors UNANIMOUSLY RECOMMENDS that   
shareholders APPROVE the Combined Exchange Agreement.         

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THE LIFELINE EXCHANGE                                         

         If the Lifeline Exchange occurs, you will receive a number of shares of
         Citizens Class A common stock having an aggregate market value equal to
       the agreed value of the shares of Lifeline common stock owned by you.
        The per share market value of Citizens Class A common stock will equal
      its average closing price as reported on the American Stock Exchange
         for the 20 trading days immediately preceding the effective date of the
    Lifeline Exchange. The Lifeline Board of Directors has agreed to a
    value of your Lifeline common stock of $5.00 per share. Fractional
        shares will be rounded up to the nearest whole share of Citizens Class
         A common stock. If the Lifeline Exchange occurs, Lifeline will mail you
       instructions for exchanging your Lifeline shares for Citizens Class A
common stock.                                                 

The Lifeline Board Of Directors UNANIMOUSLY RECOMMENDS that   
shareholders APPROVE the Lifeline Exchange Agreement.         

----------

Neither the Securities and Exchange Commission nor any state securities         
commission has approved or disapproved of these securities, or determined if    
this proxy statement-prospectus is truthful or complete. Any representation to  
the contrary is a criminal offense.                                             

----------

               THE SECURITIES OF CITIZENS INVOLVE SIGNIFICANT RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE 16.                                            

----------

 The date of this proxy statement-prospectus is February 13, 2002,
 and it is first being mailed to the shareholders of Combined and Lifeline
on or about February 14, 2002.

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TABLE OF CONTENTS 

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                                                                                                              Page
                                                                                                              ----

                                                                                                                  
AVAILABLE INFORMATION...........................................................................................1 

INCORPORATION OF DOCUMENTS BY REFERENCE.........................................................................1 

FORWARD-LOOKING STATEMENTS......................................................................................2 

SUMMARY.........................................................................................................3 

PLANS AND AGREEMENTS OF EXCHANGE................................................................................6 

SUMMARY SELECTED FINANCIAL DATA................................................................................10 

RISK FACTORS...................................................................................................15 

SPECIAL MEETINGS OF COMBINED AND LIFELINE......................................................................21 

PROPOSED EXCHANGES - COMBINED AND LIFELINE.....................................................................26 

COMBINED'S DISCUSSION  AND ANALYSIS OF<                                                                        
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................................................41 

LIFELINE'S DISCUSSION  AND ANALYSIS OF                                                                            
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................................................46 

CERTAIN FEDERAL INCOME TAX CONSEQUENCES........................................................................50 

INFORMATION CONCERNING COMBINED................................................................................55 

INFORMATION CONCERNING LIFELINE................................................................................61 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                                                                     
         ON ACCOUNTING AND FINANCIAL DISCLOSURE................................................................64 

COMPARISON OF RIGHTS OF SECURITYHOLDERS........................................................................65 

EXPERTS  ......................................................................................................68 

LEGAL MATTERS..................................................................................................68 

OTHER MATTERS..................................................................................................68 

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APPENDIX A -- Combined -- Plan and Agreement of Exchange-Combined Underwriters  
Life Insurance Company and Citizens, Inc.                                       

APPENDIX B -- Lifeline -- Plan and Agreement of Exchange-Lifeline Underwriters  
Life Insurance Company and Citizens, Inc.                                       

APPENDIX C -- Part Five, Articles 5.11, 5.12 and 5.13 of the Texas Business     
Corporation Act                                                                 

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 AVAILABLE INFORMATION

         Citizens files annual, quarterly, and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").  
Those reports, proxy statements and other information can be inspected and      
copied at the public reference facilities maintained by the SEC at the SEC's    
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549, telephone
(800) SEC-0330, and at the regional offices of the SEC at 233 Broadway, New     
York, New York 10279, and Suite 1400, Citicorp Center, 500 West Madison Street, 
Chicago, Illinois 60661. Copies can be obtained at prescribed rates from the    
Public Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., 
Washington, D.C. 20549. In addition, copies may be inspected at the offices of  
the American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881 and
on the SEC Internet website at http://www.sec.gov.                              

      Citizens has filed with the SEC a registration statement on Form S-4
under the Securities Act of 1933, for the shares of Citizens Class A common     
stock to be issued in connection with the transactions described in this proxy  
statement-prospectus. In accordance with SEC rules and regulations, this proxy  
statement-prospectus does not contain all the information in the registration   
statement. For further information, please see the registration statement,      
including its exhibits. Statements contained in this proxy statement-prospectus 
concerning the provisions of documents are not necessarily complete, and in each
instance, reference is made to the copy of such document filed as an exhibit to 
the registration statement or otherwise filed with the SEC. Each such statement 
is qualified in its entirety by reference to the registration statement.        

 INCORPORATION OF DOCUMENTS BY REFERENCE

  The following documents have been filed by Citizens with the SEC
pursuant to the Securities Exchange Act of 1934 (File No. 0-16509) and are      
incorporated by reference into this proxy statement- prospectus:                

        o        Citizens' Annual Report on Form 10-K filed on March 29, 2001,
for the year ended December 31, 2000;       

         o        the description of Citizens' Class A common stock contained in
                its Registration Statement on Form 8-A declared effective by
the SEC on April 14, 1994;                  

         o        Citizens' Quarterly Reports on Form 10-Q filed on or about (i)
                 May 15, 2001 for the period ended March 31, 2001, (ii) August
           14, 2001, for the period ended June 30, 2001, and (iii)
                  November 7, 2001, for the period ended September 30, 2001; and

        o        Citizens' Current Report on Form 8-K dated November 20, 2001,
filed on or about November 26, 2001.        

         All documents filed by Citizens pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this proxy statement-prospectus and 
prior to the shareholder meetings of Lifeline and Combined are incorporated by  
reference into this proxy statement-prospectus from the date of the filing of   
the documents.                                                                  

Any statement contained in this proxy statement-prospectus or 
incorporated in this document in a document by reference will be deemed to be   
modified or superseded for purposes of this proxy statement- prospectus to the  
extent that a statement contained in this document or in any subsequently filed 
document that is also incorporated by reference in this proxy                   
statement-prospectus modifies or supersedes such statement. The foregoing       
sentence does not apply to Lifeline, Combined or any of their affiliates.       

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     THIS PROXY STATEMENT-PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
        FINANCIAL INFORMATION ABOUT CITIZENS THAT IS NOT INCLUDED OR DELIVERED
       WITH THIS DOCUMENT. YOU MAY OBTAIN THIS INFORMATION WITHOUT CHARGE BY
      REQUEST TO SECRETARY, CITIZENS, INC., P.O. BOX 149151, AUSTIN, TEXAS
      78714-9151; TELEPHONE (512) 837-7100. TO ENSURE TIMELY DELIVERY, ANY
     REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS BEFORE MARCH 15,
2002.                                                         

FORWARD-LOOKING STATEMENTS

         Certain statements contained in this proxy statement-prospectus are not
statements of historical fact and constitute forward-looking statements within  
the meaning of the Private Securities Litigation Reform Act. These statements   
include specifically identified forward-looking statements within this proxy    
statement-prospectus. In addition, statements in future filings by Citizens with
the SEC, in press releases, and in oral and written statements made by or with  
the approval of Citizens, Lifeline or Combined which are not statements of      
historical fact constitute forward-looking statements within the meaning of the 
Act. Examples of forward-looking statements, include: (i) projections of        
revenues, income or loss, earnings or loss per share, the payment or non-payment
of dividends, capital structure, and other financial items; (ii) statements of  
plans and objectives of Citizens, Lifeline or Combined or any of their          
management or Boards of Directors; (iii) statements of future economic          
performance; and (iv) statements of assumptions underlying those statements.    
Words such as "believes," "anticipates," "expects," "intends," "targeted,"      
"may," "will" and similar expressions are intended to identify forward-looking  
statements but are not the exclusive means of identifying such statements.      

      Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from those in such statements. Factors
that could cause actual results to differ from those discussed in the           
forward-looking statements include: (i) the strength of foreign and U.S.        
economies in general and the strength of the local economies in which operations
are conducted; (ii) the effects of and changes in trade, monetary and fiscal    
policies and laws; (iii) inflation, interest rates, market and monetary         
fluctuations and volatility; (iv) the timely development of and acceptance of   
new products and services and perceived overall value of these products and     
services by existing and potential customers; (v) changes in consumer spending, 
borrowing and saving habits; (vi) concentrations of business from persons       
residing in third world countries; (vii) the ability of Citizens to consummate  
and integrate acquisitions; (viii) the persistency of existing and future       
insurance policies sold by Citizens, Lifeline and Combined; (ix) the dependence 
of Citizens on its Chairman of the Board; (x) the ability to control expenses;  
(xi) the effect of changes in laws and regulations, including those concerning  
insurance, with which Citizens, Lifeline and Combined must comply; (xii) the    
effect of changes in accounting policies and practices, as may be adopted by the
regulatory agencies as well as the Financial Accounting Standards Board; (xiii) 
changes in the organization and compensation plans of Citizens, Lifeline and    
Combined; (xiv) the costs and effects of litigation and of unexpected or adverse
outcomes in litigation; and (xv) the success of Citizens, Lifeline and Combined 
at managing the above risks.                                                    

         These forward-looking statements speak only as of the date on which the
statements are made, and Citizens, Lifeline and Combined undertake no obligation
to update any forward-looking statement to reflect events or circumstances after
the date on which a statement is made to reflect the occurrence of unanticipated
events.                                                                         

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 SUMMARY

      This is a summary. Please read the entire proxy statement-prospectus
before you make an investment decision.                                         

PARTIES TO THE COMBINED EXCHANGE AND THE LIFELINE EXCHANGE                      

        Citizens, a Colorado corporation, is a life insurance holding company.
Citizens' principal executive office is located at 400 East Anderson Lane,      
Austin, Texas 78752, and its telephone number there is (512) 837-7100.          

         Combined is a Texas stipulated premium life insurance company. Combined
has the same principal office and telephone number as Lifeline.                 

      Lifeline is a Texas legal reserve life insurance company. Lifeline's
principal executive office is located at 307 North Glenwood Boulevard, Tyler,   
Texas 75702 and the telephone number there is (800) 872- 6339.                  

        Neither Combined, Lifeline, nor any of their officers or directors are
affiliated with Citizens, nor are any officers or directors of Citizens         
affiliated with Combined or Lifeline. If the Combined Exchange and Lifeline     
Exchange are approved, Combined and Lifeline will become subsidiaries of        
Citizens.                                                                       

        Neither the common stock of Combined nor Lifeline is listed on a stock
exchange or traded regularly through security brokerage firms, and there is     
virtually no trading activity. Consequently, Combined and Lifeline are unable to
determine a reliable market value for their stock. For an explanation of the    
manner in which Citizens, Combined and Lifeline negotiated the share exchange   
ratios, see "Proposed Exchanges-- Background and Reasons-Combined and Lifeline."

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PERSONS ENTITLED TO VOTE; RECORD DATE        The record date for shareholders of both Combined and   
                                             Lifeline is the close of business on February 11, 2002. 
                                             Only shareholders as of the record date will be notified
                                             of, and be entitled to vote at, the special meetings of 
                                             shareholders of Combined and Lifeline.                  

DATE, TIME AND PLACE OF SPECIAL MEETINGS OF  Combined - The special meeting of Combined              
LIFELINE AND COMBINED                        shareholders will be held on Tuesday, March 19, 2002    
                                             at 10:00 a.m., Central Standard Time, at 307 North      
                                             Glenwood Boulevard, Tyler, Texas.                       

                                             Lifeline - The special meeting of Lifeline              
                                             shareholders will be held on Tuesday, March 19, 2002    
                                             at 11:00 a.m., Central Standard Time, at 307 North      
                                             Glenwood Boulevard, Tyler, Texas.                       

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BUSINESS                                      TO BE TRANSACTED At each respective special meeting,  
                                              shareholders of Combined and Lifeline will be asked to
                                              vote upon an Exchange Agreement under which their     
                                              shares of Combined and Lifeline will be exchanged for 
                                              Class A common stock of Citizens.                     

RECOMMENDATIONS OF THE BOARD OF DIRECTORS     Combined - The Combined Board of Directors has        
OF LIFELINE AND COMBINED                      unanimously approved the Combined Exchange Agreement  
                                              and RECOMMENDS that the shareholders vote FOR APPROVAL
                                              of the Combined Exchange. The Combined Board of       
                                              Directors reviewed several factors in reaching its    
                                              decision to recommend that shareholders vote to       
                                              approve the Combined Exchange, although it did not    
                                              solicit or receive an outside fairness opinion with   
                                              respect to the Combined Exchange. See "Proposed       
                                              Exchanges--Background and Reasons-Combined and        
                                              Lifeline--Recommendation of Combined's Board of       
                                              Directors."                                           

                                              Lifeline - The Lifeline Board of Directors has        
                                              unanimously approved the Lifeline Exchange Agreement  
                                              and RECOMMENDS that the shareholders vote FOR APPROVAL
                                              of the Lifeline Exchange. The Lifeline Board of       
                                              Directors reviewed several factors in reaching its    
                                              decision to recommend that shareholders vote to       
                                              approve the Lifeline Exchange, although it did not    
                                              solicit or receive an outside fairness opinion with   
                                              respect to the Lifeline Exchange. See "Proposed       
                                              Exchanges--Background and Reasons-Combined and        
                                              Lifeline--Recommendation of Lifeline's Board of       
                                              Directors."                                           

INTERESTS OF CERTAIN PERSONS IN THE COMBINED  The Chairman of the Board and Chief Executive Officer 
EXCHANGE AND THE LIFELINE EXCHANGE            of Combined and controlling shareholder of Lifeline,  
                                              Walden P. "Red" Little, as well as Regina Little      
                                              Rooney, a significant shareholder of Combined and     
                                              Lifeline and director of Combined, have interests in  
                                              the Combined Exchange and the Lifeline Exchange in    
                                              addition to their interests as shareholders of        
                                              Combined and Lifeline. Upon the closings of the       
                                              Combined Exchange and the Lifeline Exchange, both     
                                              companies will enter into one overall marketing       
                                              development allowance agreement with the Red Little   
                                              Combined Agency, Inc., a wholly-owned insurance       
                                              agency of Mr. Little. Under this agreement Combined   
                                              and Lifeline will provide working capital to the      
                                              insurance agency to be used as a marketing development
                                              allowance and for other purposes deemed               

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                    necessary by the insurance agency to strengthen and   
                    enhance the operations of the insurance agency for a  
                    period of 36 months. The payment rate to the agency   
                    will be $25,000 per month. In addition, upon the      
                    closing of the Combined Exchange, Combined will enter 
                    into two lease extension and modification agreements  
                    with Little, Rooney & Little Associates which provide 
                    that Combined will extend its existing leases on its  
                    offices for a term of 60 months on the same terms and 
                    conditions that presently exist. The existing lease   
                    rate for both leases is $10,121 per month. Little,    
                    Rooney & Little Associates is 50% owned by Mr. Little 
                    and 50% owned by Ms. Rooney.                          

PROXY REVOCABILITY  Proxies of shareholders of Combined and Lifeline are  
                    revocable at any time prior to voting at the meetings.
                    See "The Special Meetings--Revocability of Proxies."  

REQUIRED VOTES      Combined - Approval of the Combined Exchange Agreement
                    and the transactions contemplated thereby requires the
                    affirmative vote of two-thirds of the outstanding     
                    Combined common stock. See "The Special               
                    Meetings--Voting Securities." No shareholder vote of  
                    Citizens is required by the Exchange Agreements or    
                    applicable law. Walden P. "Red" Little, Chairman of   
                    the Board of Combined, and Regina Little Rooney, a    
                    director and significant shareholder of Combined, who 
                    have an aggregate ownership of approximately 92.6% of 
                    the shares of Combined common stock, have indicated   
                    that they intend to vote for the Combined Exchange.   
                    This vote will virtually assure that the Combined     
                    Exchange will occur absent unfulfilled conditions to  
                    complete the Combined Exchange.                       

                    Lifeline - Approval of the Lifeline Exchange Agreement
                    and the transactions contemplated thereby requires the
                    affirmative vote of two-thirds of the outstanding     
                    Lifeline common stock. See "The Special               
                    Meetings--Voting Securities." No shareholder vote of  
                    Citizens is required by the Exchange Agreements or    
                    applicable law. Walden P. "Red" Little, the majority  
                    shareholder of Lifeline, and Regina Little Rooney, a  
                    significant shareholder of Lifeline, who have an      
                    aggregate ownership of approximately 85.8% of the     
                    shares of Lifeline common stock, have indicated that  
                    they intend to vote for the                           

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                                             Lifeline Exchange. This vote will virtually assure    
                                             that the Lifeline Exchange will occur absent          
                                             unfulfilled conditions to complete the Lifeline       
                                             Exchange.                                             

OUTSTANDING SHARES                           Combined - As of the record date there were           
                                             outstanding 1,000,000 shares of Combined common stock.
                                             As of the record date, Combined's directors, executive
                                             officers and their affiliates held 925,858 shares of  
                                             Combined common stock or a total of 92.6% of the      
                                             shares entitled to vote.                              

                                             Lifeline - As of the record date there were           
                                             outstanding 700,000 shares of Lifeline common stock.  
                                             As of the record date, Lifeline's directors, executive
                                             officers and their affiliates held 625,793 shares of  
                                             Lifeline common stock or a total of 89.4% of the      
                                             shares entitled to vote.                              

                               PLANS AND AGREEMENTS OF EXCHANGE                                    

CONSIDERATION FOR YOUR SHARES                Combined - If the Combined Exchange occurs, you will  
                                             receive a number of shares of Citizens Class A common 
                                             stock equal in market value to the shares of Combined 
                                             common stock owned by you. The per share market value 
                                             of Citizens Class A common stock will equal its       
                                             average closing price as reported on the American     
                                             Stock Exchange for the 20 trading days immediately    
                                             preceding the effective date of the Combined Exchange.
                                             The market value of your Combined common stock has    
                                             been agreed to be $8.64 per share. Fractional shares  
                                             will be rounded up to the nearest whole share of      
                                             Citizens Class A common stock. Fractional shares will 
                                             not be issued. Any Combined shareholder who perfects  
                                             dissenters' rights under Texas law will receive cash  
                                             in lieu of Citizens Class A common stock. See         
                                             "Proposed Exchange--Receipt of Citizens Shares" and   
                                             "Rights of Dissenting Shareholders."                  

                                             Lifeline - If the Lifeline Exchange occurs, you will  
                                             receive a number of shares of Citizens Class A common 
                                             stock equal in market value to the shares of Lifeline 
                                             common stock owned by you. The per share market value 
                                             of Citizens Class A common stock will equal its       
                                             average closing price as reported on the American     
                                             Stock Exchange for the 20 trading days immediately    
                                             preceding the effective date of the Lifeline Exchange.
                                             The market value of your Lifeline common stock has    
                                             been agreed to                                        

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                                             be $5.00 per share. Fractional shares will be rounded  
                                             up to the nearest whole share of Citizens Class A      
                                             common stock. Fractional shares will not be issued.    
                                             Any Lifeline shareholder who perfects dissenters'      
                                             rights under Texas law will receive cash in lieu of    
                                             Citizens Class A common stock. See "Proposed           
                                             Exchange--Receipt of Citizens Shares" and "Rights of   
                                             Dissenting Shareholders."                              

CLOSING DATES                                The parties believe that the Closing will occur and the
                                             Combined Exchange and Lifeline Exchange will become    
                                             effective shortly after the conditions in the Exchange 
                                             Agreements (including shareholder approval) are        
                                             satisfied.                                             

CONDUCT OF BUSINESS PRIOR TO CLOSINGS        Combined and Lifeline have each agreed that they will  
                                             not: (1) enter into any transactions prior to the      
                                             Exchanges with Citizens other than in the ordinary     
                                             course of business, (2) pay shareholder dividends or   
                                             increase the compensation of officers, nor (3) enter   
                                             into any agreement or transaction which will adversely 
                                             affect their respective financial conditions. See      
                                             "Proposed Exchanges--Conduct of Business Pending the   
                                             Exchanges; the Covenants of the Parties."              

DISSENTERS' RIGHTS                           Combined and Lifeline shareholders may dissent from    
                                             the Exchange applicable to them and demand payment of  
                                             their share values in cash. If holders of more than    
                                             2.5% of the outstanding shares of Combined             
                                             (approximately 25,000 shares) or Lifeline              
                                             (approximately 17,500 shares) perfect their            
                                             dissenter's rights, Citizens may cancel the Exchanges. 
                                             See "Rights of Dissenting Shareholders," "Proposed     
                                             Exchanges-- Combined and Lifeline--Other Conditions to 
                                             Consummation of the Exchanges," and Appendix C which   
                                             contains copies of the Texas statutes for dissenting   
                                             shareholder procedures.                                

CONDITIONS TO THE COMBINED EXCHANGE AND THE  In addition to approval by the shareholders of         
LIFELINE EXCHANGE                            Combined and Lifeline, the Exchanges are subject to    
                                             satisfaction of other conditions including: (1)        
                                             approval by the Texas Commissioner of Insurance; (2)   
                                             the performance by each party of its obligations; (3)  
                                             the absence of any legal proceeding relating to the    
                                             transactions contemplated by the Exchange Agreements;  
                                             (4) the continued material accuracy of representations 
                                             made by each party; and                                

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                                               (5) the delivery of legal opinions. See "Proposed     
                                               Exchanges--Combined and Lifeline--Other Conditions."  

OPERATIONS OF COMBINED AND LIFELINE AFTER THE  Combined - Following the Combined Exchange, Combined  
EXCHANGES                                      will continue to operate in its locations under a     
                                               joint management team, with the consolidation of      
                                               computer data processing in Citizens' system. Citizens
                                               will continue to evaluate the personnel, business     
                                               practices and opportunities for Combined and may make 
                                               such changes as it deems appropriate following the    
                                               Combined Exchange.                                    

                                               Lifeline - Following the Lifeline Exchange, Lifeline  
                                               will continue to operate in its location under a joint
                                               management team, with the consolidation of computer   
                                               data processing in Citizens' system. Citizens will    
                                               continue to evaluate the personnel, business practices
                                               and opportunities for Lifeline and may make such      
                                               changes as it deems appropriate following the Lifeline
                                               Exchange.                                             

SUMMARY OF FEDERAL INCOME TAX CONSIDERATIONS   The Combined Exchange and the Lifeline Exchange are   
                                               each intended to be treated as a reorganization.      
                                               Accordingly, for federal income tax purposes it is    
                                               anticipated that:                                     

                                               o    no gain or loss will generally be recognized by  
                                                    holders of Combined or Lifeline common stock on  
                                                    the exchange of their shares of stock for        
                                                    Citizens Class A common stock;                   

                                               o    the holding period for Citizens Class A common   
                                                    stock received in the Exchanges will include the 
                                                    holding period for the Combined and Lifeline     
                                                    common stock surrendered in exchange therefor;   
                                                    and                                              

                                               o    the aggregate adjusted tax basis of Citizens     
                                                    Class A common stock received by a Combined      
                                                    shareholder and a Lifeline shareholder will be   
                                                    the same as the basis of the stock surrendered in
                                                    exchange therefor.                               

                                               Consummation of each of the Combined Exchange and the 
                                               Lifeline Exchange is conditioned upon receipt of an   
                                               opinion of counsel substantially to such effect.      

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                                           However, a ruling from the Internal Revenue Service is  
                                           not being sought in connection with the Combined        
                                           Exchange or the Lifeline Exchange. The opinions of      
                                           counsel are subject to certain assumptions and          
                                           qualifications and are not binding on the Internal      
                                           Revenue Service. If the Combined Exchange or the        
                                           Lifeline Exchange were not to so qualify as a           
                                           reorganization, the non-qualifying exchange of shares   
                                           would be taxable. See "Certain Federal Income Tax       
                                           Consequences."                                          

TERMINATION AND AMENDMENT OF THE COMBINED  Either the Combined Exchange Agreement or the Lifeline  
AND LIFELINE EXCHANGE AGREEMENTS           Exchange Agreement may be terminated by any party if    
                                           the Texas Commissioner of Insurance does not approve    
                                           the Combined Exchange and the Lifeline Exchange by      
                                           April 2, 2002. See "Proposed Exchanges-- Combined and   
                                           Lifeline--Other Conditions." The Exchange Agreements    
                                           may also be terminated at any time prior to becoming    
                                           effective:                                              

                                           o     by unanimous consent of the parties;              

                                           o     by any beneficiary of a condition precedent to the
                                                 Exchanges if the condition has not been met or    
                                                 waived;                                           

                                           o     by any party if a suit, action, or proceeding     
                                                 threatens to prohibit the Exchanges; or           

                                           o     by any party who discovers a material error in the
                                                 representations of another party.                 

OTHER MATTERS                              Combined - The Combined Board knows of no other         
                                           matters that will come before the Combined meeting. If  
                                           any additional matters come before the Combined         
                                           meeting, the proxies will be voted at the discretion    
                                           of the proxy holders.                                   

                                           Lifeline - The Lifeline Board knows of no other         
                                           matters that will come before the Lifeline meeting. If  
                                           any additional matters come before the Lifeline         
                                           meeting, the proxies will be voted at the discretion    
                                           of the proxy holders.                                   

FORWARD-LOOKING STATEMENTS                 Certain statements contained or incorporated by         
                                           reference in this proxy statement-prospectus relate to  
                                           future matters which are qualified in certain           
                                           respects. See "Forward-Looking Statements," "Available  
                                           Information" and "Incorporation of Documents by         
                                           Reference."                                             

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 SUMMARY SELECTED FINANCIAL DATA

       The tables below set forth in summary certain selected financial data
of Citizens, Combined and Lifeline.                                             

       Citizens financial data at or for the nine months ended September 30,
2001 and 2000 is derived from the unaudited consolidated financial statements of
Citizens, Inc. and subsidiaries included elsewhere or incorporated by reference 
in this prospectus. Citizens financial data at or for the years ended December  
31, 1996 through 2000 is derived from audited consolidated financial statements 
of Citizens, Inc. and subsidiaries included elsewhere or incorporated by        
reference in this prospectus. The data for Citizens is presented in conformity  
with U.S. Generally Accepted Accounting Principles ("GAAP").                    

Combined and Lifeline financial information presented below in
accordance with GAAP is derived from the unaudited financial statements of each 
respective company. Additional Combined and Lifeline financial data on a GAAP   
basis is not readily available and Combined and Lifeline management believe that
development of additional GAAP basis financial information would represent a    
significant burden and cost to the companies. Combined and Lifeline prepare     
financial statements in the normal course of business on the basis of accounting
principles prescribed or permitted by the Texas Department of Insurance         
(statutory basis), which basis differs from GAAP. A description of the more     
significant differences between GAAP and Statutory basis financial data of      
Combined and Lifeline is presented below. Combined and Lifeline's selected      
statutory financial data at or for the nine months ended September 30, 2001 and 
2000 is derived from the unaudited financial statements of Combined and         
Lifeline. Combined and Lifeline statutory financial data at or for the years    
ended December 31, 1996 through 2000 is derived from audited financial          
statements of Combined and Lifeline. Combined and Lifeline's financial          
information presented elsewhere in this prospectus is presented on a Statutory  
basis and should be read in conjunction with the description below of           
differences between Statutory basis financial data and financial data presented 
in accordance with GAAP.                                                        

CITIZENS, INC.
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]


                             At or for the Nine Months                        At or for the Year Ended                       
                               Ended September 30,                                  December 31,                             
                            --------------------------  ---------------------------------------------------------------------
                               2001           2000         2000           1999         1998            1997            1996  
                            ------------  ------------  ------------  ------------  ------------   ------------  ------------
                                                                                                                             
Revenues                    $     49,418  $     48,667  $     66,678  $     71,877  $     72,685   $     65,027  $     63,822
Net income (loss)                  2,464           362         2,053         1,271        (6,721)         3,426         2,214
Basis and diluted earnings                                                                                                   
  (loss) per share                                 .10           .01           .08           .05           (.27)          .10
Total assets                     287,195       261,556       267,842       255,485       253,384        249,519       218,277
Total liabilities                204,222       187,719       190,529       183,218       178,480        169,938       151,394
Total shareholders' equity        82,973        73,837        77,313        72,267        74,904         79,581        66,883
Book value per share                3.30          2.94          3.08          2.88          3.06           3.33          2.89

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COMBINED UNDERWRITERS LIFE INSURANCE COMPANY
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]


                          At or for the Nine Months                       At or for the Year Ended              
                             Ended September 30,                                 December 31,                   
                          -------------------------    ---------------------------------------------------------
                              2001          2000           2000          1999       1998       1997       1996  
                          ------------   ------------  ------------    --------   --------   --------   --------
                                                                                                                
Revenues                           (a)            (a)  $     15,677         (a)        (a)        (a)        (a)
Net loss                           (a)            (a)           (69)        (a)        (a)        (a)        (a)
Net loss per share                 (a)            (a)                      (.07)       (a)        (a)        (a)
Total assets                       (a)            (a)        24,901    $ 24,090        (a)        (a)        (a)
Total liabilities                  (a)            (a)        18,603      17,703        (a)        (a)        (a)
Total shareholders'                                                                                             
   equity                          (a)            (a)         6,298       6,387        (a)        (a)        (a)
Book value per share               (a)            (a)          6.30        6.39        (a)        (a)        (a)
Fully diluted book value                                                                                        
   per share                       (a)            (a)          6.30        6.39        (a)        (a)        (a)

----------                                                                      

(a) Information not available on a GAAP basis.                                  

LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]


                           At or for the Nine Months                    At or for the Year Ended               
                              Ended September 30,                              December 31,                    
                          ---------------------------  --------------------------------------------------------
                              2001           2000          2000         1999       1998       1997      1996   
                          ------------   ------------  ------------   --------   --------   --------   --------
                                                                                                               
Revenues                           (a)            (a)  $        838        (a)        (a)        (a)        (a)
Net income                         (a)            (a)           156        (a)        (a)        (a)        (a)
Net income per share               (a)            (a)                      .22        (a)        (a)        (a)
Total assets                       (a)            (a)         4,106   $  4,136        (a)        (a)        (a)
Total liabilities                  (a)            (a)           726        891        (a)        (a)        (a)
Total shareholders'                                                                                            
   equity                          (a)            (a)         3,380      3,245        (a)        (a)        (a)
Book value per share               (a)            (a)          4.83       4.64        (a)        (a)        (a)
Fully diluted book value                                                                                       
   per share                       (a)            (a)          4.83       4.64        (a)        (a)        (a)

----------                                                                      
(a) Information not available on a GAAP basis.                                  

       A reconciliation of Combined's and Lifeline's statutory basis surplus
to its GAAP basis shareholders' equity at December 31, 2000 and 1999 is as      
follows (an explanation of the reconciling items is summarized below):          

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Combined Underwriters Life Insurance Company
(in thousands)
 Reconciliation of Statutory Basis to GAAP Basis

                                                                [Download Table]


                                                  2000            1999      
                                               ------------    ------------ 
                                                                            
Statutory basis surplus, December 31           $      3,319    $      3,891 
Deferred acquisition costs (1)                        8,918           8,499 
Accident and health reserves (2)                     (6,851)         (6,389)
Deferred income taxes (3)                               827             430 
Life insurance reserves (2)                              18            (112)
Asset valuation and interest maintenance                                    
   reserves (4)                                          59              65 
Other                                                     8               3 
                                               ------------    ------------ 
GAAP basis shareholders' equity, December 31   $      6,298    $      6,387 
                                               ============    ============ 

Lifeline Underwriters Life Insurance Company
(in thousands)
 Reconciliation of Statutory Basis to GAAP Basis

                                                                [Download Table]


                                                  2000             1999     
                                               ------------    ------------ 
                                                                            
Statutory basis surplus, December 31           $      2,984    $      2,900 
Deferred acquisition costs (1)                          280             386 
Accident and health reserves (2)                       (208)           (260)
Life insurance reserves (2)                             424             285 
Deferred income taxes (3)                               (74)            (55)
Asset valuation and interest maintenance                                    
   reserves (4)                                          (8)              8 
Other                                                   (18)            (19)
                                               ------------    ------------ 
GAAP basis shareholders' equity, December 31   $      3,380    $      3,245 
                                               ============    ============ 

       A reconciliation of Combined's and Lifeline's statutory basis surplus
to its GAAP basis net income (loss) for the year ended December 31, 2000, is as 
follows (an explanation of the reconciling items is summarized below):          

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Combined Underwriters Life Insurance Company
(in thousands)
 Reconciliation of Statutory Basis to GAAP Basis Net Income (Loss)

                                                                [Download Table]


                                                       2000     
                                                   ------------ 
                                                                
Statutory basis net loss                           $       (569)
Capitalization of deferred acquisition costs (1)          3,382 
Amortization of deferred acquisition costs (1)           (2,963)
Increase in future policy benefit reserves (2)             (307)
Deferred income tax benefit (3)                             387 
Other                                                         1 
                                                   ------------ 
GAAP basis net loss                                $        (69)
                                                   ============ 

Lifeline Underwriters Life Insurance Company
(in thousands)
Reconciliation of Statutory Basis to GAAP Basis Net Income

                                                                [Download Table]


                                                       2000     
                                                   ------------ 
                                                                
Statutory basis net income                         $         85 
Capitalization of deferred acquisition costs (1)             95 
Amortization of deferred acquisition costs (1)             (201)
Decrease in future policy benefit reserves (2)              201 
Deferred income tax expense (3)                             (30)
Other                                                         6 
                                                   ------------ 
GAAP basis net income                              $        156 
                                                   ============ 

----------                                                                      

         The significant differences between Combined's and Lifeline's statutory
basis and GAAP basis financial statements are as follows:                       

(1)      The costs related to acquiring business such as commissions, premium   
        taxes, and other items, are charged to income in the year incurred and
         thus are not amortized over the periods benefitted, whereas the related
     premiums are taken into income on a pro rata basis over the periods
     covered by the policies for statutory accounting purposes. For GAAP
      accounting purposes, costs that vary and are directly related to the
       acquisition of new and renewal business are capitalized and amortized
over the revenue recognition period.                          

(2)      Reserves for life and accident and health insurance are based on       
        statutory mortality and interest requirements without consideration of
 withdrawals, which may differ from reserves based on reasonably
         conservative estimates of mortality, interest, and withdrawals for GAAP
accounting purposes.                                          

(3)      Deferred federal income taxes are not provided for in statutory        
accounting purposes for unrealized investment gains or losses,
         differences in policy reserves, and other temporary differences between
book and tax bases of existing asset and liabilities.         

(4)      An asset valuation reserve and an interest maintenance reserve are     
established for statutory accounting purposes.                

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        On March 16, 1998, the National Association of Insurance Commissioners
("NAIC") approved the codification of statutory accounting practices that was   
generally adopted by the Texas Department of Insurance. The codification will   
constitute the only source of "prescribed" statutory accounting practices and   
was effective January 1, 2001. The primary difference between the Texas statutes
and the codified rules involved the admission of 100% of all fixed assets for   
Texas domiciled companies. In NAIC codification, fixed assets are not admitted. 
Such is the case for Combined. As a result, Combined will not nonadmit          
approximately $70,000 in its 2001 statutory financial statements. In addition,  
Combined and Lifeline began to account for deferred income taxes during 2001 in 
accordance with the codification of statutory accounting principles. Upon       
adoption, Combined's surplus increased by $180,000 and the impact on Lifeline   
was insignificant.                                                              

COMBINED UNDERWRITERS LIFE INSURANCE COMPANY
 STATUTORY BASIS
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]


                            At or for the Nine Months                           At or for the Year Ended                         
                               Ended September 30,                                      December 31,                             
                           ---------------------------   ----------------------------------------------------------------------- 
                               2001          2000           2000             1999           1998            1997           1996  
                           ------------   ------------   ------------    ------------   ------------    ------------    -------- 
                                                                                                                                 
Revenues                   $     11,552   $     11,659   $     15,677    $     15,484         16,678          15,754      16,099 
Net income (loss)                   362           (811)          (569)          2,586         (1,704)           (635)       (656)
Net income (loss) per                                                                                                            
   share                                           .36           (.81)           (.57)          2.59            (.64)       (.66)
Total admitted assets            15,165         14,724         15,115          15,158         17,825          18,986      19,145 
Total liabilities                11,484         11,634         11,796          11,267         16,535          15,981      15,546 
Total capital and surplus         3,681          3,090          3,319           3,891          1,290           3,005       3,599 
Statutory book value per                                                                                                         
   share                           3.68           3.09           3.32            3.89           1.29            3.01        3.60 
Fully diluted statutory                                                                                                          
   book value per share            3.68           3.09           3.32            3.89           1.29            3.01        3.60 

LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY
 STATUTORY BASIS
(in thousands, except per share amounts)

                                                        [Enlarge/Download Table]


                             At or for the Nine Months                           At or for the Year Ended                        
                                Ended September 30,                                     December 31,                             
                           ------------------------------     ----------------------------------------------------------------   
                              2001              2000            2000          1999          1998          1997          1996     
                           ------------      ------------     --------      --------      --------      --------      --------   
                                                                                                                                 
Revenues                   $        770      $        620     $    829      $    957      $  1,054      $  1,096      $  1,095   
Net income                           70                 5           85           160           365           162            57   
Net income per share                                  .10(a)       .01(a)        .12(a)        .23(a)        .33(a)        .18(a)
Total admitted assets             3,971             3,806        3,861         3,782         3,579         3,178         3,011   
Total liabilities                   918               902          877           882           839           802           800   
Total capital and surplus         3,053             2,904        2,984         2,900         2,740         2,376         2,211   
Statutory book value per           4.36(a)           4.15(a)      4.26(a)       4.14(a)       4.98(a)       4.75(a)       4.42(a)
   share                                                                                                                         
Fully diluted statutory                                                                                                          
   book value per share            4.36(a)           4.15(a)      4.26(a)       4.14(a)       4.98(a)       4.75(a)       4.42(a)

----------                                                                      

(a)      Lifeline's issued and outstanding shares increased from 500,000 in 1996
       and 1997, to 550,000 in 1998 and finally to 700,000 in 1999, 2000 and
2001.                                                         

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RISK FACTORS

      You should consider carefully the risks described below in assessing
the Combined Exchange and the Lifeline Exchange and an investment in Citizens   
Class A common stock.                                                           

A SUBSTANTIAL NUMBER OF SHARES OF CLASS A COMMON STOCK HAVE BEEN REGISTERED FOR 
SALE BY EXISTING CITIZENS SHAREHOLDERS, WHICH COULD DEPRESS THE MARKET PRICE OF 
THE STOCK.                                                                      

       Sales of significant amounts of shares of Citizens Class A common
stock in the public market could depress the price of the stock. Further, even  
without actual sales, the prospect of significant amounts of shares being       
offered into the public market may depress the price of Class A common stock.   
There is an effective registration statement with the SEC permitting the public 
offer and sale by certain holders of Citizens Class A common stock, including   
Harold E. Riley, Chairman of the Board. Mr. Riley, as of December 31, 2001,     
owned 4,374,108 shares of Class A common stock or approximately 17.9% of        
Citizens outstanding Citizens Class A common stock.                             

LOSS OF THE SERVICES OF THE CITIZENS CHAIRMAN OF THE BOARD WOULD LIKELY HINDER  
FURTHER DEVELOPMENT OF THE OPERATING AND MARKETING PROGRAMS OF CITIZENS AND ITS 
STRATEGY FOR EXPANDING ITS BUSINESS.                                            

        Citizens relies heavily on the active participation of its Chairman of
the Board, Harold E. Riley, in connection with the development and execution of 
operating and marketing plans and strategy for expanding its business. For      
instance, in the past Citizens has expanded business significantly through the  
acquisition of other insurance companies. Mr. Riley's experience with mergers   
and acquisitions has been of considerable value in pursuing these opportunities.
Citizens anticipates that this expertise will continue to be of substantial     
value in connection with any future acquisitions of insurance companies. The    
loss of his services would likely have a significant adverse effect on Citizens 
in these respects. Citizens does not have an employment agreement with Mr.      
Riley.                                                                          

THE COMBINED EXCHANGE AND LIFELINE EXCHANGE HAVE BEEN STRUCTURED SO AS TO RESULT
IN A TAX-DEFERRED EXCHANGE OF YOUR STOCK FOR THE CITIZENS CLASS A COMMON STOCK. 
HOWEVER, THERE CAN BE NO ASSURANCES IN THIS REGARD, AND IF TAX-DEFERRED         
TREATMENT WERE TO BE DENIED, YOU COULD OWE FEDERAL INCOME TAXES ON ANY GAIN     
DEEMED TO BE REALIZED BY YOU UPON THE EXCHANGE OF YOUR STOCK.                   

       The transactions contemplated by both the Combined Exchange Agreement
and the Lifeline Exchange Agreement are intended to be a tax-deferred exchange. 
However, neither Citizens, Combined nor Lifeline has obtained a ruling from the 
Internal Revenue Service concerning whether the Combined Exchange or the        
Lifeline Exchange will in fact be treated as a tax-deferred exchange. Combined  
and Lifeline will each, however, obtain an opinion of counsel which will support
the conclusions contained in this proxy statement-prospectus regarding the      
material federal income tax consequences of the Combined Exchange Agreement and 
the Lifeline Exchange Agreement and transactions contemplated thereby to its    
shareholders. You should understand that an opinion of counsel is not binding on
the Internal Revenue Service and the Internal Revenue Service could successfully
assert a contrary position. Also, the conditions and assumptions upon which     
counsel's opinion is qualified may not continue to exist and the laws or        
regulations affecting the material federal income tax consequences of the       
Combined Exchange and the Lifeline Exchange may change. In either event, the tax
aspects of the Combined Exchange and the Lifeline Exchange may be adversely     
affected, and such effect may be material. As a result, there can be no         
assurance                                                                       

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that the Combined Exchange or the Lifeline Exchange will be accorded the tax    
treatment intended and that you will realize the tax consequences described in  
this proxy statement-prospectus. See "Certain Federal Income Tax Consequences." 

HOLDERS OF CLASS A COMMON STOCK RECEIVED IN THE COMBINED EXCHANGE AND THE       
LIFELINE EXCHANGE WILL BE MINORITY STOCKHOLDERS. THESE MINORITY STOCKHOLDERS    
WILL NOT CONTROL CITIZENS, WILL HAVE A LIMITED ABILITY TO INFLUENCE CITIZENS'   
BUSINESS POLICIES AND CORPORATE ACTIONS, AND WILL NOT BE ABLE TO ELECT ANY      
DIRECTORS OF CITIZENS.                                                          

       It is difficult for minority stockholders of Citizens to elect any of
its directors or otherwise exert influence over its business. Citizens'         
outstanding Class B common stock elects a majority of the board of directors of 
Citizens. All of the Class B common stock is owned indirectly by Harold E.      
Riley, Chairman of the Board, through the Harold E. Riley Trust. Additionally,  
Mr. Riley is the largest Class A stockholder. Therefore, as a practical matter, 
Mr. Riley has effective control over significant corporate transactions.        
Additionally, cumulative voting of shares is not permitted by Citizens' articles
of incorporation. These factors would also make it more difficult and time      
consuming for a third party to acquire control of Citizens or to change the     
board of directors of Citizens.                                                 

ALMOST 80% OF CITIZENS' REVENUES COME FROM OVERSEAS. THIS INVOLVES RISKS        
ASSOCIATED WITH BUSINESS IN THIRD WORLD COUNTRIES, SUCH AS MIGHT RESULT FROM    
POLITICAL OR ECONOMIC INSTABILITY, HUMAN RIGHTS VIOLATIONS OR NEW LAWS OR       
REGULATIONS.                                                                    

    There is a risk of loss of a significant portion of sales overseas
should adverse events occur in the countries from which Citizens receives       
applications. Almost 80% of Citizens' revenues come from Latin America. Its     
international operations consist of issuance of ordinary whole-life insurance   
policies around the world. These policies have an average face amount of $70,000
and are marketed by independent marketing firms primarily to heads of households
in the top 3% to 5% income bracket around the world.                            

YOU SHOULD NOT ANTICIPATE RECEIVING CASH DIVIDENDS ON YOUR CITIZENS CLASS A     
COMMON STOCK, BECAUSE CITIZENS HAS NOT PAID ANY CASH DIVIDENDS AND DOES NOT     
ANTICIPATE DOING SO IN THE FORESEEABLE FUTURE.                                  

    To date Citizens has not paid cash dividends on its Class A common
stock or Class B common stock. It is Citizens' policy to retain earnings for use
in the operations and expansion of its business.                                

POLICY LAPSES IN EXCESS OF THOSE ACTUARIALLY ANTICIPATED WOULD HAVE A NEGATIVE  
IMPACT ON CITIZENS' FINANCIAL PERFORMANCE.                                      

 The profitability of Citizens could be reduced if its lapse and
surrender rate were to exceed the assumptions upon which it priced its insurance
policies. Policy sales costs are deferred and recognized over the life of a     
policy. Excess policy lapses, however, cause the immediate expensing or         
amortizing of deferred policy sales costs.                                      

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CITIZENS OPERATES IN A HIGHLY COMPETITIVE, MATURE INDUSTRY, WHICH COULD LIMIT   
ITS ABILITY TO GAIN OR MAINTAIN ITS POSITION IN THE INDUSTRY.                   

         Citizens competes with 1,500 to 2,000 other life insurance companies in
the United States, some of which Citizens also competes with internationally.   
The life insurance business is highly competitive. This is in part because it is
a mature industry in the United States which, in recent years, has experienced  
no growth in life insurance sales. Competition has also increased because the   
life insurance industry is consolidating, with larger, more efficient           
organizations emerging from consolidation. Furthermore, mutual insurance        
companies are converting to stock ownership, which should give them greater     
access to capital markets, resulting in greater competition with respect to     
corporate finance as well. Additionally, legislation became effective in 2000   
permitting commercial banks, insurance companies and investment banks to        
combine. This law permits, for instance, a commercial bank to acquire or form an
insurance company. These factors have increased competitive pressures in        
general.                                                                        

        Many life insurance companies have greater financial resources, longer
business histories, and more diversified lines of insurance coverage than       
Citizens has. These companies also generally have larger sales forces. Citizens 
also faces competition from companies operating in foreign countries and        
marketing in person as well as with direct mail sales campaigns. Although       
Citizens may be at a competitive disadvantage to these entities, it believes    
that its products are competitive in the marketplace.                           

  Citizens' international marketing plan stresses making available
dollar-denominated life insurance products to high net worth individuals        
residing around the world. Citizens experiences competition primarily from the  
following sources around the world:                                             

            LOCALLY OPERATED COMPANIES WITH LOCAL CURRENCY POLICIES.
        Citizens competes with companies formed and operated in the country in
      which the insureds reside. Generally, these companies are subject to
   risks of currency fluctuations, and use mortality tables based on
       experience of the local population as a whole. These mortality tables
    are typically based on significantly shorter life spans than those
       Citizens uses. As a result, the economic return of policies issued by
   locally operated companies is more uncertain than for U.S. dollar
       policies, such as Citizens issues. Also, as a result of the foregoing
         factors, the statistical cost of insurance for these companies tends to
be higher than Citizens.                                      

            FOREIGN OPERATED COMPANIES WITH LOCAL CURRENCY POLICIES.
         Another group of competitors consists of companies which are foreign to
the countries in which the policies are sold but use the local
        currencies of those countries. Local currency policies entail risks of
         uncertainty due to local currency fluctuations as well as the perceived
     instability and weakness of local currencies. Citizens has observed
    that local currency policies, whether issued by foreign or locally
   operated companies, tend to focus on universal life insurance and
annuities instead of whole life insurance as Citizens does.   

                  FOREIGN OPERATED COMPANIES WITH U.S. DOLLAR POLICIES. Citizens
       also faces direct competition from companies that operate in the same
 manner as Citizens does. Citizens competes using its history of
performance and its products.                                 

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         Citizens' ability to compete is dependent upon, among other things, its
ability:                                                                        

o        to market its insurance products;                    

o        to develop competitive and profitable products; and  

o        its ability to maintain low unit costs.              

TAX LAW CHANGES COULD REDUCE CERTAIN COMPETITIVE ADVANTAGES WHICH CITIZENS LIFE 
INSURANCE PRODUCTS MAY HAVE OVER NON-INSURANCE PRODUCTS.                        

        Under the Internal Revenue Code, income taxes payable by policyholders
on investment earnings are deferred during the accumulation period of certain   
life insurance and annuity products. This favorable tax treatment may give      
certain Citizens products a competitive advantage over other non-insurance      
products. To the extent that the Internal Revenue Code is revised to reduce the 
tax-deferred status of life insurance and annuity products, or to increase the  
tax-deferred status of competing products, all life insurance companies,        
including those of Citizens, would be adversely affected with respect to their  
ability to sell products. Also, depending on grandfathering provisions, the     
surrenders of existing annuity contracts and life insurance policies might      
increase. In addition, life insurance products are often used to fund estate tax
obligations. Legislation was enacted in June 2001 under which the estate tax    
will be repealed during the year 2010, but in the absence of interim legislation
extending the repeal, it will expire at the end of that year. There may be      
interim legislation which will modify or do away with this estate tax repeal or 
otherwise modify the estate tax. If the estate tax is eliminated, the demand for
certain life insurance products would be adversely affected because these       
products are sold to pay claims outside of the insured's estate. Citizens cannot
predict what future tax initiatives may be proposed with respect to the estate  
tax or other taxes which may affect Citizens, although Citizens' international  
clients are generally not subject to U.S. income taxes.                         

THE INSURANCE INDUSTRY IS HIGHLY REGULATED AND CITIZENS' ACTIVITIES ARE         
RESTRICTED AS A RESULT. CITIZENS EXPENDS SUBSTANTIAL AMOUNTS OF TIME AND INCURS 
SUBSTANTIAL EXPENSES IN CONNECTION WITH COMPLYING WITH APPLICABLE REGULATIONS,  
AND CITIZENS IS SUBJECT TO THE RISK THAT MORE BURDENSOME REGULATIONS COULD BE   
IMPOSED ON IT.                                                                  

       Compliance with regulation in the United States by Citizens is costly
and time consuming. Insurance companies in the U.S. are subject to extensive    
regulation in the states where they do business. This regulation primarily      
protects policyholders rather than stockholders. The regulations require:       

 o        prior approval of acquisitions of insurance companies;

      o        certain solvency standards; licensing of insurers and their
agents; investment limitations;             

   o        deposits of securities for the benefit of policyholders;

o        approval of policy forms and premium rates;          

o        triannual examinations; and                          

    o        reserves for unearned premiums, losses and other matters.

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Citizens is subject to this regulation in each state in the U.S. in which it is 
licensed to do business. This regulation involves additional costs and restricts
operations. Citizens cannot predict the form of any future regulatory           
initiatives.                                                                    

       Citizens is regulated by the Colorado Division of Insurance under the
Colorado Insurance Holding Company Act. Certain "extraordinary" intercorporate  
transfers of assets and dividend payments from its life insurance subsidiaries  
require prior approval by the Colorado Insurance Commissioner. Citizens also    
files detailed annual reports with the Colorado Division of Insurance and all of
the states in which it is licensed. The business and accounts of its life       
insurance subsidiaries are subject to examination by the Colorado Division of   
Insurance, as well as inquiries and follow up, including investigations, of the 
various insurance regulatory authorities of the states in which Citizens'       
insurance subsidiaries are licensed.                                            

   The principal insurance subsidiary of Citizens is qualified to do
business as an insurance company only in the U.S. It does not have any assets or
employees in foreign countries. In connection with business from foreign        
countries, Citizens only accepts applications at its main office. In addition,  
Citizens requires premium payments to be in U.S. dollars, which may include     
checks drawn on U.S. banks. Citizens is not currently subject to regulation in  
the various foreign countries from which it receives applications for insurance.
Although Citizens provides insurance to foreign citizens, independent marketing 
firms, rather than employees of Citizens, submit the applications. In this way  
Citizens avoids conducting business in the foreign countries. However, Citizens 
is unable to predict if foreign regulation will be implemented and, if so, the  
effect of any such regulation on Citizens' business.                            

FLUCTUATING INTEREST RATES COULD REDUCE CITIZENS' PROFITABILITY.                

        Rapid interest rate changes can result in increases in the lapse rates
of policies in-force and hamper an insurance company's ability to achieve a     
profit. Citizens does not issue interest-sensitive or universal life insurance  
policies and it has only a small amount of annuity business. Citizens does,     
however, have an investment portfolio that would likely be adversely affected in
the event of material increases in interest rates. An insurance company's       
profitability depends, in large part, on investing premiums and policy reserves 
at a higher interest rate than the returns distributed to existing policies.    

CITIZENS' INVESTMENTS ARE SUBJECT TO RISKS OF DEFAULT AND REDUCTIONS IN MARKET  
VALUES.                                                                         

   The invested assets of Citizens are subject to customary risks of
defaults and changes in market values. Factors that may affect the overall      
default rate on, and market value of, the invested assets of Citizens include   
interest rate levels, financial market performance, and general economic        
conditions.                                                                     

THERE IS A RISK THAT CITIZENS MAY NOT CONTINUE ITS PAST STRATEGY OF ACQUIRING   
OTHER U.S. LIFE INSURANCE COMPANIES, AND THAT IT MAY NOT REALIZE IMPROVEMENTS TO
ITS FINANCIAL RESULTS AS A RESULT OF PAST AND FUTURE ACQUISITIONS.              

      Over the past several years, Citizens has acquired a number of small
U.S. life insurance companies. Citizens' objective in pursuing this acquisition 
strategy has been to increase the size of the U.S. segment of its business,     
improve its competitive position and increase its earnings, in part by allowing 
it to realize certain operating efficiencies associated with economies of scale.
However, there can be no assurance that                                         

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suitable acquisitions, presenting opportunities for continued growth and        
operating efficiencies, will continue to be available to Citizens, or that it   
will realize the anticipated financial results from its acquisitions.           

REINSURERS WITH WHICH CITIZENS DOES BUSINESS MAY NOT HONOR THEIR OBLIGATIONS,   
LEAVING CITIZENS LIABLE FOR THE REINSURED COVERAGE, AND CITIZENS' REINSURERS    
COULD INCREASE THEIR PREMIUM RATES.                                             

     Citizens obtains a large amount of reinsurance from other insurance
companies. However, Citizens remains liable with respect to ceded insurance     
should any reinsurer fail to meet the obligations assumed by it. The cost of    
reinsurance is, in some cases, reflected in its premium rates. Under certain    
reinsurance agreements, the reinsurer may increase the rate it charges Citizens 
for the reinsurance. However, if the cost of reinsurance were to increase with  
respect to policies for which Citizens has guaranteed the rates, Citizens could 
be adversely affected.                                                          

CITIZENS IS SUBJECT TO A RISK OF LOSING CASH BALANCES THAT ARE NOT INSURED.     

  Citizens maintains cash balances in one bank, J.P. Morgan Chase,
Austin, Texas, that are significantly in excess of Federal Deposit Insurance    
Corporation coverage. If this bank were to fail, Citizens would likely lose a   
substantial amount of its cash. Citizens monitors the solvency of this bank and 
does not believe a material risk of loss exists because this bank is            
substantially above the federally mandated levels of capital and liquidity.     

INCREASED UNCERTAINTY DUE TO TERRORIST ATTACKS AND WAR.                         

    Terrorists attacks, such as the attacks that occurred in New York,
Pennsylvania and Washington, D.C., on September 11, 2001, and current and future
war risks may adversely impact the results of operation, financial condition,   
ability to raise capital or future growth of Citizens. The impact that the      
terrorist attacks of September 11, 2001, may have on the life insurance industry
in general, and on Citizens in particular, is not known at this time. Citizens  
does not conduct business in New York, Pennsylvania or Washington, D.C. and has 
not received any claims as a result of the terrorist acts. Uncertainty          
surrounding retaliatory military strikes or a sustained military campaign may   
impact the operations of Citizens in unpredictable ways, including general      
disruptions to commerce and the possibility that financial infrastructure       
facilities could be direct targets of, or indirect casualties of, an act of     
terror or war. In addition, war or the risk of war may also have an adverse     
effect on national and global economies. A lower level of economic activity     
could result in a decline in the use of life and accidental health insurance    
services and could increase lapse ratios of insurance in-force.                 

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 SPECIAL MEETINGS OF COMBINED AND LIFELINE

Date, Time and Place of Meetings

COMBINED SPECIAL MEETING                                                        

     A special meeting of Combined shareholders will be held on Tuesday,
March 19, 2002 at 10:00 a.m., Central Standard Time, at 307 North Glenwood      
Boulevard, Tyler, Texas.                                                        

LIFELINE SPECIAL MEETING                                                        

     A special meeting of Lifeline shareholders will be held on Tuesday,
March 19, 2002 at 11:00 a.m., Central Standard Time, at 307 North Glenwood      
Boulevard, Tyler, Texas.                                                        

BUSINESS TO BE TRANSACTED AT THE SPECIAL MEETINGS                               

        This proxy statement-prospectus was mailed to Combined shareholders on
or about February 14, 2002 to solicit proxies to vote for the exchange of       
Combined common stock for Class A common stock of Citizens. This proxy          
statement-prospectus was mailed to Lifeline shareholders on or about February   
14, 2002 to solicit proxies to vote for the exchange of Lifeline common stock   
for Class A common stock of Citizens.                                           

      As of the date of this proxy statement-prospectus, neither Citizens,
Combined nor Lifeline are aware of other business that will come before the     
Combined special meeting or the Lifeline special meeting. Should any other      
matter requiring a vote of shareholders arise, the proxies named in the enclosed
forms of proxy will vote the shares in their discretion with respect to any such
matter.                                                                         

VOTING SECURITIES                                                               

         COMBINED. Only Combined shareholders of record at the close of business
on February 11, 2002 will be entitled to vote at the Combined special meeting.  
On that date, there were issued and outstanding 1,000,000 shares of Combined    
common stock. Each share of Combined common stock is entitled to one vote per   
share with respect to the Combined Exchange. The affirmative vote of two-thirds 
of the outstanding common stock of Combined is necessary to approve the Combined
Exchange in favor of the Combined Exchange. Walden P. "Red" Little, Chairman of 
the Board of Combined, and Regina Little Rooney, a director and significant     
shareholder of Combined, who have an aggregate ownership of approximately 92.6% 
of the shares of Combined common stock, have indicated that they intend to vote 
for the Combined Exchange. This vote will virtually assure that the Combined    
Exchange will occur absent unfulfilled conditions to complete the Combined      
Exchange.                                                                       

         LIFELINE. Only Lifeline shareholders of record at the close of business
on February 11, 2002 will be entitled to vote at the Lifeline special meeting.  
On that date, there were issued and outstanding 700,000 shares of Lifeline      
common stock. Each share of common stock is entitled to one vote per share with 
respect to the Lifeline Exchange. The affirmative vote of two-thirds of the     
outstanding common stock of Lifeline is necessary to approve the Lifeline       
Exchange. Walden P. "Red" Little, the majority shareholder of Lifeline, and     
Regina Little Rooney, a significant shareholder of Lifeline, who have an        
aggregate ownership of                                                          

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approximately 85.8% of the shares of Lifeline common stock, have indicated that 
they intend to vote for the Lifeline Exchange. This vote will virtually assure  
that the Lifeline Exchange will occur absent unfulfilled conditions to complete 
the Lifeline Exchange.                                                          

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF - COMBINED                      

        The following table sets forth, as of February 11, 2002, the shares of
Combined common stock (i) beneficially owned by each director and executive     
officer, (ii) for all directors and executive officers as a group, and (iii)    
each person who is known to Combined to be the beneficial owner of more than 5% 
of the Combined stock, its only class of voting securities.                     

                                                                [Download Table]

Name and Address                    Nature and Amount                 Percent 
of Beneficial Owner                  of Ownership(1)                  of Class
-------------------                 -----------------                 --------
                                                                              

Walden P. "Red" Little                  781,854(2)                     78.2%  
P.O. Box 2503                                                                 
Tyler, Texas 75710                                                            

Regina Little Rooney                    143,933(3)                     14.4%  
13155 CR 461                                                                  
Tyler, Texas 75708                                                            

Gary C. Cole                                   (4)                         (4)
Rte. 2, Box 1213                                                              
Bullard, Texas 75757                                                          

Betty M. Mitchell                              (4)                         (4)
1103 Russell Drive                                                            
Whitehouse, Texas 75791                                                       

Jimmie M. Procell                              (4)                         (4)
330 West Charnwood                                                            
Tyler, Texas 75701                                                            

Donald F. Bagozzi                            --                          --   
307 North Glenwood                                                            
Tyler, Texas 75702                                                            

Milo Reamy                                     (4)                         (4)
17966 Briarcrest                     ----------                    --------   
Flint, Texas 75762                                                            

All directors and                       925,858                        92.6%  
executive officers as a              ==========                    ========   
group (7 persons)                                                             

----------                                                                      

(1)      All ownership is direct unless otherwise noted.                        

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(2)      These shares are owned of record by the W.P. Little Family Limited     
Partnership of which Mr. Little is the general partner.       

(3)      Includes 58,510 shares over which Ms. Rooney serves as a trustee and   
  85,423 shares over which Ms. Rooney has sole or joint ownership.

(4)      Less than 1%.                                                          

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF - LIFELINE                      

        The following table sets forth, as of February 11, 2002, the shares of
Lifeline common stock (i) beneficially owned by each director and executive     
officer, (ii) for all directors and executive officers as a group, and (iii)    
each person who is known to Lifeline to be the beneficial owner of more than 5% 
of the Lifeline stock, its only class of voting securities.                     

                                                                [Download Table]


Name and Address           Nature and Amount  Percent   
of Beneficial Owner         of Ownership(1)   of Class  
-------------------        -----------------  --------  

                                                        
Walden P. "Red" Little(2)     450,950.125        64.4%  
P.O. Box 2503                                           
Tyler, Texas 75710                                      

Regina Little Rooney(3)        149,943.25(3)     21.4%  
13155 CR 461                                            
Tyler, Texas 75708                                      

Gary C. Cole                       18,004         2.5%  
Rte. 2, Box 1213                                        
Bullard, Texas 75757                                    

Betty M. Mitchell                        (4)         (4)
1103 Russell Drive                                      
Whitehouse, Texas 75791                                 

Robert C. Norman                         (4)         (4)
307 North Glenwood                                      
Tyler, Texas 75702                                      

Jimmie M. Procell                        (4)         (4)
330 West Charnwood                                      
Tyler, Texas 75701                                      

Donald F. Bagozzi                      --          --   
307 North Glenwood                                      
Tyler, Texas 75702                                      

Milo Reamy                               (4)         (4)
17966 Briarcrest                                        
Flint, Texas 75762                                      

Tommy Rowell                           --          --   
307 North Glenwood           ------------     -------   
Tyler, Texas 75701                                      

All directors and               24,899.62         3.6%  
executive officers as a      ============     =======   
Group (7 persons)                                       


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----------                                                                      
(1)      All ownership is direct unless otherwise noted.                        

(2)      Mr. Little is the majority shareholder of Lifeline, but he does not    
serve as an officer or director of Lifeline.                  

(3)      Ms. Rooney does not serve as an officer or director of Lifeline.       
      Includes 20,973.5 shares over which Ms. Rooney serves as trustee and
      128,969.75 shares over which Ms. Rooney has sole or joint ownership.

(4)      Less than one percent.                                                 

REVOCABILITY OF PROXIES                                                         

         COMBINED - Any Combined proxy may be revoked before its exercise at the
Combined special meeting or any adjournment thereof by:                         

  o        giving written notice of revocation to the Secretary of
   Combined prior to the Combined special meeting;

      o        giving written notice of revocation to the Secretary at the
Combined special meeting; or                

o        signing and delivering a proxy bearing a later date. 

The presence of a shareholder at the Combined special meeting will not revoke   
his or her proxy. However, being present at the Combined special meeting allows 
a shareholder to revoke any prior proxy and to vote in person.                  

         LIFELINE - Any Lifeline proxy may be revoked before its exercise at the
Lifeline special meeting or any adjournment thereof by:                         

  o        giving written notice of revocation to the Secretary of
   Lifeline prior to the Lifeline special meeting;

      o        giving written notice of revocation to the Secretary at the
Lifeline special meeting; or                

o        signing and delivering a proxy bearing a later date. 

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The presence of a shareholder at the Lifeline special meeting will not revoke   
his or her proxy. However, being present at the Lifeline special meeting allows 
a shareholder to revoke any prior proxy and to vote in person.                  

PROXY SOLICITATION                                                              

         Combined and Lifeline will pay the costs of soliciting their respective
proxies. Officers and employees of Combined and Lifeline may solicit proxies by 
telephone and personally, in addition to solicitation by mail. These persons    
will receive their regular salaries but no special compensation for soliciting  
proxies. Because no shares of Combined or Lifeline are held by brokers, nominees
or other fiduciaries, neither Combined nor Lifeline will reimburse brokers,     
custodians, nominees or other fiduciaries for their charges and expenses in     
forwarding materials to beneficial owners of shares.                            

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PROPOSED EXCHANGES - COMBINED AND LIFELINE

BACKGROUND AND REASONS - COMBINED AND LIFELINE                                  

      In early July 2001, the Chairman of the Board of Citizens, Harold E.
Riley, called Walden P. "Red" Little, Chairman of the Board and Chief Executive 
Officer of Combined and the controlling shareholder of Combined and Lifeline.   
The purpose of Mr. Riley's call was to discuss whether Combined and Lifeline    
would be interested in affiliating with Citizens. Mr. Riley had been acquainted 
with Mr. Little for more than 30 years through insurance industry meetings and  
gatherings. In the call, Mr. Riley and Mr. Little discussed in general the      
nature the business of each of Citizens, Combined and Lifeline, and whether     
Combined and Lifeline would consider becoming part of the Citizens organization.
A meeting date of July 18, 2001, was scheduled by Messrs. Riley and Little to   
continue the discussions in person.                                             

   At the July 18th meeting, Mr. Riley met with Mr. Little in Tyler,
Texas. The parties discussed whether Combined and Lifeline could be acquired by 
Citizens and the general nature of any acquisition transaction. Gary Cole,      
President of both Combined and Lifeline, attended the July 18th meeting as did  
Donna Smith, a former controller and treasurer of Combined and Lifeline. At the 
July 18th meeting, Mr. Riley set forth a preliminary structure under which      
Citizens would acquire the stock of both Combined and Lifeline. The parties took
the issues discussed at the meeting under consideration. Another meeting between
the parties occurred in Tyler, Texas, on August 9, 2001. On August 15, 2001,    
another meeting, occurred with Messrs. Little and Cole and Ms. Smith traveling  
to the offices of Citizens in Austin, Texas, to meet with Mr. Riley and several 
executive officers of Citizens. After the August 15th meeting, the parties began
circulating drafts of acquisition contracts. On August 28, 2001, Mr. Riley again
met with Messrs. Little and Cole and Ms. Smith in Tyler, Texas. The parties     
further discussed the structure, amount and timing of an acquisition of Combined
and Lifeline. On September 19, 2001, Messrs. Little, Cole, Riley, Rick Riley,   
Vice Chairman of Citizens, and Mark A. Oliver, President of Citizens, met for   
several hours at the offices of the attorney for Combined and Lifeline to       
discuss the proposed acquisition transactions. After revisions to the contracts 
were made and after further discussions among the parties, the share exchange   
ratios were finalized. For the next several weeks the parties worked on         
revisions to the drafts of the exchange agreements. Citizens, Combined and      
Lifeline executed Exchange Agreements on November 20, 2001, subject to the      
various conditions, including approval by the respective shareholders of        
Combined and Lifeline.                                                          

         The valuation of the companies to the proposed transactions centered on
a share exchange ratio. Management of Citizens, Combined and Lifeline recognized
that, due to the lack of any ascertainable market for the shares of Combined and
Lifeline, an alternative valuation would be necessary. In contrast, the American
Stock Exchange market for the shares of Citizens permitted the parties to select
a fair market valuation for Citizens.                                           

COMBINED                                                      

       Management of Citizens and Messrs. Little and Cole reviewed carefully
the assets and liabilities of Combined, and it was concluded that determination 
of the exchange ratio value for Combined should use a statutory book value      
basis, adjusted to reflect values which are standard within the life insurance  
industry. The capital and surplus of Combined was reviewed as well as its annual
insurance premium revenue valued at multiple factors depending upon the         
profitability of the products and paid-up policy reserves. State                

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licenses, agency force, and non-admitted capital and surplus assets of life     
insurance subsidiaries were reviewed. These values are summarized in the table  
below.                                                                          

                                                                [Download Table]


                                                                   Combined  
                                                                 ------------

                                                                             
Capital and surplus                                              $  3,319,000

Asset valuation reserve                                                51,000

Value of building over carrying value                                  50,000

Multiple of annual premium revenue of life                                   
insurance in-force                                                  3,144,000

Accident and health premium multiple                                  618,443

Paid-up policy reserves and future dividends reserves                   9,933

State licenses                                                        550,000

Agency force (new life premium written)                               900,000
                                                                 ------------

Combined adjusted book value                                        8,642,376
                                                                 ============

Number of shares issued and outstanding                             1,000,000

Combined total adjusted book value per share                     $       8.64

       The resulting values have been reviewed carefully by Citizens and Mr.
Little and the resulting total adjusted book value per share was reviewed by the
Combined Board. Also discussed at length were how payment would be made to      
Combined shareholders, and the tax consequences of the Combined Exchange. The   
Board of Combined agreed to the final total adjusted book value per share.      

LIFELINE                                                      

       Management of Citizens and Messrs. Little and Cole reviewed carefully
the assets and liabilities of Lifeline, and it was concluded that determination 
of the exchange ratio value for Lifeline should use a statutory book value      
basis, adjusted to reflect values which are standard within the life insurance  
industry.                                                                       
The capital and surplus of Lifeline was reviewed as well as its annual        
insurance premium revenue valued at multiple factors depending upon the         
profitability of the products and paid-up policy reserves. State licenses,      
agency force, and non-admitted capital and surplus assets of life insurance     
subsidiaries were reviewed. These values are summarized in the table below.     

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                                                                [Download Table]


                                                                   Lifeline  
                                                                 ------------
                                                                             
Capital and surplus                                              $  2,984,000

Asset valuation and interest maintenance reserve                        9,000

Multiple of annual premium revenue of life                                   
insurance in-force                                                    109,501

Accident and health premium multiple                                  129,686

Paid-up policy reserves and future dividends reserves                  11,891

State licenses                                                        100,000

Agency force (new life premium written)                               160,000
                                                                 ------------

Combined adjusted book value                                        3,504,078
                                                                 ============

Number of shares issued and outstanding                               700,000

Lifeline total adjusted book value per share                     $       5.00

         The resulting values were reviewed carefully by Citizens and Mr. Little
and the resulting total adjusted book value per share was reviewed by the       
Lifeline Board. Also discussed at length were how payment would be made to      
Lifeline shareholders, and the tax consequences of the Lifeline Exchange. The   
Board of Lifeline agreed to the final total adjusted book value per share.      

RECOMMENDATION OF COMBINED'S BOARD OF DIRECTORS                                 

     The Combined Board of Directors RECOMMENDS APPROVAL OF THE COMBINED
EXCHANGE. The Board believes that the exchange ratio to the Combined            
shareholders is fair. The management and Board of Directors of Combined, after  
careful study and evaluation of the economic, financial, legal and market       
factors, also believe that the Combined Exchange could provide Citizens with    
increased opportunity for profitable expansion of its business, which in turn   
should benefit Combined shareholders who become Citizens shareholders.          

 The terms of the Combined Exchange Agreement were the result of
arm's-length negotiations between Citizens and Combined over a several month    
period, with a significant effort by Combined management with assistance of     
legal counsel. Among the factors considered by the Boards of Directors of       
Combined in deciding to approve and recommend the Combined Exchange were:       

       1.       The terms and conditions of the Combined Exchange Agreement,
                 which the Combined Board and management believes results in a
fair price for the Combined shares;         

       2.       The financial condition, business assets and liabilities and
management of Citizens;                     

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3.       The financial and business prospects of Citizens;    

      4.       The increased liquidity to Combined shareholders including:

          o        the market on the American Stock Exchange for
    Citizens Class A common stock;

              o        the lack of market for the Combined common stock;

              o        the demographics of Combined shareholder base and
                      their expressed concerns regarding liquidity and
estate settlement;        

                  o        the ability to sell Citizens Class A common stock for
                         cash to satisfy obligations of a decedent's estate;

      5.       Economies of scale available in the event of combination of
                  the companies including, in particular, reduction in the total
number of regulatory filings;               

      6.       The business, operations, financial condition, earnings and
prospects of Combined;                      

         7.       The expectation that the Combined Exchange will generally be a
                  tax-deferred transaction to Combined and its shareholders (see
 "Certain Federal Income Tax Considerations");

         8.       The growth and liquidity potential to Combined shareholders as
               future holders of Citizens Class A common stock compared to
              the historical growth and liquidity of the Combined common
stock;                                      

9.       The current and prospective economic environment and 
             competitive constraints facing small insurance companies,
including Combined;                         

      10.      The Combined Board of Directors' evaluation of the risks to
             consummation of the Combined Exchange, including the risk
                 associated with obtaining necessary regulatory approvals; and

        11.      The possible alternatives to the Combined Exchange, the range
           of possible values to the Combined shareholders of such
           alternatives, and the timing and likelihood of actually
               receiving, and risks and rewards associated with seeking to
obtain, those values.                       

      The Combined Board did not assign any specific or relative weight to
these factors in its consideration. All of the above factors contributed in     
determining the consideration received.                                         

    The exchange of Combined shares solely for Citizens shares is also
intended to be a tax-deferred exchange, thereby giving Combined shareholders the
equity participation in Citizens without initially incurring taxes. See "Certain
Federal Income Tax Consequences."                                               

     The Combined Board of Directors made this determination without the
assistance or cost of a financial adviser for a so-called "fairness opinion."   
The Combined Board believes that it reviewed in sufficient depth the respective 
conditions of Combined, Citizens and their subsidiaries as well as the terms of 
the Combined Exchange Agreement.                                                

RECOMMENDATION OF LIFELINE'S BOARD OF DIRECTORS                                 

     The Lifeline Board of Directors RECOMMENDS APPROVAL OF THE LIFELINE
EXCHANGE. The Board believes that the exchange ratio to the Lifeline            
shareholders is fair. The management and Board of Directors of Lifeline, after  
careful study and evaluation of the economic, financial, legal and market       
factors, also believe that the Lifeline Exchange could provide Citizens with    
increased opportunity for profitable expansion of its business, which in turn   
should benefit Lifeline shareholders who become Citizens shareholders.          

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 The terms of the Lifeline Exchange Agreement were the result of
arm's-length negotiations between Citizens and management of Lifeline over a    
several month period, with a significant effort by Lifeline management with     
assistance of legal counsel. In addition to the factors regarding Lifeline      
discussed above under "--Recommendation of Combined's Board of Directors," other
factors considered by the Boards of Directors of Lifeline in deciding to approve
and recommend the Lifeline Exchange were:                                       

       1.       The terms and conditions of the Lifeline Exchange Agreement,
                 which the Lifeline Board and management believes results in a
fair price for the Lifeline shares;         

      2.       The increased liquidity to Lifeline shareholders including:

          o        the market on the American Stock Exchange for
    Citizens Class A common stock;

              o        the lack of market for the Lifeline common stock;

              o        the demographics of Lifeline shareholder base and
                      their expressed concerns regarding liquidity and
estate settlement;        

                  o        the ability to sell Citizens Class A common stock for
                         cash to satisfy obligations of a decedent's estate;

      3.       Economies of scale available in the event of combination of
                  the companies including, in particular, reduction in the total
number of regulatory filings;               

       4.       Lifeline's Board of Directors familiarity with and review of
               the business, operations, financial condition, earnings and
prospects of Lifeline;                      

         5.       The expectation that the Lifeline Exchange will generally be a
                  tax-deferred transaction to Lifeline and its shareholders (see
 "Certain Federal Income Tax Considerations");

         6.       The growth and liquidity potential to Lifeline shareholders as
               future holders of Citizens Class A common stock compared to
              the historical growth and liquidity of the Lifeline common
stock;                                      

7.       The current and prospective economic environment and 
             competitive constraints facing small insurance companies,
including Lifeline;                         

      8.       The Lifeline Board of Directors' evaluation of the risks to
             consummation of the Lifeline Exchange, including the risk
                 associated with obtaining necessary regulatory approvals; and

        9.       The possible alternatives to the Lifeline Exchange, the range
           of possible values to the Lifeline shareholders of such
           alternatives, and the timing and likelihood of actually
               receiving, and risks and rewards associated with seeking to
obtain, those values.                       

      The Lifeline Board did not assign any specific or relative weight to
these factors in its consideration. All of the above factors contributed in     
determining the consideration received.                                         

 The Lifeline Board of Directors considers the Lifeline Exchange
particularly advantageous to Lifeline shareholders in that shareholders will    
receive a security which, in the opinion of the Lifeline Board, has the         
potential to achieve a greater growth and market value and which now has        
significantly greater market liquidity than the Lifeline common stock. The      
exchange of Lifeline shares for Citizens shares is also intended to be a        
tax-deferred exchange, thereby giving Lifeline shareholders the equity          
participation in Citizens without initially incurring taxes. See "Certain       
Federal Income Tax Consequences."                                               

     The Lifeline Board of Directors made this determination without the
assistance or cost of a financial adviser for a so-called "fairness opinion."   
The Lifeline Board believes that it reviewed in sufficient depth the respective 
conditions of Lifeline, Citizens and their subsidiaries as well as the terms of 
the Lifeline Exchange Agreement.                                                

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INTERESTS OF CERTAIN PERSONS IN THE COMBINED EXCHANGE AND THE LIFELINE EXCHANGE 

        In considering the recommendation of the Combined Board with regard to
the Combined Exchange Agreement and the recommendation of the Lifeline Board    
with regard to the Lifeline Exchange Agreement, Combined and Lifeline           
shareholders should be aware that the controlling shareholder of Combined and   
Lifeline, and an officer and director of Combined, Walden P. "Red" Little, as   
well as Regina Little Rooney, a significant shareholder of Combined and         
Lifeline, director of Combined and daughter of Mr. Little, have interests in    
both transactions that are in addition to the interests of Combined and Lifeline
shareholders generally. Upon effectiveness of the Combined Exchange and the     
Lifeline Exchange, both companies intends to enter into one overall marketing   
development allowance agreement with the Red Little Combined Agency, Inc., a    
Texas corporation wholly-owned by Mr. Little, under which the agency will be    
provided working capital to be used as a marketing development allowance and for
such other purposes as deemed necessary to strengthen and enhance the operations
of the agency. The purpose of this agreement is to provide such services as are 
reasonably required to preserve and increase the insurance business in-force on 
the books of Combined and Lifeline. Combined and/or Lifeline or their designees 
will pay to the agency $25,000 per month for 36 months or a total of $900,000.  
The agency is authorized to use the marketing development allowance to, among   
other things, make commission advance arrangements with producing agents of     
Combined and Lifeline, entertain current agents and recruit new agents, pay     
operational expenses of the agency, pay advertising costs that benefit the sales
efforts of Combined and Lifeline, provide the agency with transportation, office
equipment, and other expenses as necessary, assist the agency with salary and   
operating expenses, and loan money to Mr. Little and Ms. Rooney of the agency as
deemed necessary. In addition, in order to facilitate the operations of the     
agency during the 36 month term of the agreement, Combined has agreed to make   
available at its sole expense office space suitable for Mr. Little and Ms.      
Rooney and provide a secretary for Mr. Little and Ms. Rooney.                   

       In addition, upon the closing of the Combined Exchange, Combined will
enter into two lease extension and modification agreements with Little, Rooney &
Little Associates which provide that Combined will extend its existing leases by
60 months at $10,121 per month. Little, Rooney & Little Associates is 50% owned 
by Mr. Little and 50% owned by Ms. Rooney. The total payments under the         
extensions will be $607,260. Lifeline is paying for a portion of the cost of    
Combined's home office through a cost sharing agreement determined to be market 
value by the Texas Department of Insurance. Lifeline's portion of shared rent   
and equipment payments was $29,584 in 1999, $29,202 in 2000, and $25,586 for the
nine months ended September 30, 2001.                                           

         The members of the Combined Board were aware of the foregoing interests
and considered them, among other matters, in approving the Combined Exchange    
Agreement and the transactions contemplated thereby. The members of the Lifeline
Board were aware of these interests and considered them, among other matters, in
approving the Lifeline Exchange Agreement and the transactions contemplated     
thereby.                                                                        

REGULATORY REQUIREMENTS - COMBINED                                              

        The Combined Exchange is subject to approval of the Texas Commissioner
of Insurance. An application for approval was filed on or about December 3,     
2001. The parties do not believe the Combined Exchange is subject to any other  
insurance regulatory approval. Neither Citizens nor Combined is aware of any    
other governmental or regulatory approvals required for consummation of the     
Combined Exchange.                                                              

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REGULATORY REQUIREMENTS - LIFELINE                                              

        The Lifeline Exchange is subject to approval of the Texas Commissioner
of Insurance. An application for approval was filed on or about December 3,     
2001. The parties do not believe the Lifeline Exchange is subject to any other  
insurance regulatory approval. Neither Citizens nor Lifeline is aware of any    
other governmental or regulatory approvals required for consummation of the     
Lifeline Exchange.                                                              

SUMMARY OF THE COMBINED EXCHANGE AGREEMENT                                      

This is a summary of the Combined Exchange Agreement, which is
incorporated herein and attached hereto as Appendix A. You should read the      
Combined Exchange Agreement in addition to this Summary. See "Available         
Information" and "Incorporation of Documents by Reference."                     

 Delivery of Citizens Class A Common Stock; Closing Date. If the
Combined Exchange occurs, Citizens Class A common stock will be available for   
distribution at a closing ("Closing") on a closing date ("Closing Date") as soon
as possible after all regulatory approvals and shareholder approvals are        
obtained in accordance with Texas law. In order for the Combined Exchange to be 
consummated, the Combined Exchange Agreement must be approved by two-thirds of  
the Combined common stock. The Combined Exchange between Citizens and Combined  
will become effective ("Effective Date") on or as soon after the meeting as     
possible (assuming shareholder approval). It is presently anticipated that the  
Effective Date will occur on or before April 2, 2002, but there can be no       
assurance that the conditions to the Combined Exchange will be satisfied and    
that the Combined Exchange will be consummated on that date or any other date.  
The parties to the Combined Exchange Agreement have agreed to take all actions  
reasonably necessary to consummate the proposed transactions.                   

Representations, Warranties and Covenants; Legal Proceedings  
Disclosure. Each party to the Combined Exchange Agreement has represented to the
other with respect to organization, good standing, capitalization and other     
related matters, as well as certain matters with respect to pending legal       
proceedings, none of which are deemed material by Citizens. For a description of
those legal proceedings see Exhibits B and C to the Combined Exchange Agreement.

   Receipt of Citizens Shares - Procedures. If the Combined Exchange
Agreement is approved at the meeting, Combined shareholders who do not perfect  
dissenters' rights will be notified of the approval and furnished with a "Letter
of Transmittal" to send to an exchange agent ("Exchange Agent") that will be    
identified in the Letter of Transmittal. DO NOT SUBMIT YOUR COMBINED SHARES AT  
THIS TIME. If the Combined Exchange is completed:                               

o        a Letter of Transmittal will be sent to you;         

         o        you should send in your shares with the Letter of Transmittal;
and                                         

    o        the Exchange Agent will exchange your Combined shares for
               Citizens Class A common stock in the ratio set forth in the
                Combined Exchange Agreement after it receives your Letter of
Transmittal and Combined stock certificates.

     Exchange Agent. Combined will appoint Mellon Investor Services LLC,
Dallas, Texas (Citizens' current stock transfer agent) as Exchange Agent and may
appoint one or more forwarding agents to accept delivery of the Combined's stock
certificates for forwarding to the Exchange Agent. The instructions             

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accompanying the Letter of Transmittal will provide details for surrendering    
certificates for Combined shares and the procedure for obtaining certificates   
for Citizens Class A common stock, including instructions for obtaining         
certificates for Citizens Class A common stock for lost or destroyed            
certificates of Combined shares.                                                

      Authorization of the Exchange Agent may be terminated by Citizens at
any time after six months following the Effective Date. If terminated, any      
shares and funds held by the Exchange Agent for Combined shareholders will be   
transferred to Citizens or its designee, who will thereafter serve as Exchange  
Agent.                                                                          

         Shareholder Rights Prior to Share Exchange. The Exchange Agent will not
be entitled to vote or exercise any rights of ownership of the Combined shares  
held by it prior to the issuance of Citizens Class A common stock to former     
holders of such shares, except that it will receive any distributions paid or   
distributed with respect to the Combined shares for the account of the persons  
exchanging such shares. No distributions are expected with respect to Citizens  
Class A common stock.                                                           

      After the Effective Date, there will be no transfers on the Combined
stock transfer books of shares which were issued and outstanding immediately    
prior to the Effective Date. If after the Effective Date certificates           
representing Combined shares are properly presented to the Exchange Agent or    
directly to Combined or Citizens, they will be canceled and exchanged for       
certificates representing Citizens Class A common stock in the ratio set forth  
in the attached Exchange Agreement.                                             

    Unclaimed Shares or Cash. If outstanding certificates for Combined
shares or payment for any fractional or dissenting shares are not claimed, they 
may be turned over to a governmental authority in accordance with the respective
abandoned property laws of the various jurisdictions.                           

     In Colorado (Citizens' state of incorporation) if an owner of stock
cannot be located and does not come forward for a period of five years, and if  
the last known address of the shareholder is in Colorado, then the stock must be
turned over to the state treasurer. If the last known address of the shareholder
is in another state, the stock must be turned over to the other state if that   
state's laws so provide, otherwise the stock must be turned over to the state of
Colorado.                                                                       

   Abandoned property laws vary from state to state. However, to the
extent it might be permitted by abandoned property and other applicable law,    
such unclaimed items shall become the property of Citizens (and to the extent   
not in its possession shall be paid over to it) free and clear of all claims or 
interest of any persons previously entitled to such items. Notwithstanding the  
foregoing, neither the Exchange Agent nor any party to the Combined Exchange    
Agreement will be liable to any Combined shareholder for amounts paid to any    
governmental authority having jurisdiction of such unclaimed item pursuant to   
abandoned property or other applicable laws of such jurisdiction.               

    Fractional Shares. Fractional shares of Citizens stock will not be
issued under the Combined Exchange Agreement. Instead, fractional shares will be
rounded up to the nearest whole share of Citizens Class A common stock.         

  Accounting. It is anticipated that the Combined Exchange will be
accounted for as a purchase in accordance with accounting principles generally  
accepted in the United States of America.                                       

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     Other Conditions; Termination or Amendment of the Combined Exchange
Agreement. In addition to Combined shareholder approval of the Combined Exchange
Agreement, the obligations of Citizens and Combined to complete the Combined    
Exchange are subject to the satisfaction of a number of closing conditions,     
including:                                                                      

       o        performance by each party to the Combined Exchange Agreement
of its respective obligations;              

    o        approval of the Commissioner of Insurance of the State of
              Texas (and any other governmental entity with jurisdiction
over the transaction);                      

 o        absence of any proceedings instituted or threatened to
                 restrain, enjoin or prohibit the transactions contemplated by
the Combined Exchange Agreement;            

o        continued accuracy in all material respects of the   
            representations and warranties made by each party in the
Combined Exchange Agreement;                

       o        delivery of certain legal opinions and closing certificates;

   o        filing Articles of Exchange consistent with the Combined
              Exchange Agreement, for the transaction with the requisite
governmental authorities;                   

o        the closing of the Lifeline Exchange Agreement; and  

      o        the implementation by Combined of a plan to replace certain
                  insurance policy assets on the life of Mr. Little with cash or
   other liquid, admissible assets of equal value.

         In addition, Citizens may decline to proceed with the Combined Exchange
if dissenters' rights are perfected by more than 2.5% of the outstanding        
Combined shares.                                                                

         Any party may waive its unsatisfied conditions to complete the Combined
Exchange, except those which are required by law (such as shareholder and       
regulatory approval).                                                           

        The Combined Exchange Agreement may be terminated and abandoned at any
time (whether before or after approval by the Combined shareholders) by         
unanimous consent of Citizens and Combined, or by any party for whose benefit a 
closing condition has not been satisfied or waived. Any terms or conditions of  
the Combined Exchange Agreement, except those required by law, may be waived by 
the Board of Directors of the party entitled to the benefit thereof.            

       The Combined Exchange Agreement may be amended by mutual agreement of
the Board of Directors of each party; provided that the definition of Market    
Value for the stock of Combined and/or Citizens cannot be amended without       
approval of the requisite shareholders of Combined.                             

    Expenses and Liability for Termination. Each of the parties to the
Combined Exchange Agreement will pay its own fees and expenses incurred in      
connection with the transaction contemplated by the                             

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Combined Exchange Agreement, including costs incurred in connection with the    
termination of the Combined Exchange Agreement.                                 

   Status Regarding Possible Waiver, Modification, or Termination of
Agreement. As of the date of this proxy statement-prospectus, to the best of the
knowledge of the parties to the Combined Exchange Agreement, there are no       
conditions precedent which must be waived by any party in order for the Combined
Exchange to be consummated, nor does any party intend to seek to modify or      
terminate the Combined Exchange Agreement based on existing circumstances.      

       Conduct of Business Pending the Combined Exchange; Other Covenants of
the Parties. Combined and Citizens agreed that neither of them will, prior to   
the Combined Exchange:                                                          

       o        enter into any transactions except in the ordinary course of
business;                                   

         o        pay any dividends nor increase the compensation of any officer
or directors; or                            

      o        enter into any transaction which would adversely affect its
respective financial conditions.            

       Each party has agreed to provide the other with information as to any
significant corporate developments during the term of the Combined Exchange     
Agreement and to promptly notify the other parties if it discovers that any of  
its representations, warranties or covenants contained in the Combined Exchange 
Agreement or any document delivered in connection therewith was not true and    
correct in all material respects or became untrue or incorrect in any material  
respect. All of the parties to the Combined Exchange Agreement have agreed to   
take all such actions as may be reasonably necessary and appropriate in order to
consummate the transactions contemplated by the Combined Exchange Agreement.    

       The Combined Board of Directors, subject to its fiduciary obligations
to its shareholders, has agreed to use its best efforts to obtain the requisite 
approval of Combined shareholders for the Combined Exchange Agreement and the   
transactions contemplated thereby.                                              

   Operations of Combined after the Combined Exchange. Following the
Combined Exchange, Combined will continue to operate in its locations under a   
joint management team, with the consolidation of computer data processing in    
Citizens' system. Citizens will continue to evaluate the personnel, business    
practices and opportunities for Combined and may make such changes as it deems  
appropriate following the Combined Exchange.                                    

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It is anticipated that the following individuals will serve as
executive officers of Combined upon effectiveness of the Combined Exchange:     

                                                                [Download Table]


Name               Office                                                          
----               ------                                                          
                                                                                   
Rick D. Riley      Chairman of the Board and Chief Executive Officer               
Mark A. Oliver     Vice Chairman and Chief Investment Officer                      
Gary C. Cole       President and Assistant Treasurer                               
Clayton D. Dunham  Executive Vice President and Chief Marketing Officer            
Jeffrey J. Wood    Executive Vice President, Treasurer, Chief Financial Officer and
                   Assistant Secretary                                             
Betty Mitchell     Corporate Secretary                                             

       The Board of Directors of Combined upon effectiveness of the Combined
Exchange is expected to be the composed of the following individuals:           

Harold E. Riley                                               
Rick D. Riley                                                 
Mark A. Oliver                                                
Jeffrey Yeatman                                               
Jeffrey J. Wood                                               

        In addition, with the approval of the Texas Commissioner of Insurance,
Citizens intends to enter into a management services agreement with Combined    
under which Citizens would provide data processing systems, management expertise
and staff to Combined on a "cost plus 12.5%" basis. This agreement is similar in
substance to agreements that Citizens has with its other insurance subsidiaries.

         Stock Transfer Restrictions Applicable to "Affiliates" of Combined. The
Combined Exchange Agreement provides that any shareholder who is an "affiliate" 
of Combined, as defined in the rules adopted under the Securities Act of 1933,  
will enter into an agreement to not dispose of any Citizens shares received by  
him or her in violation of certain transfer restrictions under SEC Rules 144 and
145.                                                                            

SUMMARY OF THE LIFELINE EXCHANGE AGREEMENT                                      

This is a summary of the Lifeline Exchange Agreement, which is
incorporated herein and attached hereto as Appendix B. You should read the      
Lifeline Exchange Agreement in addition to this Summary. See "Available         
Information" and "Incorporation of Documents by Reference."                     

 Delivery of Citizens Class A Common Stock; Closing Date. If the
Lifeline Exchange occurs, Citizens Class A common stock will be available for   
distribution at a closing ("Closing") on a closing date ("Closing Date") as soon
as possible after all regulatory approvals and shareholder approvals are        
obtained in accordance with Texas law. In order for the Lifeline Exchange to be 
consummated, the Lifeline Exchange Agreement must be approved by two-thirds of  
the Lifeline common stock. The Lifeline Exchange between Citizens and Lifeline  
will become effective ("Effective Date") on or as soon after the meeting as     
possible (assuming shareholder approval). It is presently anticipated that the  
Effective Date will occur on or before April 2, 2002, but there can be no       
assurance that the conditions to the Lifeline Exchange will be satisfied and    
that the Lifeline Exchange will be consummated on that date or any other date.  
The parties to the Lifeline Exchange Agreement have agreed to take all actions  
reasonably necessary to consummate the proposed transactions.                   

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Representations, Warranties and Covenants; Legal Proceedings  
Disclosure. Each party to the Lifeline Exchange Agreement has represented to the
other with respect to organization, good standing, capitalization and other     
related matters, as well as certain matters with respect to pending legal       
proceedings, none of which are deemed material by Citizens. For a description of
those legal proceedings see Exhibits B and C to the Lifeline Exchange Agreement.

   Receipt of Citizens Shares - Procedures. If the Lifeline Exchange
Agreement is approved at the meeting, Lifeline shareholders who do not perfect  
dissenters' rights will be notified of the approval and furnished with a "Letter
of Transmittal" to send to an exchange agent ("Exchange Agent") that will be    
identified in the Letter of Transmittal. DO NOT SUBMIT YOUR LIFELINE SHARES AT  
THIS TIME. If the Lifeline Exchange is completed:                               

o        a Letter of Transmittal will be sent to you;         

         o        you should send in your shares with the Letter of Transmittal;
and                                         

    o        the Exchange Agent will exchange your Lifeline shares for
               Citizens Class A common stock in the ratio set forth in the
                Lifeline Exchange Agreement after it receives your Letter of
Transmittal and Lifeline stock certificates.

     Exchange Agent. Lifeline will appoint Mellon Investor Services LLC,
Dallas, Texas (Citizens' current stock transfer agent) as Exchange Agent and may
appoint one or more forwarding agents to accept delivery of the Lifeline's stock
certificates for forwarding to the Exchange Agent. The instructions accompanying
the Letter of Transmittal will provide details for surrendering certificates for
Lifeline shares and the procedure for obtaining certificates for Citizens Class 
A common stock, including instructions for obtaining certificates for Citizens  
Class A common stock for lost or destroyed certificates of Lifeline shares.     

      Authorization of the Exchange Agent may be terminated by Citizens at
any time after six months following the Effective Date. If terminated, any      
shares and funds held by the Exchange Agent for Lifeline shareholders will be   
transferred to Citizens or its designee, who will thereafter serve as Exchange  
Agent.                                                                          

         Shareholder Rights Prior to Share Exchange. The Exchange Agent will not
be entitled to vote or exercise any rights of ownership of the Lifeline shares  
held by it prior to the issuance of Citizens Class A common stock to former     
holders of such shares, except that it will receive any distributions paid or   
distributed with respect to the Lifeline shares for the account of the persons  
exchanging such shares. No distributions are expected with respect to Citizens  
Class A common stock.                                                           

      After the Effective Date, there will be no transfers on the Lifeline
stock transfer books of shares which were issued and outstanding immediately    
prior to the Effective Date. If after the Effective Date certificates           
representing Lifeline shares are properly presented to the Exchange Agent or    
directly to Lifeline or Citizens, they will be canceled and exchanged for       
certificates representing Citizens Class A common stock in the ratio set forth  
in the attached Lifeline Exchange Agreement.                                    

    Unclaimed Shares or Cash. If outstanding certificates for Lifeline
shares or payment for any fractional or dissenting shares are not claimed, they 
may be turned over to a governmental authority in accordance with the respective
abandoned property laws of the various jurisdictions.                           

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     In Colorado (Citizens' state of incorporation) if an owner of stock
cannot be located and does not come forward for a period of five years, and if  
the last known address of the shareholder is in Colorado, then the stock must be
turned over to the state treasurer. If the last known address of the shareholder
is in another state, the stock must be turned over to the other state if that   
state's laws so provide, otherwise the stock must be turned over to the state of
Colorado.                                                                       

   Abandoned property laws vary from state to state. However, to the
extent it might be permitted by abandoned property and other applicable law,    
such unclaimed items shall become the property of Citizens (and to the extent   
not in its possession shall be paid over to it) free and clear of all claims or 
interest of any persons previously entitled to such items. Notwithstanding the  
foregoing, neither the Exchange Agent nor any party to the Lifeline Exchange    
Agreement will be liable to any Lifeline shareholder for amounts paid to any    
governmental authority having jurisdiction of such unclaimed item pursuant to   
abandoned property or other applicable laws of such jurisdiction.               

    Fractional Shares. Fractional shares of Citizens stock will not be
issued under the Lifeline Exchange Agreement. Instead, fractional shares will be
rounded up to the nearest whole share of Citizens Class A common stock.         

  Accounting. It is anticipated that the Lifeline Exchange will be
accounted for as a purchase in accordance with accounting principles generally  
accepted in the United States of America.                                       

     Other Conditions; Termination or Amendment of the Lifeline Exchange
Agreement. In addition to Lifeline shareholder approval of the Lifeline Exchange
Agreement, the obligations of Citizens and Lifeline to complete the Lifeline    
Exchange are subject to the satisfaction of a number of closing conditions,     
including:                                                                      

       o        performance by each party to the Lifeline Exchange Agreement
of its respective obligations;              

    o        approval of the Commissioner of Insurance of the State of
              Texas (and any other governmental entity with jurisdiction
over the transaction);                      

 o        absence of any proceedings instituted or threatened to
                 restrain, enjoin or prohibit the transactions contemplated by
the Lifeline Exchange Agreement;            

o        continued accuracy in all material respects of the   
            representations and warranties made by each party in the
Lifeline Exchange Agreement;                

       o        delivery of certain legal opinions and closing certificates;

   o        filing Articles of Exchange consistent with the Lifeline
              Exchange Agreement, for the transaction with the requisite
governmental authorities; and               

o        the closing of the Combined Exchange Agreement.      

         In addition, Citizens may decline to proceed with the Lifeline Exchange
if dissenters' rights are perfected by more than 2.5% of the outstanding        
Lifeline shares.                                                                

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         Any party may waive its unsatisfied conditions to complete the Lifeline
Exchange, except those which are required by law (such as shareholder and       
regulatory approval).                                                           

        The Lifeline Exchange Agreement may be terminated and abandoned at any
time (whether before or after approval by the Lifeline shareholders) by         
unanimous consent of Citizens and Lifeline, or by any party for whose benefit a 
closing condition has not been satisfied or waived. Any terms or conditions of  
the Lifeline Exchange Agreement, except those required by law, may be waived by 
the Board of Directors of the party entitled to the benefit thereof.            

       The Lifeline Exchange Agreement may be amended by mutual agreement of
the Board of Directors of each party; provided that the definition of Market    
Value for the stock of Lifeline and/or Citizens cannot be amended without       
approval of the requisite shareholders of Lifeline.                             

    Expenses and Liability for Termination. Each of the parties to the
Lifeline Exchange Agreement will pay its own fees and expenses incurred in      
connection with the transaction contemplated by the Lifeline Exchange Agreement,
including costs incurred in connection with the termination of the Lifeline     
Exchange Agreement.                                                             

   Status Regarding Possible Waiver, Modification, or Termination of
Agreement. As of the date of this proxy statement-prospectus, to the best of the
knowledge of the parties to the Lifeline Exchange Agreement, there are no       
conditions precedent which must be waived by any party in order for the Lifeline
Exchange to be consummated, nor does any party intend to seek to modify or      
terminate the Lifeline Exchange Agreement based on existing circumstances.      

       Conduct of Business Pending the Lifeline Exchange; Other Covenants of
the Parties. Lifeline and Citizens agreed that neither of them will, prior to   
the Lifeline Exchange:                                                          

       o        enter into any transactions except in the ordinary course of
business;                                   

         o        pay any dividends nor increase the compensation of any officer
or directors; or                            

      o        enter into any transaction which would adversely affect its
respective financial conditions.            

       Each party has agreed to provide the other with information as to any
significant corporate developments during the term of the Lifeline Exchange     
Agreement and to promptly notify the other parties if it discovers that any of  
its representations, warranties or covenants contained in the Lifeline Exchange 
Agreement or any document delivered in connection therewith was not true and    
correct in all material respects or became untrue or incorrect in any material  
respect. All of the parties to the Lifeline Exchange Agreement have agreed to   
take all such actions as may be reasonably necessary and appropriate in order to
consummate the transactions contemplated by the Lifeline Exchange Agreement.    

       The Lifeline Board of Directors, subject to its fiduciary obligations
to its shareholders, has agreed to use its best efforts to obtain the requisite 
approval of Lifeline shareholders for the Lifeline Exchange Agreement and the   
transactions contemplated thereby.                                              

   Operations of Lifeline after the Lifeline Exchange. Following the
Lifeline Exchange, Lifeline will continue to operate in its location under a    
joint management team, with the consolidation of computer data processing in    
Citizens' system. Citizens will continue to evaluate the personnel, business    
practices and                                                                   

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opportunities for Lifeline and may make such changes as it deems appropriate    
following the Lifeline Exchange.                                                

       It is expected that the following individuals will serve as executive
officers of Lifeline upon effectiveness of the Lifeline Exchange:               

                                                                [Download Table]


Name               Office                                                          
----               ------                                                          
                                                                                   
Rick D. Riley      Chairman of the Board and Chief Executive Officer               
Mark A. Oliver     Vice Chairman and Chief Investment Officer                      
Gary C. Cole       President and Assistant Treasurer                               
Clayton D. Dunham  Executive Vice President and Chief Marketing Officer            
Jeffrey J. Wood    Executive Vice President, Treasurer, Chief Financial Officer and
                   Assistant Secretary                                             
Betty Mitchell     Corporate Secretary                                             

       The Board of Directors of Lifeline upon effectiveness of the Lifeline
Exchange is expected to be the composed of the following individuals:           

Harold E. Riley                                               
Rick D. Riley                                                 
Mark A. Oliver                                                
Jeffrey Yeatman                                               
Jeffrey J. Wood                                               

        In addition, with the approval of the Texas Commissioner of Insurance,
Citizens intends to enter into a management services agreement with Lifeline    
under which Citizens would provide data processing systems, management expertise
and staff to Lifeline on a "cost plus 12.5%" basis. This agreement is similar in
substance to agreements that Citizens has with its other insurance subsidiaries.

         Stock Transfer Restrictions Applicable to "Affiliates" of Lifeline. The
Lifeline Exchange Agreement provides that any shareholder who is an "affiliate" 
of Lifeline, as defined in the rules adopted under the Securities Act of 1933,  
will enter into an agreement to not dispose of any Citizens shares received by  
him or her in violation of certain transfer restrictions under SEC Rules 144 and
145.                                                                            

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 COMBINED'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

       The discussion below compares the year ended December 31, 2000 to the
year ended December 31, 1999, on a statutory basis of accounting. The following 
discussion should be read in conjunction with the description of differences    
between the GAAP basis and statutory basis financial information included under 
the heading "Summary Selected Financial Data" included in this proxy            
statement-prospectus.                                                           

FINANCIAL POSITION                                                              

       Combined's statutory financial position at December 31, 2000 and 1999
was as follows:                                                                 

                                                                [Download Table]


                                      2000           1999    
                                   -----------    -----------
                                                             
ADMITTED ASSETS                                              
Bonds                              $12,020,976    $12,120,125
Preferred Stocks                       452,813        453,400
Common Stocks                           90,465         93,758
Real Estate                             14,000         14,000
Policy Loans                             9,663          9,217
Cash and Short-term Investments      1,335,592      1,295,730
Other Assets                         1,191,405      1,172,097
                                   -----------    -----------
TOTAL ADMITTED ASSETS              $15,114,914    $15,158,327
                                   ===========    ===========

LIABILITIES                                                  
Policy Reserves                    $ 8,409,010    $ 8,090,043
Claim Reserves                       2,767,386      2,732,747
Other Policy Liabilities                50,807         37,758
Amounts Due or Accrued                 162,681        100,413
Amounts Held for Others                355,465        250,135
Asset Valuation Reserve                 50,548         56,443
                                   -----------    -----------
TOTAL LIABILITIES                  $11,795,897    $11,267,539
                                   ===========    ===========

TOTAL CAPITAL AND SURPLUS          $ 3,319,017    $ 3,890,788

         Total assets reflected little change, decreasing less than 1%. Bond and
stock holdings decreased minimally, while cash and short-term investments       
increased 3%. Cash generated through prepayments of loan-backed securities was  
sufficient to cover operating losses for the year without liquidating other     
investments. Combined continued to expand its holdings in investment grade      
corporate bonds, as well as preferred stocks, while reducing its exposure to    
mortgage-backed securities. Combined did not hold any non-investment grade      
securities as of December 31, 2000.                                             

    With the exception of due and unpaid premiums, all assets remained
fairly level during the year. As payroll deduction sales become a greater       
percentage of total business, due premiums continue to increase. Combined bills 
groups for the initial premium after issue, resulting in many groups paying in  
arrears. Due premiums increased 35% from 1999 to 2000.                          

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        Total liabilities rose 5%. Policy reserves increased from $8.1 million
at December 31, 1999, to $8.4 million at December 31, 2000. Life and accident   
and health claim reserves both reflected little change. In management's opinion,
claim reserves are more than adequate to cover the current levels of life and   
accident and health claims experienced by Combined.                             

         Capital and surplus declined from $3.9 million at December 31, 1999, to
$3.3 million at December 31, 2000. Although the sale of a block of life business
on January 1, 1999, contributed approximately $3.7 million to surplus as of     
December 31, 1999, the loss of profits generated from this block of business    
created additional pressures on earnings in 2000, as well as continuing losses  
on certain accident and health lines of business.                               

RESULTS OF OPERATIONS                                                           

     Combined's core product lines include individual life insurance and
individual accident and health insurance, including hospitalization, accident   
and disability insurance. Additionally, Combined's A&H specialty products are   
marketed within worksite markets.                                               

       In 1998 Combined adopted a new marketing/business plan under which it
planned to utilize the underlying value of a portion of its life business to    
stabilize surplus while eliminating losses and returning the Company to         
profitable operations. As a result of emerging loss trends, Combined            
re-evaluated the decision made in 1997 to re-enter the major medical market. The
decision was made to non-renew its in- force block of major medical policies in 
Texas and de-emphasize the sale of major medical policies in all operating      
areas. The decision was also make to discontinue marketing Medicare supplemental
policies due to continuing losses and to increase emphasis on worksite marketing
of limited benefit A&H specialty products. The above financial information for  
1999, 2000 and the nine-month period ending September 30, 2001 reflect the      
successful implementation of the marketing/business plan.                       

         Combined sold a portion of its in-force life business via an assumption
reinsurance treaty on January 1, 1999. The transaction provided $3.7 million of 
income which eliminated the 1999 operational loss of $1.1 million, resulting in 
a reported income of $2.6 million for 1999. The operational loss for 1999 was   
generated by losses within Combined's major medical, Medicare supplement and    
cancer lines of business.                                                       

       Combined began non-renewing its in-force block of Texas major medical
policies in January 1999 with the last segments of the block non-renewed in     
January 2000. Annualized in-force major medical premiums have decreased from    
$4.9 million in 1998, $3.4 million in 1999, $2.7 million in 2000 to $2.5 million
at September 30, 2001. Under the terms of the non-renewal, policyholders had the
option to purchase on a guaranteed issue basis the major medical policy then    
being marketed by the Company. The rate structure and margins under that policy 
were significantly improved over the in-force block. Claims runoff from the     
non-renewed block continued to negatively impact operations during the first two
quarters of 2000.                                                               

  The non-renewal of Texas major medical policies coupled with the
implementation of rate increases have reduced the Company's loss on its major   
medical policies from 107% in 1998 to 104% in both 1999 and 2000 to 89% for the 
nine-month period ended September 30, 2001. The dollar amounts of major medical 
claims have decreased from $4.9 million in 1998, $4.3 million in 1999, $2.9     
million in 2000 to $1.7 million for the nine-month period ended September 30,   
2001.                                                                           

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     Combined discontinued marketing Medicare Supplement policies in May
1999 and has continually implemented rate increases to the extent permitted by  
regulatory authorities since that time. Annualized in- force Medicare supplement
premiums have correspondingly decreased from $1.9 million in 1998, to $1.7      
million in 1999, to $1.6 million in 2000 to $1.4 million at September 30, 2001, 
related to Combined's withdrawal from the Medicare supplement market.           

Combined implemented a new loss review program in 1999 which  
consolidated multiple policy forms for expense purposes to enable the company to
more aggressively implement rate increases within of regulatory guidelines.     
Overall Company loss ratios on a paid basis decreased from 74% in 1999 to 65% in
2000 to 62% for the nine-month period ended September 30, 2001.                 

      Combined's withdrawal from the Medicare supplement and major medical
markets impacted premium income in 1999. Premium income decreased 6.4% from     
$15.6 million in 1998 to $14.6 million in 1999. The continued expansion of      
Combined's worksite marketing activities increased premium income in 2000.      
Premium income increased 1.7% from $14.6 million in 1999 to $14.9 million in    
2000. Premium income for the nine-month period ended September 30, 2001 was     
$10.9 million reflecting a decrease in new worksite marketing activity of the   
Company's largest general agency.                                               

     Accident and health benefits were $8.6 million for 2000 compared to
$9.7 million for 1999. This 12.6% decrease in accident and health benefits is   
directly related to the withdrawal from the Medicare supplement and major       
medical markets discussed above.                                                

LIQUIDITY AND CAPITAL RESOURCES                                                 

    The cash flows of Combined for 2000 and 1999 are summarized below:

                                                                [Download Table]


                                                       2000            1999    
                                                   -----------     ----------- 
                                                                               
Operations                                                                     
         Cash to insurance operations              $(1,002,965)    $(3,565,999)
         Investment income received                    547,370         646,375 
         Federal income taxes                                0               0 
                                                   -----------     ----------- 
         Cash used by operations                      (455,595)     (2,919,624)

Investment Activities                                                          
         Proceeds from sales or maturity of                                    
           long-term assets                            706,829       2,914,711 
         Cost of long-term investments acquired       (346,224)       (986,065)
                                                   -----------     ----------- 
         Cash provided by investment activities        360,605       1,928,646 

Financing Activities                                                           
         Other - Net                                   134,852          19,364 
                                                   -----------     ----------- 
         Cash provided by financing activities         134,852          19,364 
                                                   -----------     ----------- 

Net change in cash and short-term                                              
  investments                                      $    39,862     $  (971,614)
                                                   ===========     =========== 

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     In 1999, the cash used by operations included a $1.7 million ceding
commission expense. Excluding that non-recurring item, the cash used by         
operations would have been for 1999 $1.2 million. Accident and health benefits  
associated with the non-renewed major medical policies were more significant    
than expected in early 2000, producing temporary liquidity pressures during     
second quarter 2000. Overall, cash and short- term investments reflected a      
modest increase of $39,862 for 2000. Combined does not anticipate any           
significant liquidity needs in 2001. Cash flows should be more than sufficient  
to accommodate Combined's cash requirements.                                    

 The payroll deduction market continues to be the main thrust of
Combined's marketing plan. Emphasis is also being placed on life insurance      
sales. Combined does not anticipate making any material capital expenditures    
during 2001.                                                                    

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH NINE MONTHS ENDED SEPTEMBER  
30, 2000                                                                        

      The discussion below compares Combined's results for the nine months
ended September 30, 2001 with the nine months ended September 30, 2000. The     
following discussion should be read in conjunction with the description of      
differences between the GAAP basis and statutory basis financial information    
included under the heading "Summary Selected Financial Data" included in this   
proxy statement-prospectus.                                                     

    Effective January 1, 2001, Combined adopted codification statutory
accounting practices. The primary difference between the Texas statutes and the 
NAIC's codified rules involve the admission of 100% of all fixed assets for     
Texas domiciled companies. In NAIC codification fixed assets are not admitted.  
The 2001 nine month results discussed below include the impact of the adoption  
of codifications. The most significant impact of which is the adoption of       
deferred income taxes which increased surplus at September 30, 2001 by $108,000.

        Total assets increased 0.3% to $15,165,000 at September 30, 2001, from
$15,115,000 at December 31, 2000. Bond and stock holdings decreased 0.6% from   
$12,474,000 at December 31, 2000 to $12,405,000 at September 30, 2001. Cash and 
short-term investments increased 10.1% from $1,336,000 at December 31, 2000 to  
$1,470,000 at September 30, 2001.                                               

        Total liabilities decreased 2.6% from $11,796,000 at December 31, 2000
to $11,484,000 at September 30, 2001. The major cause of the decrease was a     
18.0% decrease in accident and health claims from $2,564,000 at December 31,    
2000 to $2,104,000 at September 30, 2001, related to Combined's withdrawal from 
the Medicare supplement and individual major medical markets.                   

       Capital and surplus increased from $3,891,000 at December 31, 2000 to
$3,681,466 primarily due to $362,000 of net income for the nine months ended    
September 30, 2001.                                                             

      Premium revenue decreased from $11,029,000 in 2000 to $10,919,000 in
2001 due to Combined's decision to discontinue marketing Medicare supplement    
policies. Other items of revenue were essentially unchanged. Total revenue for  
2001 was $11,552,000 versus $11,659,000 for 2000. Death benefits increased from 
$737,000 in 2000 to $771,000 in 2001 due to higher claims. Accident and health  
claims decreased from $6,798,000 in 2000 to $5,549,000 in 2001 due to the       
withdrawal from the Medicare supplement and major medical markets. Total death  
benefits and increases in reserves and other expenses were $6,590,000 for 2000  
versus $7,808,000 for 2001. Commissions decreased from $2,616,000 in 2000 to    
$2,493,000 in                                                                   

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2001. General insurance expenses increased 4.5% from $1,712,000 for the first   
nine months of 2000 to $1,790,000 for the same period in 2001, due to legal     
expenses. The net gain from operations for the first nine months of 2001 was    
$362,000 versus a net loss from operations of $811,000 for the same period of   
2000.                                                                           

LIQUIDITY AND CAPITAL RESOURCES                                                 

   The capital and surplus of Combined as of September 30, 2001, was
$3,681,000 versus $3,319,000 as of December 31, 2000. Management of Combined    
believes that Combined's cash and other liquid assets on hand are sufficient for
it to undertake its operations as contemplated for the foreseeable future.      

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 LIFELINE'S DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

       The discussion below compares the year ended December 31, 2000 to the
year ended December 31, 1999, on a statutory basis of accounting. The following 
discussion should be read in conjunction with the description of differences    
between the GAAP basis and statutory basis financial information included under 
the heading "Summary Selected Financial Data" included in this proxy            
statement-prospectus. Effective January 1, 2001, Lifeline adopted codified      
statutory accounting practices. The adoption did not have a significant impact  
on Lifeline's financial position or results of operations.                      

FINANCIAL POSITION                                                              

       Lifeline's statutory financial position at December 31, 2000 and 1999
was as follows:                                                                 

                                                                [Download Table]


                                       2000            1999    
                                   ------------    ------------
                                                               
ADMITTED ASSETS                                                
Bonds                              $  2,963,832    $  2,936,000
Preferred Stocks                        273,402         275,418
Policy Loans                              4,386           2,753
Cash and Short-term Investments         539,909         444,006
Other Assets                             79,531         123,773
                                   ------------    ------------
TOTAL ADMITTED ASSETS              $  3,861,060    $  3,781,950
                                   ============    ============

LIABILITIES                                                    
Policy Reserves                    $    610,857    $    608,465
Claim Reserves                          168,040         185,152
Other Policy Liabilities                 67,136          61,607
Amounts Due or Accrued                   23,090          19,382
Asset Valuation Reserve                   8,358           7,706
                                   ------------    ------------
TOTAL LIABILITIES                  $    877,481    $    882,312
                                   ============    ============

TOTAL CAPITAL AND SURPLUS          $  2,983,579    $  2,899,638

     Assets reflected a modest increase of 2%, from $3.8 million to $3.9
million. Cash and short-term investments represented the most significant       
portion of that growth, increasing 22% due to the earnings through the first    
nine months of 2001. Lifeline has continued to reduce investments in loan-backed
securities, while investing available funds in corporate bonds and short-term   
investments. Although 29% of the portfolio continues to be invested in          
loan-backed securities, Lifeline's exposure to extension risk and yield loss is 
minimal. The average life of Lifeline's loan-backed portfolio decreased from 4.8
years to 3.7 years. As of December 31, 2000, Lifeline did not hold any          
non-investment grade securities.                                                

       Accident and health policy reserves increased slightly. Life reserves
decreased minimally as a result of an increase in surrender activity during the 
year. Claim reserves fell 9% from $185,152 to $168,040 due to a downward trend  
in paid claims. All other liabilities remained fairly consistent with prior year
levels. Life and accident and health claim reserves have consistently been more 
than adequate to support the level of benefits paid by Lifeline.                

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     Capital and surplus continued to show a moderate increase from $2.9
million to $3.0 million. This growth in earnings was less than the previous     
three years, primarily due to the loss of premium income associated with a block
of life policies, which became fully paid-up during 2000.                       

 The declaration of a stock dividend in 1999 enabled Lifeline to
finalize compliance with minimum capital requirements according to Article      
3.02(c) of the Texas Insurance Code. No further capital increases will be       
necessary. Lifeline's total adjusted capital is substantially in excess of      
authorized control level risk- based capital.                                   

RESULTS OF OPERATIONS                                                           

         Lifeline's product lines include small face amount whole life insurance
and accidental and indemnity insurance with primary emphasis on the sale of     
limited benefit A&H specialty products within worksite markets. Lifeline also   
markets PPO major medical policy on a limited basis.                            

        During 1999 and the first three quarters of 2000 Lifeline discontinued
all recruiting and sales efforts while evaluating alternative business plans. A 
new business plan was implemented during the fourth quarter of 2000 emphasizing 
the sale of limited benefit A&H specialty products within worksite markets. The 
new business plan did not impact operations in 2000, but has positively impacted
2001 operations.                                                                

     Operations were negatively impacted by the absence of new marketing
initiatives in 1999 and the first three quarters of 2000. Premium income        
decreased 15.6% from $837,903 in 1998 to $707,506 in 1999 and decreased an      
additional 16.5% in 2000 to $590,586. Net income decreased from $364,673 in 1998
to $160,286 in 1999 and $84,540 in 2000.                                        

         The new business plan implemented during the fourth quarter of 2000 has
favorably impacted Lifeline's operations in 2001. Premium income for the        
nine-month period ended September 30, 2001 totaled $560,762 and net income for  
the period totaled $70,162.                                                     

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LIQUIDITY AND CAPITAL RESOURCES                                                 

    The cash flows of Lifeline for 2000 and 1999 are summarized below:

                                                                [Download Table]


                                                   2000             1999     
                                               ------------     ------------ 
                                                                             
Operations                                                                   
         Cash to insurance operations          $   (126,388)    $     (8,656)
         Investment income received                 221,663          213,892 
         Federal income taxes                             0          (17,724)
                                               ------------     ------------ 
         Cash provided by operations                 95,275          187,512 

Investment Activities                                                        
         Proceeds from sales or maturity of                                  
           long-term assets                         356,235          614,986 
         Cost of long-term assets                  (381,557)        (752,103)
                                               ------------     ------------ 
         Cash provided (used) by investment                                  
           activities                               (25,322)        (137,117)

Financing Activities                                                         
         Other - Net                                 25,951          (24,456)
                                               ------------     ------------ 

Net change in cash and short-term                                            
  investments                                  $     95,904     $     25,939 
                                               ============     ============ 

       Cash flow from insurance operations was significantly affected by the
decline in both life and accident and health premium. Cash provided by          
operations decreased 49%, from $187,512 in 1999 to $95,275 in 2000. Due to the  
expected decrease in cash provided by operations as a result of the decline in  
life premium, excess cash was invested predominantly in short-term investments  
to maintain adequate liquidity for operating needs. As a result, cash and       
short-term investments continued to be sufficient to meet Lifeline's liquidity  
needs in 2000.                                                                  

       Lifeline has accelerated marketing activities for 2001, including the
introduction of a payroll deduction product. This expansion of marketing efforts
is expected to favorably impact cash flow and earnings for 2001. Lifeline does  
not expect to make any material capital expenditures during 2001.               

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH NINE MONTHS ENDED SEPTEMBER  
30, 2000                                                                        

      The discussion below compares Lifeline's results for the nine months
ended September 30, 2001 with the nine months ended September 30, 2000. The     
following discussion should be read in conjunction with the description of      
differences between the GAAP basis and statutory basis financial information    
included under the heading "Summary Selected Financial Data" included in this   
proxy statement-prospectus.                                                     

    Effective January 1, 2001, Lifeline adopted codification statutory
accounting practices. This adopted did not significantly impact the financial   
position or results of operations of Lifeline as of and for the nine months     
ended September 30, 2001. The 2001 nine month results discussed below include   
the impact of the adoption of codification.                                     

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Assets increased 2.8% from $3,861,000 at December 31, 2000 to 
$3,971,000 at September 30, 2001. Investments in bonds and stocks decreased     
10.2% from $3,237,000 at December 31, 2000 to $2,905,000. This decrease was     
primarily offset by a 76.5% increase in cash from $540,000 at December 31, 2000 
to $953,000 at September 30, 2001, due to the sale of bonds.                    

  Liabilities increased 4.6% from $877,000 at December 31, 2000 to
$917,000 at September 30, 2001. The primary reason for the increase was a 25.4% 
increase in accident and health claims which increased from $138,000 at December
31, 2000 to $173,000 at September 30, 2001.                                     

         Capital and surplus increased 2.3% from $2,984,000 at December 31, 2000
to $3,053,000 at September 30, 2001, primarily due net income of $70,000 for the
nine months ended September 30, 2001.                                           

       Premiums increased significantly from $436,000 in 2000 to $561,000 in
2001 due to the accelerated marketing activities in 2001 discussed above. Net   
investment income also increased from $175,000 in 2000 to $201,000 in 2001 due  
to increased production related to the 2001 marketing activities. The other     
items of income remain essentially unchanged.                                   

        Death benefits decreased from $26,000 in 2000 to $12,000 in 2001 while
accident and health benefits increased from $338,000 in 2000 to $419,000 in     
2001. The increase in accident and health benefits was due to increased claim   
volume directly related to the increased production discussed above. Surrender  
benefits also increased from $11,000 in 2000 to $26,000 in 2001 due to higher   
lapse experience. In 2001 there was a decrease in reserves for life, accident   
and health policies of $7,000 versus an increase of $30,000 in 2000. Commissions
increased in 2001 to $139,000 versus $74,000 in 2000 due to a higher volume of  
business written. However, general insurance expenses decreased to $97,000 in   
2001 from $116,000 in 2000 due to non-recurring claim investigation expenses.   
Net income in 2001 was $70,000 versus net income of $5,000 in 2000.             

LIQUIDITY AND CAPITAL RESOURCES                                                 

       At September 30, 2001, Lifeline had capital and surplus of $3,053,000
versus $2,984,000 as of December 31, 2000. Cash on hand and other liquid assets 
are sufficient for Lifeline to undertake its operations for the foreseeable     
future.                                                                         

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 CERTAIN FEDERAL INCOME TAX CONSEQUENCES

     The following discussion summarizes the material federal income tax
considerations relevant to the exchange of shares of Combined common stock and  
Lifeline common stock for Citizens Class A common stock pursuant to the Combined
Exchange and the Lifeline Exchange that are generally applicable to holders of  
Combined common stock and Lifeline common stock. This discussion is based on    
currently existing provisions of the Internal Revenue Code of 1986, as amended  
(the "Code"), existing and proposed Treasury Regulations thereunder and current 
administrative rulings and court decisions, all of which are subject to change. 
Any such change, which may or may not be retroactive, could alter the tax       
consequences to Combined shareholders and Lifeline shareholders, as described   
below. There can be no assurance that such changes will not occur.              

 Shareholders of Combined and Lifeline should be aware that this
discussion does not deal with all federal income tax considerations that may be 
relevant to particular shareholders in light of their particular circumstances, 
or to certain types of shareholders such as shareholders who are dealers in     
securities, who are financial institutions, who are insurance companies, who are
foreign persons, who are real estate investment trusts, who are regulated       
investment companies, who are tax-exempt persons, who hold their stock as part  
of a position in a "straddle" or as part of a "hedging" or other integrated     
transaction, who do not hold their stock as capital assets, or who acquired     
their shares in connection with stock option or stock purchase plans or in other
compensatory transactions. In addition, the following discussion does not       
address the tax consequences of the Combined Exchange or the Lifeline Exchange  
under foreign, state or local tax laws, the tax consequences of transactions    
effectuated prior or subsequent to or concurrently with, the transactions       
discussed in this prospectus (whether or not any such transactions are          
undertaken in connection with the Combined Exchange or the Lifeline Exchange),  
including any transaction in which shares of Combined or Lifeline stock are     
acquired or shares of Citizens Class A common stock are disposed of, or the tax 
consequences of the alternative minimum tax provisions of the Code. Accordingly,
COMBINED SHAREHOLDERS AND LIFELINE SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN  
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE COMBINED EXCHANGE AND   
THE LIFELINE EXCHANGE, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND       
FOREIGN TAX CONSEQUENCES TO THEM.                                               

 The anticipated federal income tax consequences to Combined and
Lifeline shareholders are as follows:                                           

COMBINED                                                                        

     (a) No gain or loss will be recognized by holders of Combined stock
solely upon their receipt in the Combined Exchange of Citizens Class A common   
stock in exchange therefor.                                                     

       (b) The aggregate tax basis of Citizens Class A common stock received
by Combined shareholders in the Combined Exchange will be the same as the       
aggregate tax basis of the Combined stock surrendered in exchange therefor.     

     (c) The holding period of Citizens Class A common stock received by
each Combined shareholder in the Combined Exchange will include the period for  
which the Combined stock surrendered                                            

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in exchange therefor was considered to be held, provided that the Combined stock
so surrendered is held as a capital asset at the time of the Combined Exchange. 

      (d) Cash received by the Combined shareholders who properly exercise
their dissenters' rights will be treated as having been received in redemption  
of the shares so cashed out, and will likely result in taxable gain or loss,    
measured by the difference (if any) between the amount of cash received and such
shareholder's basis in the Combined stock. Provided the shares were held as a   
capital asset at the time of the redemption, such gain or loss will constitute  
capital gain or loss. It is possible that for some shareholders, the            
distribution of cash may be treated as a dividend taxable as ordinary income.   

LIFELINE                                                                        

     (a) No gain or loss will be recognized by holders of Lifeline stock
solely upon their receipt in the Lifeline Exchange of Citizens Class A common   
stock in exchange therefor.                                                     

       (b) The aggregate tax basis of Citizens Class A common stock received
by Lifeline shareholders in the Lifeline Exchange will be the same as the       
aggregate tax basis of the Lifeline stock surrendered in exchange therefor.     

     (c) The holding period of Citizens Class A common stock received by
each Lifeline shareholder in the Lifeline Exchange will include the period for  
which the Lifeline stock surrendered in exchange therefor was considered to be  
held, provided that the Lifeline stock so surrendered is held as a capital asset
at the time of the Lifeline Exchange.                                           

      (d) Cash received by the Lifeline shareholders who properly exercise
their dissenters' rights will be treated as having been received in redemption  
of the shares so cashed out, and will likely result in taxable gain or loss,    
measured by the difference (if any) between the amount of cash received and such
shareholder's basis in the Lifeline stock. Provided the shares were held as a   
capital asset at the time of the redemption, such gain or loss will constitute  
capital gain or loss. It is possible that for some shareholders, the            
distribution of cash may be treated as a dividend taxable as ordinary income.   

RELATED TAX ISSUES                                                              

       The parties are not requesting and will not request a ruling from the
IRS in connection with either the Combined Exchange or the Lifeline Exchange.   
Combined and Lifeline, however, will receive an opinion from counsel for        
Citizens to the effect that the Combined Exchange and the Lifeline Exchange will
each constitute a reorganization resulting in the anticipated federal tax       
consequences (the "Tax Opinions"). Combined and Lifeline shareholders should be 
aware that the Tax Opinions do not bind the IRS or the courts. There is no      
assurance that the IRS will not assert a contrary position regarding the tax    
consequences of either Exchange, nor is there any assurance that the IRS would  
not prevail in the event the tax consequences of either Exchange were litigated.
The Tax Opinions will not address the tax consequences of either Exchange to the
shareholders of Combined or Lifeline under applicable foreign, state or local   
income tax laws. The Tax Opinions are subject to certain assumptions and        
qualifications, including but not limited to the truth and accuracy of          
representations made by Citizens, Combined and Lifeline, including              
representations in certain certificates to be delivered to counsel by the       
respective managements of Citizens, Combined and Lifeline.                      

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     Combined and Lifeline shareholders should be aware that the IRS may
examine transactions taking place before, contemporaneously with, or after a    
reorganization to determine whether reorganization treatment is appropriate, or 
in some cases to determine whether shareholders will be taxed on other economic 
benefits that are included as part of the overall transaction. Thus, loan       
transactions between parties, compensation arrangements, noncompete agreements, 
consulting arrangements and other transactions could be reviewed by the IRS.    
Gain could also have to be recognized by all Combined shareholders in the       
Combined Exchange, and by all Lifeline shareholders in the Lifeline Exchange, if
any Combined or Lifeline shareholder was treated as receiving (directly or      
indirectly) in that Exchange consideration other than Citizens Class A common   
stock in exchange for the shareholder's stock. Furthermore, if the IRS were to  
establish as to some shareholders that part of Citizens Class A common stock    
received in either the Combined Exchange or the Lifeline Exchange is severable, 
resulting in a proportionally increased equity interest being received by other 
shareholders, the shareholders whose equity interests were deemed to be         
constructively increased may be treated as having received a taxable stock      
dividend.                                                                       

       A successful IRS challenge to the reorganization status of the either
the Combined Exchange or the Lifeline Exchange would result in shareholders of  
the challenged entity recognizing taxable gain or loss with respect to each     
share of stock surrendered equal to the difference between the shareholder's    
basis in such shares and the fair market value, as of the effective time of the 
transaction, of Citizens Class A common stock received in exchange therefor. In 
such event, a shareholder's aggregate basis in Citizens Class A common stock    
received would equal its fair market value at the time of the transaction, and  
the shareholder's holding period for such stock would begin the day after the   
transaction is completed.                                                       

        Pursuant to Section 1.368-3(b) of the Regulations, the shareholders of
Combined and Lifeline must file with their income tax returns for the year in   
which the transaction is consummated, a statement which provides details        
pertinent to the nonrecognition of gain or loss arising from that Exchange,     
including the cost or other basis of stock transferred in the Exchange and the  
amount of stock received in the Exchange.                                       

        Under Section 3406 of the Code, Combined and Lifeline shareholders may
be subject to "backup withholding" on "reportable payments," if any, to be      
received by them if they fail to furnish their correct taxpayer identification  
numbers to Citizens or for certain other reasons. Citizens will report to these 
persons and to the IRS for each calendar year the amount of any reportable      
payments during that year and the amount of tax withheld, if any, with respect  
to those reportable payments.                                                   

        THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A SHAREHOLDER'S
PARTICULAR SITUATION. COMBINED AND LIFELINE SHAREHOLDERS SHOULD CONSULT THEIR   
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF EACH EXCHANGE,     
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS   
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAW.                

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 RIGHTS OF DISSENTING SHAREHOLDERS

       The following summary of dissenters' rights available to Combined and
Lifeline shareholders identifies and discusses all of the material information  
necessary to perfect dissenters' rights. However, this summary is not intended  
to be a complete statement of applicable Texas law and is qualified in its      
entirety by reference to Part 5, Articles 5.11 through 5.13 of the Texas        
Business Corporation Act (the "Act"), set forth in their entirety in Appendix C.

      CITIZENS HAS CONDITIONED BOTH THE COMBINED EXCHANGE AND THE LIFELINE
EXCHANGE, SUBJECT TO ITS RIGHT TO WAIVE, AND HAS RESERVED THE RIGHT TO ABANDON  
EITHER EXCHANGE IN THE EVENT THAT HOLDERS OF GREATER THAN 2.5% OF THE           
OUTSTANDING SHARES OF COMBINED OR LIFELINE DISSENT FROM THEIR RESPECTIVE        
EXCHANGE AND SEEK PAYMENT FOR THEIR SHARES IN ACCORDANCE WITH THE ACT.          

        FULL AND EXACT COMPLIANCE WITH THE STATUTORY REQUIREMENTS IS ESSENTIAL
FOR A SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS SUCCESSFULLY. SHAREHOLDERS ARE 
URGED TO READ AND UNDERSTAND THIS DISCUSSION AND THE STATUTORY PROVISIONS       
ATTACHED AS APPENDIX C TO THIS PROXY-STATEMENT PROSPECTUS.                      

        Right to Dissent. A shareholder of Combined is entitled to dissent and
obtain payment of the fair value of its shares assuming that the Combined       
Exchange is completed. A shareholder of Lifeline is entitled to dissent and     
obtain payment of the fair value of its shares assuming that the Lifeline       
Exchange is completed. A shareholder entitled to dissent and obtain payment for 
his or her shares under Article 5.11 of the Act may not challenge the corporate 
action creating his or her entitlement unless the action is or would be         
fraudulent.                                                                     

Procedure for Exercise of Dissenters' Rights. In order for a  
shareholder to exercise dissenters' rights and receive payment for such         
shareholder's shares, the shareholder must comply exactly with the requirements 
in Article 5.11 through 5.13 of the Act. To briefly summarize, subject to       
certain other requirements, the shareholder must, before the vote is taken at   
the meeting of shareholders, file a written objection to the Combined Exchange  
or the Lifeline Exchange with Combined or Lifeline, as the case may be, setting 
out that the right to dissent will be exercised if the Combined Exchange or the 
Lifeline Exchange is approved by shareholders, and stating the shareholder's    
address. Written notice must be sent to Combined, which is located at 307 North 
Glenwood Boulevard, Tyler, Texas 75702. Written notice must be sent to Lifeline,
which is also located at 307 North Glenwood Boulevard, Tyler, Texas 75702.      
Furthermore, the shareholder must not vote in favor of the applicable Exchange. 

         If the Combined Exchange or the Lifeline Exchange is approved, Combined
or Lifeline, as the case may be, will send written notice to the dissenting     
shareholders within 10 days, indicating that the applicable Exchange was        
approved. A shareholder then has 10 days after being notified of the approval to
demand in writing to Combined or Lifeline, as appropriate, at the addresses     
above, the fair value of the shareholder's shares. The written demand must state
the number and class of the shares owned, and the shareholder's estimate of the 
fair value of their shares. Fair value under Article 5.12 of the Act is the     
value as of the day immediately preceding the meeting of shareholders, excluding
any appreciation or depreciation in anticipation of the proposed action.        

      Combined or Lifeline, within 20 days of receipt of the shareholder's
notice, will provide written notice that: a) it accepts the amount claimed and  
agrees to pay that amount within 90 days of the approval                        

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of the applicable Exchange (or in the case of shares represented by             
certificates, upon the surrender of the certificates), or b) contains an        
estimate of the fair value together with an offer to pay that amount within 90  
days of the approval of the applicable Exchange (or in the case of shares       
represented by certificates, upon the surrender of the certificates), if the    
shareholder accepts the offer within 60 days of the approval of the applicable  
Exchange.                                                                       

      The holders of certificated shares must submit their certificates to
Combined or Lifeline, as appropriate, for notation within 20 days of their      
demand for payment, or risk terminating their dissenter's rights.               

         A shareholder may withdraw such demand for payment of his or her shares
any time before payment for the shares, or before any petition for judicial     
review is filed.                                                                

Judicial Appraisal of Shares. If a shareholder fails to accept
Combined's or Lifeline's offer within 60 days following approval of the         
applicable Exchange, then within an additional 60 days, either the shareholder  
or the corporation may file a petition in any court of competent jurisdiction in
Smith County, Texas, requesting the court to determine the fair value. If the   
shareholder files the petition, the shareholder must provide a copy to the      
corporation within 10 days. The clerk of the court will give notice of the time 
and place fixed for the hearing of the petition by registered mail to the       
corporation and all dissenting shareholders. All shareholders notified as well  
as the corporation will be bound by the final judgment of the court.            

       The court will appoint one or more appraisers to assist in making the
determination of the fair value of the shares. The appraiser will give the      
shareholders and the corporation an opportunity to submit pertinent evidence as 
to the value of the shares. The court will make the final decision of the fair  
value of the shares, and will direct the corporation to pay that amount,        
together with interest, beginning 91 days after the date on which the applicable
Exchange was approved to the date of the judgment. The sum will be payable to   
holders of uncertificated shares immediately, and to holders of certificated    
shares simultaneously with their surrender of the certificates. Upon payment,   
the dissenting shareholders will cease to have any interest in those shares or  
in the corporation. The court will allow the appraisers a reasonable fee as     
court costs, and all court costs will be allotted between the parties in a      
manner that the court determines to be fair and equitable.                      

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 INFORMATION CONCERNING COMBINED

       Combined, a Texas stipulated premium life insurance company chartered
in 1965, is licensed in 11 states. Its business is primarily conducted in Texas.
In addition to Texas, Combined presently writes business in five other states,  
Arizona, Arkansas, Louisiana, Mississippi and Oklahoma. Combined currently      
distributes through master managing general agents and 1,200 personal producing 
general agents. The quarterly statement as of September 30, 2001 of Combined    
filed with the Texas Commissioner of Insurance reflects admitted assets of      
$15,071,994, capital and surplus of $3,681,466, and premiums for the nine months
ended September 30, 2001 of $10,918,872.                                        

    The core product lines of Combined include individual accident and
health insurance and individual life, with the former presently representing    
most of total direct premium writings. Coverages offered include accident,      
disability income, hospitalization and voluntary payroll deduction. During 1998,
Combined adopted a new business plan under which it would utilize the underlying
profitability of its life business to stabilize surplus while eliminating losses
and returning Combined to a profitable operation. One of the primary components 
of this plan was the sale of a portion of its older in-force whole life         
business, via an assumption reinsurance agreement. That transaction provided an 
additional $3.75 million of surplus. In addition, Combined began non-renewing   
its in-force block of Texas major medical policies in January 1999, with the    
last segment of the block non-renewed in January 2000. Combined is not currently
promoting a major medical policy and premium of its in-force block of major     
medical policies has decreased.                                                 

         Combined also ceased writing new Medicare supplement business effective
May 1999 and has implemented rate increases to the extent permitted by          
regulatory authorities in each of the last several years. Another rate increase 
was adopted in 2001. Combined has developed products to penetrate the payroll   
deduction market, which complement its existing supplement health and life      
insurance products. Combined's current focus is on its hospitalization and life 
products.                                                                       

PREMIUM ANALYSIS                                                                

                                                        [Enlarge/Download Table]


Direct Premiums (000's)      2000         1999        1998         1997         1996    
-----------------------  -----------  -----------  -----------  -----------  -----------
                                                                                        
Ordinary life            $     1,989  $     1,978  $     3,171  $     3,236  $     3,359
Individual A&H                13,049       12,976       12,063       11,095       11,387
Group A&H                        494          492          622          606          529
                         -----------  -----------  -----------  -----------  -----------
Total                    $    15,532  $    15,446  $    15,856  $    14,937  $    15,275
                         ===========  ===========  ===========  ===========  ===========

                                                        [Enlarge/Download Table]


Reinsurance Ceded                                                                          
Premiums (000's)               2000         1999         1998         1997          1996   
--------------------------  -----------  -----------  -----------  -----------  -----------
                                                                                           
Ordinary life               $        24  $        21  $        19  $        26  $        27
Individual A&H                      650          813          247          244          287
Group A&H                             2            2            4            7            0
                            -----------  -----------  -----------  -----------  -----------
Total                       $       676  $       836  $       270  $       277  $       314
                            ===========  ===========  ===========  ===========  ===========

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                                                        [Enlarge/Download Table]


Net Premiums &                                                                             
Deposit Funds (000's)          2000         1999         1998         1997         1996    
--------------------------  -----------  -----------  -----------  -----------  -----------
                                                                                           
Ordinary life               $     1,965  $     1,957  $     3,152  $     3,210  $     3,332
Individual A&H                   12,399       12,163       11,816       10,851       11,100
Group A&H                           492          490          618          599          529
                            -----------  -----------  -----------  -----------  -----------
Total                       $    14,856  $    14,610  $    15,586  $    14,660  $    14,961
                            ===========  ===========  ===========  ===========  ===========

PROPERTIES                                                                      

        Combined's offices are located at 307 North Glenwood Boulevard, Tyler,
Texas. Combined owns the land and building at this address. Combined also leases
office space at 320 North Glenwood Boulevard, Tyler, Texas, for $2,236 per      
month, and at 300 North Hill Street, Tyler, Texas, for $7,885 per month. All of 
the space for the two offices is shared with Lifeline under an expense sharing  
agreement. Total rental expense for Combined was $121,449 for 1999, $121,449 for
2000, and $91,087 for the nine months ended September 30, 2001.                 

LEGAL PROCEEDINGS                                                               

     Combined was initially included as a Third Party Defendant in Civil
Action No. 660cv442 styled as Nathan L. Johnson et al v. East Texas Medical     
Center, et al v. Aetna Health and Life Insurance Company, et al. This suit is   
pending in the United States District Court for the Eastern District of Texas,  
Tyler Division. In the suit, the plaintiff alleges that the defendant hospitals 
mishandled patient accounts and wrongly forwarded patient funds to health       
insurance companies. Plaintiff's Motion for Severance of Third Party Claimants  
was granted by the court on April 16, 2001, and Combined was severed from the   
case. Depending on the outcome of the case as now postured, Combined could be   
reintroduced as a defendant. Combined's management believes that Combined's     
exposure under the suit is not material. Combined is unaware of any other       
pending litigation to which it is a party or to which any of its property is    
subject.                                                                        

MARKET FOR COMBINED COMMON STOCK AND RELATED SECURITYHOLDER MATTERS             

         Combined common stock is not listed or actively traded through security
brokerage firms, and there is no over-the-counter trading activity. There have  
been no dividends paid since the inception of Combined. The number of record    
holders of Combined common stock is 30.                                         

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INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS - COMBINED              

      The following information is furnished with respect to each director
and executive officer of Combined.                                              

                                                        [Enlarge/Download Table]


                             YEAR FIRST                                                        
                             ELECTED AS                                                        
NAME OF DIRECTOR OR          DIRECTOR OF  POSITIONS WITH        PRINCIPAL OCCUPATION FOR       
EXECUTIVE OFFICER       AGE  COMBINED     COMBINED              THE PAST FIVE YEARS            
-----------------       ---  --------     --------              -------------------            
                                                                                               
Walden P. "Red" Little  81         1965   Chairman of the       Chairman of the Board of       
                                          Board of Directors,   Directors of and Chief         
                                          Chief                 Executive Officer of           
                                          Executive Officer     Combined                       

Regina Little Rooney    48         1967   Director              Vice President-Underwriting    
                                                                of Combined until January      
                                                                31, 2002                       

Gary C. Cole            58         1988   Director, President,  President and Chief Operating  
                                          Chief Operating       Officer of Combined and        
                                          Officer               President of Lifeline          

Donald F. Bagozzi       64          n/a   Vice President-       Vice President- Marketing of   
                                          Marketing             Combined and Lifeline; VP      
                                                                Marketing of Statesman         
                                                                National Life                  

Betty M. Mitchell       51         1983   Director, Corporate   Corporate Secretary of         
                                          Secretary             Combined and Lifeline          

Jimmie M. Procell       73         1985   Director              Retired; President of          
                                                                Combined from April 1984,      
                                                                through January 1988, and      
                                                                President of Lifeline from July
                                                                1985, through January 1988     

Milo V. Reamy           72          n/a   Vice President-       Vice President- Claims of      
                                          Claims                Combined and Lifeline          

        All directors and officers are elected for a term of one year or until
their successors have been duly elected and qualified.                          

       Regina Little Rooney is the daughter of Walden P. "Red" Little. There
are no other family relationships among the officers or directors listed, and   
there are no arrangements or understandings pursuant to which any of them were  
elected as officers or directors.                                               

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 During the past five years, there have been no events under any
bankruptcy act, no criminal proceedings and no judgments or injunctions material
to the evaluation of the ability and integrity of any director or executive     
officer of Combined who is expected to serve in such capacity after the Combined
Exchange.                                                                       

EXECUTIVE COMPENSATION - COMBINED                                               

    The following table sets forth compensation of the Chief Executive
Officer of Combined for 1999 and 2000. No executive officer of Combined received
compensation exceeding $100,000 for any of the last two fiscal years. Combined  
does not have any restricted stock awards, stock appreciation rights or         
long-term incentive plans for its executive officers.                           

SUMMARY COMPENSATION TABLE
 Annual Compensation

                                                                [Download Table]


                                                       Other   
                                                      Annual   
Name and Principal Position  Year  Salary   Bonus  Compensation
---------------------------  ----  ------   -----  ------------
                                                               
   Walden P. "Red" Little    1999  $29,640   --         $--    
 Chairman of the Board and   2000  $29,640   --         $--    
  Chief Executive Officer                                      

         No employees are covered by a group accident and health insurance plan.
No option has been granted to any employee to purchase securities from Combined.
There are no pension or retirement benefit plans. For the two years ended       
December 31, 2000, the Combined directors received an aggregate of $200 in      
director's fees from Combined.                                                  

CERTAIN TRANSACTIONS - COMBINED                                                 

   The control person of Combined is W.P. Little. Other companies or
business ventures owned by Mr. Little which do business with Combined and his   
ownership interest therein are:                                                 

                                                                [Download Table]

                                                                               
W.P. Red Little dba East Texas Funding and Leasing                       100  %
Little Rooney & Little                                                    50  %
W.P. Red Little dba Rose City Advertising Corporation                     85.9%
W.P. Red Little dba Little Insurance Agency                              100  %
W.P. Red Little dba Underwriters Advance Funding                         100  %
Lifeline Underwriters Life Insurance Company                              64.4%

Ms. Rooney owns the other 50% of Little Rooney & Little.                        

   Combined has periodically entered into agreements with East Texas
Funding & Leasing to lease items used in the normal course of business. There   
were no such agreements in effect during 1999, 2000 or the nine months ended    
September 30, 2001 and there were no payments made by Combined to East Texas    
Funding & Leasing                                                               

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during those periods. All transactions and record keeping of East Texas Funding 
& Leasing are conducted by employees of Combined. For this service, East Texas  
Funding & Leasing pays Combined a fee of $50 per month.                         

Combined has lease agreements with Little, Rooney & Little for
facilities and equipment used by Combined. Amounts paid by Combined to Little,  
Rooney & Little under such lease agreements was $121,449 in each of 1999 and    
2000 and was $91,087 for the nine months ended September 30, 2001. All          
transactions and record keeping of Little, Rooney & Little are conducted by     
employees of Combined. For this service, Little, Rooney & Little pays Combined a
fee of $10 per month.                                                           

        Combined has an agreement with Rose City Advertising Corporation under
which Rose City Advertising Corporation serves as an advertising agency for     
Combined. No payments were made during 1999, 2000 or the nine months ended      
September 30, 2001. All transactions and record keeping of Rose City Advertising
Corporation are conducted by employees of Combined for a monthly fee of 10% of  
the profit made by Rose City Advertising Corporation acting as an advertising   
agency. The amount of such fees paid by Rose City Advertising Corporation to    
Combined was $475 in 1999, $337 in 2000 and $1,094 for the nine-month period    
ended September 30, 2001.                                                       

       A cost sharing agreement exists between Combined and Little Insurance
Agency which provides for Little Insurance Agency's reimbursement of            
telemarketing salaries and related telephone expenses to Combined. The amount   
Little Insurance Agency reimbursed to Combined was $-0- in 1999, $34,156 in 2000
and was $35,663 for the nine- month period ended September 30, 2001.            

  Combined has a General Agents Contract and Agreement with Little
Insurance Agency which provides for the payment of commissions and override     
commissions by Combined to Little Insurance Agency. Combined also has a number  
of Override Agreements with Little Insurance Agency which provide for payment of
override commissions and/or portions of one-time application fees by Combined to
Little Insurance Agency on policy forms developed and promoted by Walden P.     
"Red" Little. The total amount paid by Combined to Little Insurance Agency under
the General Agent's Contract and Agreement and all Override Agreements in 1999  
was $289,993 in 1999 and $280,761 in 2000 and was $200,240 for the nine- month  
period ended September 30, 2001.                                                

         Combined has an agreement with Underwriters Advance Funding under which
Underwriters Advance Funding pays advance commissions which would otherwise be  
payable by Combined to its agents/agencies. The commissions payable for such    
advanced business are assigned by the agents/agencies to Underwriters Advance   
Funding and Combined pays the assigned commissions to Underwriters advance      
Funding. The amount of such assigned commissions paid by Combined to            
Underwriters Advance Funding was $1,396,595 in 1999, $1,920,220 in 2000 and was 
$1,212,922 for the nine-month period ended September 30, 2001. All transactions 
and record keeping of Underwriters Advance Funding are conducted by employees of
Combined for a fee of $50 per month.                                            

        A cost sharing agreement exists between Combined and Lifeline for home
office facilities and equipment and for employee salaries. The amount paid by   
Lifeline to Combined for home office facilities and equipment was $29,584 in    
1999, $29,202 in 2000 and was $25,586 for the nine-month period ended September 
30, 2001. The amount paid by Lifeline to combined for employee salaries was     
$29,873 in 1999, $36,375 in 2000 and was $32,162 for the nine-month period ended
September 30, 2001                                                              

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        Combined is the owner, premium payer and beneficiary of a $90,000 life
insurance policy and a $500,000 life insurance policy on the life of Mr. Little.
Additionally, Combined has executed a Split-Dollar Insurance Agreement with     
Regina Little Rooney, Trustee of The Walden P. "Red" Little Insurance Trust     
Number One under which the Trustee has purchased a $2,000,000 life Insurance    
policy of the life of Mr. Little. Combined pays the premium for the policy and  
is reimbursed a portion of the premium by the Trustee. The net amount paid by   
Combined in each 1999, 2000 and the nine-month period ended September 30,2001   
was $3,562. The Trustee has granted Combined a collateral security interest in  
the proceeds of the policy upon death, maturity or surrender of the policy with 
respect to the net premium paid on the policy by Combined. These three "key man"
policies provide Combined with interim financial protection in the event of Mr. 
Little's death in view of his importance to Combined's current operations. The  
Split-Dollar Insurance Agreement and related life insurance policy provide      
estate planning benefit to Mr. Little's personal estate. Combined reflects asset
values for these policies as described above on its statutory financial         
statement, and these values have been accepted by regulatory examiners as       
admitted assets. The cash surrender value of these three policies as of December
31, 2000 was $766,757. Under the terms of the Combined Exchange Agreement,      
Citizens may terminate and abandon the Exchange if Combined on or before the    
Closing has not implemented a plan reasonably acceptable to Citizens that will  
replace these three insurance policy assets with cash or other liquid admissible
assets of equal values acceptable to Citizens. Combined intends to implement    
such an asset replacement plan assuming the Combined Exchange is approved by    
Combined's shareholders and the Combined Exchange closes.                       

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 INFORMATION CONCERNING LIFELINE

       Lifeline is a Texas legal reserve life insurance company chartered in
1985. Lifeline's operations are conducted in Louisiana and Texas, where Lifeline
writes ordinary life and individual accident and health contracts on a          
non-participating basis. Lifeline uses approximately 300 general agents to      
market its products consisting of traditional whole life insurance, individual  
term life, hospitalization, PPO major medical policy, accident and disability   
income. During 1999, management of Lifeline reduced its marketing efforts, while
it contemplated alternate business plans. In 2000, management of Lifeline       
developed a new marketing plan for Lifeline. Existing products were analyzed and
new products were introduced to existing agents during the fourth quarter 2000, 
with an emphasis within the payroll deduction market. Those actions had little  
impact on 2000 operating results of Lifeline, but have resulted in significant  
improvements during 2001.                                                       

      Lifeline has an agreement with Combined to use Combined's facilities
and equipment and pays expenses associated with their use. Lifeline's quarterly 
statement as of September 30, 2001, filed with the Texas Commissioner of        
Insurance, reflects admitted assets of $3,970,857, capital and surplus of       
$3,053,360, and premiums for the nine months ended September 30, 2001, of       
$500,762.                                                                       

PREMIUM ANALYSIS                                                                

                                                                [Download Table]


Direct Premiums (000's)    2000        1999      1998       1997        1996  
-----------------------  ---------  ---------  ---------  ---------  ---------
                                                                              
Ordinary life            $      77  $     108  $     165  $     164  $     160
Individual A&H                 521        606        647        753        778
Group A&H                       22         22         24         13         --
                         ---------  ---------  ---------  ---------  ---------
Total                    $     620  $     736  $     836  $     930  $     938
                         =========  =========  =========  =========  =========

                                                                [Download Table]


Reinsurance Ceded                                                       
Premiums (000's)     2000       1999       1998       1997        1996  
-----------------  ---------  ---------  ---------  ---------  ---------
                                                                        
Ordinary life      $       9  $       8  $       8  $      10  $       9
Individual A&H            20         21         22         20         22
Group A&H                  0          0         --         --         --
                   ---------  ---------  ---------  ---------  ---------
Total              $      29  $      29  $      30  $      30  $      31
                   =========  =========  =========  =========  =========

                                                                [Download Table]


Net Premiums &                                                                 
Deposit Funds (000's)       2000        1999      1998       1997       1996   
------------------------  ---------  ---------  ---------  ---------  ---------
                                                                               
Ordinary life             $      68  $     100  $     157  $     154  $     151
Individual A&H                  501        585        625        733        756
Group A&H                        22         22         24         13         --
                          ---------  ---------  ---------  ---------  ---------
Total                     $     591  $     707  $     806  $     900  $     907
                          =========  =========  =========  =========  =========

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         Lifeline's payments to Combined under a cost sharing agreement for home
office facilities, equipment and employee salaries are as follows:              

                                                                [Download Table]


Year                Home Office Facilities and Equipment  Employee Salaries
----                ------------------------------------  -----------------
                                                                           
1999                        $    29,584                       $29,873      
2000                             29,202                        36,375      
Nine months ended                                                          
September 30, 2001               25,586                        32,162      

LEGAL PROCEEDINGS                                                               

         Lifeline is unaware of any pending litigation to which it is a party or
to which any of its property is subject.                                        

MARKET FOR LIFELINE COMMON STOCK AND RELATED SECURITYHOLDER MATTERS             

         Lifeline common stock is not listed or actively traded through security
brokerage firms, and there is no over-the-counter trading activity. There have  
been no cash dividends paid since the inception of Lifeline. There are 34       
holders of record of Lifeline common stock.                                     

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS - LIFELINE              

      The following information is furnished with respect to each director
and executive officer of Lifeline.                                              

                                                        [Enlarge/Download Table]


                          YEAR FIRST                                                     
                          ELECTED AS                                                     
NAME OF DIRECTOR OR       DIRECTOR OF  POSITIONS            PRINCIPAL OCCUPATION         
EXECUTIVE OFFICER    AGE   LIFELINE    WITH LIFELINE        FOR THE PAST FIVE YEARS      
-----------------    ---  -----------  -------------        -----------------------      
                                                                                         
Gary C. Cole         58      1988      Director, President  President of Lifeline and    
                                                            President and Chief Operating
                                                            Officer of Combined          

Donald F. Bagozzi    64       n/a      Vice President-      Vice President-Marketing of  
                                       Marketing            Lifeline and Combined; VP    
                                                            Marketing of Statesman       
                                                            National Life                

Betty M. Mitchell    51      1985      Director, Corporate  Corporate Secretary of       
                                       Secretary            Lifeline and Combined        

Robert C. Norman     38      1996      Director             Executive Vice President of  
                                                            Texas State Bank             

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                                                                [Download Table]
                                                                              

Jimmie M. Procell  73  1985  Director          Retired; President of          
                                               Combined from April 1984,      
                                               through January 1988, and      
                                               President of Lifeline from July
                                               1985, through January 1988     

Milo V. Reamy      72  1986  Director, Vice    Vice President- Claims of      
                             President-Claims  Lifeline and Combined          

Tommy D. Rowell    61   n/a  Vice President-   Vice President-Underwriting    
                             Underwriting      of Lifeline and Second Vice    
                                               President-Underwriting of      
                                               Combined                       

        All directors and officers are elected for a term of one year or until
their successors have been duly elected and qualified.                          

   There are no family relationships among the officers or directors
listed, and there are no arrangements or understandings pursuant to which any of
them were elected as officers or directors.                                     

 During the past five years, there have been no events under any
bankruptcy act, no criminal proceedings and no judgments or injunctions material
to the evaluation of the ability and integrity of any director or executive     
officer of Lifeline who is expected to serve in such capacity after the Lifeline
Exchange.                                                                       

EXECUTIVE COMPENSATION - LIFELINE                                               

       There are no officers' salaries of Lifeline. No employees are covered
by a group insurance plan. No option has been granted to any employee to        
purchase securities from Lifeline. There are no pension or retirement benefit   
plans. Lifeline directors received an aggregate of $100 in director's fees from 
Lifeline in 1999 and none since then.                                           

CERTAIN TRANSACTIONS - LIFELINE                                                 

   W.P. "Red" Little and Regina Little Rooney are control persons of
Lifeline. Other companies and business ventures owned by Mr. Little and Ms.     
Rooney which do business with Lifeline and their ownership interest are:        

                                                                [Download Table]


                                                    Mr. Little  Ms. Rooney
                                                    ----------  ----------

                                                                          
Little Rooney & Little                                     50%         50%
Combined Underwriters Life Insurance Company             78.2%       14.4%
Regina Little Rooney dba Little Rooney Agency            none         100%
W.P. "Red" Little dba Underwriters Advance Funding        100%       none 

        Lifeline has a general agents agreement with Little & Rooney Insurance
Agency which provides for payment of commissions and override commissions by    
Lifeline to Little & Rooney Insurance Agency. The                               

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amount paid by Lifeline to Little & Rooney Insurance Agency was $33,357 in 1999,
$25,083 in 2000 and was $16,550 for the nine-month period ended September 30,   
2001.                                                                           

    Lifeline has an agreement with Underwriters Advanced Funding under
which Underwriters Advance Funding pays advance commissions which would         
otherwise be payable by Lifeline to its agents/agencies. The renewal commissions
payable for such advanced business are assigned by agents/agencies to           
Underwriters Advance Funding and Lifeline pays the assigned commissions to      
Underwriters Advance Funding. The amount of such assigned commissions paid by   
Lifeline to Underwriters Advance Funding was $18,447 in 1999, $25,993 in 2000   
and was $68,205 for the nine-month period ended September 30, 2001.             

A cost sharing agreement exists between Lifeline and Combined 
Underwriters Life Insurance Company for home office facilities and equipment and
for employee salaries. The amount paid by Lifeline to Combined for home office  
facilities and equipment was $29,584 in 1999, $29,202 in 2000 and was $25,585   
for the nine-month period ended September 30, 2001. The amount paid by Lifeline 
to Combined for employee salaries was $29,873 in 1999, $36,375 in 2000, and was 
$32,162 for the nine-month period ended September 30, 2001.                     

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

    Combined and Lifeline have had no disagreements with its certified
public accountants regarding accounting and financial matters required to be    
disclosed herein during the past two fiscal years.                              

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 COMPARISON OF RIGHTS OF SECURITYHOLDERS

       Upon consummation of the Combined Exchange and the Lifeline Exchange,
the holders of issued and outstanding Combined and Lifeline stock will receive  
Citizens Class A common stock. The rights of the holders of Citizens shares are 
governed by Citizens' Articles of Incorporation, its bylaws and Colorado law,   
while the rights of holders of Combined and Lifeline shares are governed by     
their respective Articles of Incorporation, bylaws and Texas law. In most       
respects, the rights of holders of Citizens Class A common stock and holders of 
Combined and Lifeline shares are similar. The following is a brief comparison of
the rights of the holders of Combined and Lifeline stock, and Citizens Class A  
common stock.                                                                   

AUTHORIZED SHARES                                                               

         The aggregate number of shares which Citizens is authorized to issue is
50,000,000 shares of Class A common stock with no par value and 1,000,000 shares
of Class B common stock with no par value; of which 24,417,118 shares of such   
Class A common stock and 711,040 shares of Class B common stock are issued,     
fully paid and non-assessable.                                                  

         The aggregate number of shares which Combined is authorized to issue is
1,500,000 shares of common stock with a par value of $1.00 per share, of which  
1,000,000 shares of such Combined stock are issued and outstanding, fully paid  
and non-assessable.                                                             

         The aggregate number of shares which Lifeline is authorized to issue is
700,000 shares of common stock with a par value of $1.00 per share, of which    
700,000 shares of such Lifeline stock are issued and outstanding, fully paid and
non-assessable.                                                                 

The foregoing numbers do not include treasury shares.         

DIVIDEND RIGHTS                                                                 

  If Citizens were to declare and pay any cash dividends, the cash
dividends paid upon each share of Citizens Class A common stock would be twice  
the cash dividends paid on each share of Citizens Class B common stock.         

       If Combined were to declare and pay any dividends, the dividends paid
upon the shares of Combined stock would be the same for all shares.             

       If Lifeline were to declare and pay any dividends, the dividends paid
upon the shares of Lifeline stock would be the same for all shares.             

VOTING RIGHTS                                                                   

         Those who hold Combined stock on the date the Combined Exchange becomes
effective will be entitled as a group to hold approximately 860,000 shares of   
Citizens Class A common stock (assuming a market value of Citizens Class A      
common stock of $10.00 per share), or approximately 3.4% of the Class A shares  
that Citizens anticipates will then be outstanding. Those who hold Lifeline     
stock on the date the Lifeline Exchange becomes effective will be entitled as a 
group to hold approximately 350,000 shares of                                   

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Citizens Class A common stock (assuming a market value of Citizens Class A      
common stock of $10.00 per share), or approximately 1.4% of Class A shares that 
Citizens anticipates will then be outstanding.                                  

       The voting rights of Citizens Class A common stock and Class B common
stock are equal in all respects except that the holders of Class B common stock 
have the exclusive right to elect a simple majority of the members of Citizens' 
Board of Directors, and the holders of the Class A common stock have the        
exclusive right to elect the remaining directors. The holders of Citizens common
stock do not have cumulative voting rights in the election of directors.        

       Each outstanding share of Combined stock is entitled to one vote upon
each matter submitted to a vote of the shareholders of Combined. Each           
outstanding share of Lifeline stock is entitled to one vote upon each matter    
submitted to a vote of the shareholders of Lifeline. Neither the Combined nor   
Lifeline shareholders have cumulative voting rights in the election of directors
of the respective companies.                                                    

   The Articles of Incorporation of Citizens provide that when, with
respect to any action to be taken by Citizens shareholders, the Colorado        
Corporation Code (now superseded by the Colorado Business Corporation Act)      
requires the affirmative vote of the holders of two-thirds of the outstanding   
shares entitled to vote thereon, or of any class or series, such action may be  
taken by the affirmative vote of the holders of a majority of the outstanding   
shares entitled to vote on such action. The power to amend the Articles of      
Incorporation, approve mergers and approve extraordinary asset transfers are all
subject to this requirement. For Combined and Lifeline, the Texas Business      
Corporation Act requires the affirmative vote of two-thirds of the outstanding  
shares to approve the same transactions. With respect to the Combined Exchange  
and the Lifeline Exchange, respectively, the approval of two-thirds of the      
outstanding Combined shares and two- thirds of the outstanding Lifeline shares  
entitled to vote is required. Each share of Combined stock is entitled to one   
vote, with respect to the Combined Exchange. Each share of Lifeline stock is    
entitled to one vote, with respect to the Lifeline Exchange.                    

      The bylaws of Combined and Lifeline provide that the power to alter,
amend, or repeal their respective bylaws or to adopt new bylaws is vested in the
respective Boards of Directors. However, under the Texas Business Corporation   
Act, the Combined and Lifeline shareholders have the right to amend and repeal  
the respective bylaws of Combined and Lifeline even thought the respective      
Boards of Directors also have this right. Citizens' Articles of Incorporation   
provide that Citizens' Board of Directors has the power to enact, alter, amend  
and repeal Citizens' bylaws not inconsistent with the laws of Colorado or       
Citizens' Articles of Incorporation, as the Board of Directors deems best for   
the management of Citizens; however, Colorado statutes give shareholders the    
right to amend and repeal bylaws even if not so provided for in the bylaws      
themselves.                                                                     

       Special meetings of Combined shareholders may be called by Combined's
President, its Board of Directors or by the holders of 10% or more of all       
Combined shares entitled to vote. Special meetings of Lifeline shareholders may 
be called by Lifeline's President, or its Board of Directors, and shall be      
called by the President or Secretary at the written request of the holders of   
not less than one-fourth of all outstanding shares of stock of Lifeline. Special
meetings of Citizens' shareholders may be called by the Chairman of the Board,  
by the Board of Directors, or by the holders of 10% or more of all Citizens'    
shares entitled to vote.                                                        

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         A majority of the shares of stock entitled to vote constitutes a quorum
under the bylaws of both Combined and Lifeline. The bylaws of Citizens provide  
that one-third of the votes entitled to be cast on a matter by a voting group   
shall constitute a quorum of that voting group.                                 

    The bylaws of Citizens, Combined and Lifeline all provide that the
shareholders may take action without a meeting, and all shareholders entitled to
vote must consent to the action in writing.                                     

PREEMPTIVE RIGHTS                                                               

        Authorized Combined, Lifeline and Citizens shares may be issued at any
time, and from time to time, in such amounts and for such consideration as may  
be fixed by the Boards of Directors of the respective corporations. No holder of
shares has any pre-emptive or preferential right to purchase or to subscribe for
any shares of capital stock or other securities which may be issued by their    
respective corporations.                                                        

LIABILITY OF DIRECTORS                                                          

    As authorized by Colorado law, Citizens' Articles of Incorporation
contain a provision to the effect that no director of Citizens shall be         
personally liable to Citizens or any of its shareholders for damages for any    
breach of duty as a director except to the extent this provision is limited by  
law. There is no provision in the Articles of Incorporation of either Combined  
or Lifeline limiting the liability of directors.                                

LIQUIDATION RIGHTS                                                              

         In the event of any liquidation, dissolution or winding up of Citizens,
Combined, or Lifeline, whether voluntary or involuntary, the holders of shares  
are entitled to share, on a share-for share basis, any of the assets or funds in
their respective corporations which are distributable to the shareholders upon  
such liquidation, dissolution or winding up.                                    

ASSESSMENT AND REDEMPTION                                                       

         Citizens shares to be issued upon consummation of the Combined Exchange
and the Lifeline Exchange will be fully paid and nonassessable. Combined and    
Lifeline shares are deemed to be fully paid and nonassessable. Citizens',       
Combined's and Lifeline's shares of stock of all classes are not subject to     
redemption, conversion or further assessment.                                   

TRANSFER AGENT                                                                  

  The transfer agent for shares of Combined stock is Combined. The
transfer agent for shares of Lifeline stock is Lifeline. The transfer agent for 
Citizens shares is Mellon Investor Services LLC, Dallas, Texas.                 

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 EXPERTS

The consolidated financial statements of Citizens, Inc. and   
subsidiaries as of December 31, 2000 and 1999, and for each of the years in the 
three year period ended December 31, 2000, are incorporated herein by reference 
to Citizens, Inc.'s Annual Report on Form 10-K for the Year Ended December 31,  
2000 and are so included herein in reliance upon the report of KPMG LLP,        
independent certified public accountants, appearing in such Annual Report on    
Form 10-K and upon the authority of such firm as experts in accounting and      
auditing.                                                                       

 LEGAL MATTERS

        The legality under Colorado law of Citizens Class A common stock to be
issued pursuant to the Combined Exchange and the Lifeline Exchange will be      
passed upon by Jones & Keller, P.C., Denver, Colorado. Jones & Keller, P.C. has 
also given the tax opinions referred to under "Certain Federal Income Tax       
Consequences." Certain legal matters in connection with the Combined Exchange   
and the Lifeline Exchange will be passed upon for Combined and Lifeline by Pye, 
Dobbs & Berry.                                                                  

 OTHER MATTERS

   COMBINED. The Combined Board does not intend to bring any matters
before the meeting other than those specifically set forth in the notice of the 
meeting accompanying this proxy statement-prospectus and it does not know of any
matters to be brought before the meeting by others. If any other matters        
properly come before the meeting, it is the intention of the persons named in   
the accompanying proxies to vote such proxies in accordance with the judgment of
the Combined Board.                                                             

   LIFELINE. The Lifeline Board does not intend to bring any matters
before the meeting other than those specifically set forth in the notice of the 
meeting accompanying this proxy statement-prospectus and it does not know of any
matters to be brought before the meeting by others. If any other matters        
properly come before the meeting, it is the intention of the persons named in   
the accompanying proxies to vote such proxies in accordance with the judgment of
the Lifeline Board.                                                             

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                                                                      APPENDIX A

PLAN AND AGREEMENT OF EXCHANGE

CITIZENS, INC.
 AND
COMBINED UNDERWRITERS LIFE INSURANCE COMPANY

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                                                                      APPENDIX A

PLAN AND AGREEMENT OF EXCHANGE

CITIZENS, INC.
 AND
COMBINED UNDERWRITERS LIFE INSURANCE COMPANY

     This Plan and Agreement of Exchange ("Agreement") is by and between
Citizens, Inc. ("Citizens"), a Colorado corporation and Combined Underwriters   
Life Insurance Company ("Combined"), a Texas insurance corporation.             

 WITNESSETH:

       WHEREAS, Combined is a stipulated premium life insurance company duly
organized and existing under the laws of the State of Texas; and                

      WHEREAS, Citizens is a corporation duly organized and existing under
the laws of the State of Colorado; and                                          

      WHEREAS, the respective Boards of Directors of Combined and Citizens
have voted to effect a statutory exchange under both the Texas Business         
Corporation Act and the Colorado Business Corporation Act whereby Citizens will 
acquire all of the issued and outstanding common stock of Combined in exchange  
for shares of Class A Common Stock of Citizens upon the conditions hereinafter  
stated;                                                                         

       NOW, THEREFORE, for good and valuable consideration consisting of the
premises below it is agreed between the parties as follows:                     

 ARTICLE I
 THE TRANSACTION

         1.1 Subject to approval of this Agreement by the Insurance Commissioner
of the State of Texas, and subject to the conditions set forth herein, on the   
"Effective Date" as herein defined, Citizens shall acquire all of the issued and
outstanding common stock of Combined for shares of Citizens Class A Common Stock
pursuant to a share exchange (the "Exchange") under Part Five of the Texas      
Business Corporation Act and Article 111 of the Colorado Business Corporation   
Act as set forth herein, and for no cash or other property. The Exchange shall  
be completed at a closing ("Closing") on a date ("Closing Date") which shall be 
as soon as reasonably possible, and as mutually agreed between the parties, on  
or before the tenth business day after regulatory and stockholder approvals are 
obtained in accordance with applicable law.                                     

         1.2 On the Effective Date, the separate corporate existence of Combined
shall be unaffected and unimpaired and it shall continue to be a Texas          
stipulated premium life insurance corporation subject to and governed by the    
laws of the State of Texas, with all of its rights, powers, duties, purposes,   
franchises and licenses as are in existence on the Effective Date. Articles of  
Exchange, in the form attached hereto as Exhibit A subject to any modifications 
as may be authorized or required in accordance with applicable law              

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(collectively the "Exchange Filings"), shall be completed and executed by the   
parties and filed by Citizens as contemplated by this Agreement as soon as      
reasonably possible, and on or before the tenth business day after all          
regulatory and shareholder approvals are obtained in accordance with applicable 
law.                                                                            

       1.3 If this Agreement is duly adopted by the holders of the requisite
number of shares of Combined, in accordance with the applicable laws and subject
to the other provisions hereof, such documents as may be required by law to     
accomplish the acquisition of Combined by Citizens shall be delivered to and    
filed with the Commissioner of Insurance of the State of Texas (and any other   
governmental entity with which a filing is required), by Citizens and upon the  
approval of this Agreement as required by requisite states' laws, the           
appropriate documents to accomplish the Exchange shall then be filed as required
by law to effectuate the transactions contemplated hereby, and the Exchange     
shall become effective at the Closing Date. The Closing Date shall be the       
Effective Date for the Exchange.                                                

ARTICLE II
 ISSUANCE AND EXCHANGE OF SHARES

         2.1 The manner and basis of exchanging shares of Combined into Citizens
pursuant to the Exchange is as follows: As set forth in Section 2.2 and Section 
2.4, on the Effective Date each shareholder of Combined shall receive a number  
of shares of Citizens Class A Common Stock equal in market value ("Market       
Value") to the Combined stock owned by such shareholder. For purposes of this   
Agreement, the per share Market Value of Citizens Class A Common Stock shall be 
equal to the average closing price of such stock as reported by the American    
Stock Exchange for the 20 trading days immediately preceding (but not including)
the Effective Date; and the Market Value of the Combined stock shall be $8.64   
per share. The offer and sale of the Citizens Class A Common Stock to be issued 
hereunder shall be registered by Citizens pursuant to the Securities Act of 1933
and applicable state securities laws, as provided in Section 5.3 hereof.        

2.2 Upon the Effective Date, each holder of a certificate or  
certificates representing shares of Combined, upon presentation and surrender of
such certificate or certificates to the Exchange Agent of Citizens, shall be    
entitled to receive the consideration set forth herein, except that holders of  
those shares as to which dissenters' rights shall have been asserted and        
perfected pursuant to Texas law shall not be converted into shares of Citizens  
Class A Common Stock, but shall represent only such rights as are permitted     
under the Texas Business Corporation Act. Combined shall pay or otherwise       
satisfy payment relating to shares as to which dissenters' rights have been     
asserted and perfected pursuant to Texas law solely out of its own funds;       
Citizens shall not contribute or otherwise be liable for any payments to such   
persons arising from the Exchange. Upon such presentation, surrender, and       
exchange as provided in this Section 2.2, certificates representing shares of   
Combined previously held shall be canceled. Until so presented and surrendered, 
each certificate or certificates which represented issued and outstanding shares
of Combined at the Effective Date shall be deemed for all purposes to evidence  
the right to receive the consideration set forth in Section 2.1 of this         
Agreement. If a certificate or the certificates representing shares of Combined 
have been lost, stolen, mutilated or destroyed, the Exchange Agent shall require
the submission of an indemnity agreement and may require the submission of a    
bond in lieu of such certificate.                                               

         2.3 The stock transfer books of Combined shall be closed on the Closing
Date, and thereafter no transfers of the common stock of Combined will be made. 

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        2.4 No fractional shares of Citizens stock shall be issued as a result
of the Exchange. In the event the exchange of shares results in any shareholder 
being entitled to a fraction of a whole share of Citizens stock, the number of  
shares to be issued to such shareholder shall be rounded up to the nearest whole
share.                                                                          

ARTICLE III 
 REPRESENTATIONS, WARRANTIES AND COVENANTS OF COMBINED

      To the best of its knowledge and belief, Combined hereby represents,
warrants and covenants to Citizens as follows, except as stated in the Combined 
Disclosure Statement attached hereto as Exhibit B:                              

      3.1 Combined is a life insurance corporation duly organized, validly
existing and in good standing under the insurance laws of Texas with full       
corporate power and authority to own the respective properties which it now     
owns; and is qualified or licensed to conduct its business and is in good       
standing in all states where such qualifications or licensing is required, and  
has full corporate power to enter into and, upon the appropriate approvals as   
required by law, to consummate the transactions contemplated by this Agreement. 

     3.2 The Articles of Incorporation and Bylaws of Combined, copies of
which have been delivered to Citizens, are complete and accurate and the minute 
books of Combined contain a record of all meetings and corporate actions of the 
shareholders and Board of Directors of Combined that is complete and accurate in
all material respects.                                                          

    3.3 The aggregate number of shares which Combined is authorized to
issue is one million five hundred thousand (1,500,000) shares of $1.00 par value
common stock and 1,000,000 such shares are issued and outstanding, fully paid   
and non-assessable. Combined has no outstanding options, warrants or other      
rights to purchase, or subscribe to, or securities convertible into or exchange 
for any shares of capital stock.                                                

     3.4 Combined has complete and unrestricted power to enter into and,
upon the appropriate approvals as required by law, to consummate the            
transactions contemplated by this Agreement.                                    

 3.5 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated  
herein by Combined will conflict with or result in a breach or violation of the 
Articles of Incorporation or Bylaws of Combined or any contracts, agreements,   
pledges, loans or any other obligations of Combined.                            

        3.6 Combined has delivered to Citizens its annual convention statement
for the year ended December 31, 2000. Also, Combined has delivered to Citizens  
its quarterly financial statement for the quarter and six months ended June 30, 
2001. All such statements, herein sometimes called "Combined Financial          
Statements", present fairly, in all material respects, the admitted assets,     
liabilities and surplus of Combined as of the dates thereof, and the results of 
operations and its cash flows for the year then ended, in conformity with the   
accounting practices prescribed or permitted by the Insurance Department of the 
State of Texas.                                                                 

A-3 

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         3.7 The assets of Combined have admissible values at least equal to the
amounts attributed to them on its June 30, 2001 statutory financial statement   
and will have a value at least equal to those set forth in the December 31, 2000
annual convention statement.                                                    

      3.8 Combined has delivered to Citizens a copy of each of the Federal
income tax returns of Combined for the years ended December 31, 1999 and        
December 31, 2000. The provisions for taxes paid by Combined are believed by    
Combined to be sufficient for payment of all accrued and unpaid Federal, state, 
county and local taxes of Combined (including any penalties or interest payable)
whether or not disputed for the periods then ended and for all prior fiscal     
periods. All returns and reports of information required or requested by        
Federal, state, county and local tax authorities have been filed or supplied in 
a timely fashion and all such information is true and correct in all material   
respects. Provision has been made in Combined financial statements for the      
payment of all taxes due to date by Combined, including accrued taxes for the   
current year ended December 31, 2001. No Federal income tax return of Combined  
is currently under audit.                                                       

      3.9 Since December 31, 2000, there has not been any material adverse
change in the business or condition, financial or otherwise, of Combined,       
including any loss or damages to any of its assets, properties or rights as     
shown on December 31, 2000 Combined statutory statement as filed with the Texas 
Department of Insurance that would be material to Combined taken as a whole.    

3.10 Attached to Exhibit B is a listing of all pending legal  
proceedings or known regulatory inquiries involving Combined and, except for    
these proceedings, there are no legal proceedings or regulatory proceedings     
involving claims pending, or to the knowledge of the officers of Combined,      
threatened against Combined or affecting any of its assets, or properties.      
Combined is not in any breach or violation of or default under any contract or  
instrument to which Combined is a party, and no event has occurred which with   
the lapse of time or action by a third party could result in a breach or        
violation of or default by Combined under any contract or other instrument to   
which Combined is a party or by which it or any of its property may be bound or 
affected, or under its Articles of Incorporation or Bylaws, or any court order, 
statute, ruling or regulation applicable to Combined which breach or violation  
of or default could have a material adverse effect on Combined.                 

 3.11 The execution and delivery of this Agreement has been duly
authorized and approved by Combined's Board of Directors.                       

   3.12 Combined has provided Citizens a copy of Combined's employee
manual and related documents which include a description of Combined's employee 
benefits. Except as shown in the material provided, Combined has no employment  
agreements.                                                                     

        3.13 Combined will call and hold a meeting of its shareholders as soon
as practicable after the date hereof, at which meeting the Board of Directors   
will, subject to its fiduciary obligations to shareholders, submit and recommend
the Agreement and transactions described herein to its shareholders, and, if the
requisite approval by such shareholders is obtained, will undertake promptly to 
consummate the Exchange as set forth herein.                                    

         3.14 Combined shall not enter into or consummate any transactions prior
to the Effective Date other than in the ordinary course of business, will pay no
shareholder dividend and will not intentionally enter into any agreement or     
transaction that would materially and adversely affect its financial condition, 

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and will not increase the compensation of any of its employees other than in the
usual course of business consistent with past practices.                        

  3.15 Combined has provided to Citizens all contracts, other than
insurance policies issued or assumed by Combined, to which Combined is a party. 

       3.16 The representations and warranties of Combined shall be true and
correct as of the Effective Date as well as the date hereof.                    

       3.17 Combined has delivered, or will deliver to Citizens, any reports
relating to the financial and business condition of Combined which are prepared 
after the date of this Agreement and sent to regulators after the execution date
of this Agreement.                                                              

       3.18 No representation or warranty by Combined in this Agreement, the
Combined Disclosure Statement or any certificate delivered pursuant hereto      
contains any untrue statement of a material fact or omits to state any material 
fact necessary to make such representation or warranty not misleading.          

ARTICLE IV
 REPRESENTATIONS, WARRANTIES AND COVENANTS OF CITIZENS

      To the best of its knowledge and belief, Citizens hereby represents,
warrants and covenants to Combined as follows, except as stated in the Citizens 
Disclosure Statement attached hereto as Exhibit C:                              

       4.1 Citizens is a corporation duly organized, validly existing and in
good standing under the laws of Colorado, with full power and authority to own  
the respective properties which it now owns; and is qualified or licensed to    
conduct its business and is in good standing in all states where such           
qualifications or licensing is required.                                        

       4.2 The total number of shares of both classes of capital stock which
Citizens is authorized to issue is 50,000,000 shares of Class A Common Stock    
with no par value and 1,000,000 shares of Class B common stock of no par value. 
As of the date hereof, there are 26,642,938 shares of Class A Common Stock      
issued, of which 24,417,118 are outstanding and 711,040 shares of Class B common
stock are issued and outstanding. Citizens has no outstanding options, warrants 
or other rights to purchase, or subscribe to, or securities convertible into or 
exchangeable for any shares of capital stock. The shares to be issued in        
connection with the Exchange shall be, and all Citizens stock currently issued  
or outstanding is, validly issued, fully paid and nonassessable.                

 4.3 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated  
herein by Citizens will conflict with or result in a breach or violation of the 
Articles of Incorporation or Bylaws of Citizens.                                

  4.4 The execution of this Agreement has been duly authorized and
approved by Citizens' Board of Directors. Citizens has complete and unrestricted
power to enter into and, upon the appropriate approvals as required by law      
(which such approvals are listed on the attached Exhibit D), to consummate the  
transaction contemplated by this Agreement.                                     

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4.5 Citizens has delivered to Combined its annual consolidated
financial statement for the year ended December 31, 2000. Also, Citizens has    
delivered to Combined its consolidated financial statements for the quarter and 
six months ended June 30, 2001. All such statements, herein sometimes called    
"Citizens Financial Statements", are complete and correct in all material       
respects and, together with the notes to these financial statements, present    
fairly the financial position and results of operations of Citizens for the     
period included and have been prepared in accordance with generally accepted    
accounting principles consistently applied.                                     

      4.6 Since December 31, 2000, there has not been any material adverse
change in the business or condition, financial or otherwise, of Citizens and its
subsidiaries taken as a whole, including any material loss or damages to any of 
its assets, properties or rights from that shown on the Citizens Financial      
Statements.                                                                     

       4.7 Citizens has delivered to Combined a listing of all pending legal
proceedings involving Citizens and its consolidated subsidiaries as set forth on
Exhibit C and, except for these proceedings, there are no legal proceedings     
pending, or to the knowledge of the officers of Citizens, threatened against    
Citizens or affecting any of its assets or properties and Citizens is not in any
material breach or violation of or default under any contract or instrument to  
which Citizens is a party, and no event has occurred which with the lapse of    
time or action by a third party could result in a material breach or violation  
of or default by Citizens under any contract or other instrument to which       
Citizens is a party or by which it or any of its properties may be bound or     
affected, or under its Articles of Incorporation or Bylaws, or any court order, 
statute, ruling or regulation applicable to Citizens. The execution, delivery   
and performance of the Agreement by Citizens will not with the lapse of time or 
action by a third party result in a material breach or violation of or default  
by Citizens under any contract or other instrument to which Citizens is a party 
or by which it or any of its properties may be bound of affected, or under its  
Articles of Incorporation or Bylaws, or any court order, statute, ruling or     
regulation applicable to Citizens.                                              

        4.8 Citizens' shareholders are not required to approve the issuance of
shares pursuant to this Agreement.                                              

         4.9 Citizens is the owner of all of the issued and outstanding stock of
Citizens Insurance Company of America.                                          

    4.10 Citizens has delivered to Combined true and correct copies of
Citizens Annual Report to Shareholders for the years ended December 31, 1999 and
2000 and each of its other reports to shareholders and filings with the         
Securities and Exchange Commission ("SEC") for the years ended December 31,     
1998, 1999, and for 2000. Citizens will also deliver to Combined on or before   
the Closing Date any reports relating to the financial and business condition of
Citizens which are filed with the SEC after the date of this Agreement and any  
other reports sent generally to its shareholders after the date of this         
Agreement.                                                                      

     4.11 Citizens has duly filed all reports required to be filed by it
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, (the "Federal Securities Laws"). No such reports, or any      
reports sent to the shareholders of Citizens generally, contained any untrue    
statement of material fact or omitted to state any material fact required to be 
stated therein or necessary to make the statements in such report, in light of  
the circumstances and time under which they were made, not misleading.          

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   4.12 Citizens has received, and to the extent it deems necessary,
reviewed the various agent contracts, commission agreements and the other       
contracts included in Exhibit B between Combined and Little Insurance Agency.   

       4.13 The representations and warranties of Citizens shall be true and
correct as of the Effective Date as well as the date hereof.                    

 ARTICLE V
 OBLIGATIONS OF THE PARTIES PENDING THE EFFECTIVE DATE

   5.1 This Agreement shall be duly submitted to the shareholders of
Combined for the purpose of considering and acting upon this Agreement in the   
manner required by law at a meeting of shareholders on a date selected by       
Combined, such date to be the earliest practicable date after the proxy         
statement may first be sent to Combined shareholders without objection by       
applicable governmental authorities, provided that Combined will have at least  
30 days to solicit proxies. Citizens will furnish to Combined the information   
relating to Citizens required by the Federal Securities Laws to be included in  
the proxy statement. Citizens represents and warrants that at the time of the   
Combined shareholders' meeting, the proxy statement, insofar as it relates to   
Citizens and contains information furnished by Citizens specifically for use in 
such proxy statement, (a) will comply in all material respects with the         
provisions of the Federal Securities Laws and (b) will not contain any untrue   
statement of a material fact or omit to state a material fact required to be    
stated therein or necessary to make the statements therein, in light of the     
circumstances under which they were made, not misleading. Combined represents   
and warrants that at the time of the Combined shareholder meeting, the proxy    
statement, insofar as it relates to Combined and contains information furnished 
by Combined specifically for use in such proxy statement, will not contain any  
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the  
circumstances under which they were made, not misleading. The Board of Directors
of Combined, subject to its fiduciary obligations to shareholders, shall use    
reasonable efforts to obtain the requisite approval of Combined shareholders of 
this Agreement and the transactions contemplated herein. Citizens and Combined  
shall take all reasonable and necessary steps and actions to comply with and to 
secure Combined's shareholder approval of this Agreement and the transactions   
contemplated herein as may be required by applicable law.                       

  5.2 At all times prior to the Effective Date, but during regular
business hours, each party will permit the other to examine its books and       
records and the books and records of its affiliates and will furnish copies     
thereof on request. It is recognized that, during the performance of this       
Agreement, each party may provide the other party with information that is      
confidential or proprietary in nature. During the term of this Agreement, and   
for four years following the termination of this Agreement, the recipient of    
such information shall protect such information from disclosure to persons,     
other than members of its own or affiliated organizations and its professional  
advisers, in the same manner as it protects its own confidential or proprietary 
information from unauthorized disclosure and shall not use such information to  
the competitive detriment of the disclosing party. In addition, if this         
Agreement is terminated for any reason, each party shall promptly return or     
cause to be returned all documents or other written records of such confidential
or proprietary information together with all copies of such writings and, in    
addition, shall destroy or shall maintain the information with the standard of  
care that is exercised with respect to its own confidential or proprietary      
information. No information shall be considered confidential or proprietary if  
it is                                                                           

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(a) information already in the possession of the party to whom disclosure is    
made, (b) information acquired by the party to whom the disclosure is made from 
other sources, or (c) information in the public domain or generally available to
interested persons or which at a later date passes into the public domain or    
becomes available to the party to whom disclosure is made without any wrongdoing
by the party or any of its affiliates or any third party to whom the disclosure 
is made.                                                                        

  5.3 Citizens and Combined shall promptly provide each other with
information as to any significant developments that materially hinder the       
performance of this Agreement, and shall promptly notify the other if it        
discovers that any of its representations, warranties and covenants contained in
this Agreement or in any document delivered in connection with this Agreement   
was not true and correct in all material respects or became untrue or incorrect 
in any material respect.                                                        

   As promptly as practicable after the execution of this Agreement,
Citizens will prepare and file with the Securities and Exchange Commission      
("Commission") a registration statement on Form S-4 (the "Registration          
Statement") covering the issuance of Citizens shares in the Exchange. Each of   
Citizens and Combined will use all reasonable efforts to have or cause the      
Registration Statement to become effective as promptly as practicable, and will 
take any action required to be taken under any applicable federal or state      
securities laws in connection with the issuance of shares of Citizens Common    
Stock in the Exchange. Citizens will use all reasonable efforts to cause the    
Registration Statement to remain effective through the Effective Date. Citizens 
and Combined will furnish all information concerning it and the holders of its  
capital stock as the other may reasonably request in connection with such       
actions.                                                                        

        Citizens will use all reasonable efforts to obtain all necessary state
securities laws or "blue sky" permits, approvals and registrations in connection
with the issuance of the Citizens Class A Common Stock in the Exchange.         

        As promptly as practicable after the Registration Statement shall have
become effective, Combined will mail a notice of special meeting to its         
stockholders entitled to notice of and to vote at the Combined Stockholders'    
Meeting.                                                                        

      If at any time prior to the Effective Date any event or circumstance
relating to Combined or any of its Affiliates, or its or their respective       
officers or directors should be discovered by Combined that should be set forth 
in an amendment to the Registration Statement, Combined will promptly inform    
Citizens, and Citizens will undertake to amend or supplement the Registration   
Statement and the prospectus contained therein accordingly.                     

      If at any time prior to the Effective Date any event or circumstance
relating to Citizens or any of its Affiliates, or to their respective officers  
or directors, should be discovered by Citizens that should be set forth in an   
amendment to the Registration Statement, Citizens will promptly inform Combined,
and Citizens will undertake to amend or supplement the Registration Statement   
and the prospectus contained therein accordingly.                               

       No amendment or supplement to the Registration Statement will be made
by Citizens without prior consultation with Combined. Citizens and Combined each
will advise the other, promptly after it receives notice thereof, of the time   
when the Registration Statement has become effective or any supplement or       
amendment has been filed, the issuance of any stop order suspending the         
effectiveness of the Registration                                               

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Statement, the suspension of the qualification of Citizens Common Stock issuable
in connection with the Exchange for offering or sale in any jurisdiction, any   
request by the staff of the Commission for amendment of the Registration        
Statement or the Proxy Statement, the receipt from the staff of the Commission  
of comments thereon or any request by the staff of the Commission for additional
information with respect thereto.                                               

 Citizens will use all reasonable efforts to cause the shares of
Citizens Common Stock to be issued in the Exchange to be approved for listing   
(subject to official notice of issuance) on the American Stock Exchange prior to
the Effective Date. To the knowledge of Citizens, there are no facts and        
circumstances that would preclude Citizens Common Stock to be issued in the     
Exchange from being approved for listing on the American Stock Exchange.        

        5.4 The parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order  
to consummate the transactions contemplated hereby as promptly as reasonably    
practicable.                                                                    

ARTICLE VI
REGULATORY FILINGS

    6.1 Within 15 days after the execution of this Agreement, Citizens
shall file with the Insurance Commissioner of Texas all of the regulatory       
approval documents required by Texas law in order to close this Agreement.      

 ARTICLE VII
CONDITIONS PRECEDENT TO THE CONSUMMATION OF THE EXCHANGE

   The following are conditions precedent to the consummation of the
Exchange, on or before the Effective Date:                                      

         7.1 Citizens and Combined shall have performed and complied with all of
their respective obligations hereunder which are to be complied with or         
performed on or before the Effective Date and shall provide one another at the  
Closing with a certificate to the effect that such party has performed each of  
the acts and undertakings required to be performed by it on or before the       
Closing Date pursuant to the terms of this Agreement.                           

 7.2 This Agreement shall have been duly and validly authorized,
approved and adopted, at a meeting of the shareholders of Combined duly and     
properly called for such purpose in accordance with the applicable law.         

      7.3 This Agreement is in all things subject to the provisions of the
applicable insurance laws and the regulations promulgated thereunder, and shall 
not become effective until approval of the Exchange is obtained from the        
Commissioner of Insurance of the State of Texas (and any other governmental     
entity with jurisdiction over the transaction) in accordance with the provisions
of the laws of said state. Citizens and Combined agree, as soon as practical    
after the execution and delivery of this Agreement, to file and to use          

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commercially reasonable efforts to obtain such approval of the transactions     
contemplated by this Agreement. Neither Citizens nor Combined shall be obligated
to file a suit or to appeal from any adverse ruling by the Commissioner of      
Insurance of the State of Texas, and neither Citizens nor Combined shall be     
obligated to make any material changes in any lawful, good faith management     
policy in order to gain such approval.                                          

       7.4 No action, suit or proceeding shall have been instituted or shall
have been threatened in writing before any court or other governmental body or  
by any public authority to restrain, enjoin or prohibit the Exchange, or which  
might subject any of the parties hereto or their directors or officers to any   
material liability, fine, forfeiture or penalty on the ground that the          
transactions contemplated hereby, the parties hereto or their directors or      
officers, have violated any applicable law or regulation, or have otherwise     
acted improperly in connection with the transactions contemplated hereby, and   
the parties hereto have been advised by counsel that, in the opinion of such    
counsel, such action, suit or proceeding raises substantial questions of law or 
fact which could reasonably be decided adversely to any party hereto or its     
directors or officers.                                                          

         7.5 The representations and warranties made by Citizens and Combined in
this Agreement shall be true in all material respects as though such            
representation and warranties had been made or given on and as of the Closing   
Date, except to the extent that such representations and warranties may be      
untrue on and as of the Closing Date because of (1) changes caused by           
transactions suggested or approved in writing by each party hereto or (2) events
or changes (which shall not, in the aggregate, have materially and adversely    
affected the business, assets, or financial condition of Citizens or Combined)  
during or arising after the date of this Agreement.                             

7.6 Combined shall have furnished Citizens with:              

            (1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Combined approving this Agreement and the  
transactions contemplated by it and directing the submission thereof to a vote  
of the shareholders of Combined;                                                

            (2) a certified copy of a resolution or resolutions duly
adopted by the requisite number of shareholders of Combined approving this      
Agreement and the transactions contemplated by it in accordance with applicable 
law;                                                                            

           (3) an opinion of Sneed, Vine & Perry, P.C., counsel to
Combined. dated as of the Effective Date as set forth in Exhibit E attached     
hereto; and                                                                     

              (4) an agreement from each "affiliate" of Combined, in the
form attached as Exhibit F.                                                     

7.7 Citizens shall furnish Combined with:                     

            (1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Citizens, approving this Agreement and the 
transactions contemplated by it; and                                            

               (2) opinions of Jones & Keller, P.C., counsel for Citizens,
dated as of the Effective Date, as set forth in Exhibits G and H attached       
hereto.                                                                         

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  7.8 Citizens and Combined shall approve and file the Articles of
Exchange, consistent with this Agreement, for this transaction with the         
requisite governmental authorities.                                             

      7.9 The Closing of the Plan and Agreement of Exchange for the common
stock of Lifeline Underwriters Life Insurance Company ("Lifeline") shall occur  
simultaneously with the closing of the Exchange.                                

7.10 On or before Closing Date, Combined will implement a plan
reasonably acceptable to Citizens that will replace the three insurance policy  
assets shown on page two of Combined's statutory statement (the "Policies") with
cash or other liquid, admissible assets of equal values acceptable to Citizens. 

ARTICLE VIII
 TERMINATION AND ABANDONMENT

8.1 Anything contained in this Agreement to the contrary      
notwithstanding, the Exchange may be terminated and abandoned at any time       
(whether before or after the approval and adoption thereof by the shareholders  
of Combined) prior to the Effective Date of such Exchange:                      

           (1) By mutual written consent of Citizens and Combined;

              (2) By Citizens or Combined, if any condition set forth in
Article VII has not been met or has not been waived;                            

             (3) By Citizens or Combined, if any suit, action or other
proceeding shall be pending or threatened by the federal or a state government  
before any court or governmental agency, in which it is sought to restrain,     
prohibit or otherwise affect the consummation of the Exchange;                  

           (4) By Citizens or Combined, if there is discovered any
material error, misstatement or omission in the representations and warranties  
of another party made herein;                                                   

                (5) By Citizens or Combined, if more than 2.5% of the shares
of Combined are properly perfected as to rights to dissent to the Exchange under
Section 5.11 of the Texas Business Corporation Act;                             

              (6) If the Texas Commissioner of Insurance issues an order
denying the application of Citizens to acquire control of Combined or Lifeline  
or fails to approve both applications within 120 days from its filing, this     
Agreement shall terminate in totality; or                                       

               (7) Any of the terms or conditions of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, by    
action taken by its Board of Directors; provided, however, that such action     
shall be taken only if, in the judgment of the Board of Directors taking the    
action, such waiver will not have a material adverse effect on the benefits     
intended under this Agreement to the party (or shareholders of the party)       
waiving such term or condition.                                                 

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ARTICLE IX
TERMINATION OF REPRESENTATIONS AND WARRANTIES AND CERTAIN AGREEMENTS

9.1 The respective representations, warranties, covenants and 
agreements of the parties hereto, shall expire with, and be terminated and      
extinguished by, the Exchange or at the time of the consummation thereof.       
Neither Party shall be under any liability whatsoever with respect to any such  
representation, warranty, covenant or agreement which does not so survive, it   
being intended that the sole remedy of the parties for a breach of any such     
representation, warranty, covenant or agreement shall be to elect not to proceed
with the Exchange if such breach has resulted in the failure to satisfy a       
condition precedent to such party's obligation to consummate the transactions   
contemplated hereby.                                                            

 ARTICLE X
 MISCELLANEOUS

        10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among  
the parties other than those set forth herein or those provided for herein.     

   10.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed  
to be an original instrument, but all such counterparts shall constitute but one
instrument.                                                                     

    10.3 Each of the parties hereto will pay its own fees and expenses
incurred in connection with the transactions contemplated by this Agreement.    
Citizens and Combined each represent to the other that it has not employed any  
investment bankers, brokers, finders or intermediaries in connection with the   
transaction contemplated hereby who might be entitled to any fee or other       
payment from Citizens or Combined or any subsidiary of any of them because of   
the consummation of the transactions contemplated by this Agreement.            

       10.4 All parties to this Agreement agree that if it becomes necessary
or desirable to execute further instruments or to make such other assurances as 
are deemed necessary, the party requested to do so will use its best efforts to 
provide such executed instruments or do all things necessary or proper to carry 
out the purpose of this Agreement.                                              

  10.5 This Agreement may be amended upon approval of the Board of
Directors of each party; provided that the definition of Market Value for the   
stock of Combined and/or Citizens shall not be amended without approval of the  
requisite shareholders of Combined.                                             

 10.6 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier  
service, fees prepaid, addressed as follows:                                    

                                                                [Download Table]
                                                                     
To Citizens:             To Combined:                                

Citizens, Inc.         . Combined Underwriters Life Insurance Company
400 E. Anderson Lane     307 N. Glenwood                             
Austin, Texas 78752      Tyler, Texas 75702                          
Attn:  Mark A. Oliver    Attn: Gary C. Cole                          
President                President                                   

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                                                                [Download Table]
                                                                              
with copies to:                                      with copies to:          

Jones & Keller, P.C.                                 Sneed, Vine & Perry, P.C.
1625 Broadway, Suite 1600                            901 Congress Ave.        
Denver, CO  80202                                    Austin, Texas 78701      
Attn:  Reid Godbolt, Esq.                            Attn: Jim Shawn, Esq.    

or such other addresses as shall be furnished in writing by any party, and any  
such notice or communication shall be deemed to have been given as of the date  
received.                                                                       

      10.7 No press release or public statement will be issued relating to
the transaction contemplated by this Agreement without prior approval of        
Citizens or Combined. However, either Citizens or Combined may issue at any time
any press release or other public statement it believes on the advice of its    
counsel it is obligated to issue to avoid liability under the law relating to   
disclosures, but the party issuing such press release or public statement shall 
make a reasonable effort to give the other party prior notice of and opportunity
to participate in such release or statement.                                    

  10.8 This Agreement shall be governed, construed and enforced in
accordance with the laws of Texas, without regard to any conflicts of law       
provisions.                                                                     

  10.9 This Agreement shall be deemed to have been drafted by both
parties, and therefore the rule against construing ambiguities against the party
drafting a contract shall be inapplicable to this Agreement.                    

10.10 If any provision of this Agreement is held invalid or   
unenforceable by any court of competent jurisdiction, the other provisions of   
this Agreement will remain in full force and effect. Any provision of this      
Agreement held invalid or unenforceable only in part or degree will remain in   
full force and effect to the extent not held invalid or unenforceable.          

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        IN WITNESS THEREOF, the parties have set their hands this the 20th day
of November, 2001.                                                              

                            COMBINED UNDERWRITERS LIFE INSURANCE
     COMPANY

            By: /s/ Gary C. Cole
                                        ----------------------------------------
                               Gary C. Cole, President

      CITIZENS, INC.

              By: /s/ Mark A. Oliver
                                       ---------------------------------------
                                 Mark A. Oliver, President

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                                                                       EXHIBIT A
ARTICLES OF EXCHANGE

CITIZENS, INC.
 AND
COMBINED UNDERWRITERS LIFE INSURANCE COMPANY

         ARTICLES OF EXCHANGE entered into this ___ day of ___________, 2001, by
and between Citizens, Inc., a Colorado corporation ("Citizens") and Combined    
Underwriters Life Insurance Company, a Texas corporation ("Combined").          

THIS IS TO CERTIFY:                                           

        FIRST: The parties which are parties to these Articles of Exchange are
Combined Underwriters Life Insurance Company, a Texas corporation and Citizens, 
Inc., a Colorado corporation, and each of said corporations agrees to have the  
$1.00 par value common stock of Combined (hereinafter the "Common Stock")       
acquired by Citizens in a share exchange (the "Exchange") as provided by these  
Articles of Exchange.                                                           

    SECOND: The name and state of incorporation of each party to these
Articles of Exchange are as follows: Combined Underwriters Life Insurance       
Company is a corporation incorporated under the laws of the State of Texas, and 
Citizens, Inc. is a corporation incorporated under the laws of the State of     
Colorado.                                                                       

THIRD: As to the Common Stock:                                

        A. On the Effective Date (as defined in Article TENTH below), each one
share of the Common Stock of Combined issued and outstanding immediately prior  
thereto shall automatically be converted into and shall be exchanged for        
________ shares of the Citizens' Class A Common Stock subject to D. below.      

B. Upon the Effective Date, each holder of a certificate or   
certificates representing shares of Common Stock, upon presentation and         
surrender of such certificate or certificates to the exchange agent for         
Citizens, shall be entitled to receive the consideration set forth in this      
Article THIRD, except that holders of those shares as to which dissenters'      
rights shall have been asserted and perfected pursuant to Texas law shall not be
converted into shares of Citizens' Common Stock, but shall represent only such  
rights as are perfected under the Texas Business Corporation Act. Upon such     
presentation, surrender and exchange as provided in this Article THIRD,         
certificates representing shares of Common Stock previously held shall be       
canceled. Until so presented and surrendered, each certificate or certificates  
which represented issued and outstanding shares of Common Stock at the Effective
Date shall be deemed for all purposes to evidence the right to receive the      
consideration set forth in this Article THIRD. If the certificate or            
certificates representing shares of Common Stock have been lost, stolen,        
mutilated or destroyed, the exchange agent of Citizens shall require the        
submission of an indemnity agreement and may require the submission of a bond in
lieu of such certificate.                                                       

C. The stock transfer books of Combined shall be closed on the
Effective Date, and thereafter no transfers of the Combined Common Stock will be
made.                                                                           

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       No fractional shares of Citizens' Class A Common Stock will be issued
as a result of the Exchange. In the event the exchange of shares results in any 
shareholder being entitled to a fraction less than whole share of Citizens'     
Class A Common Stock, such fraction will be rounded up to the nearest whole     
share.                                                                          

        FOURTH: A Plan and Agreement of Exchange between Citizens and Combined
has been approved by the boards of directors of Citizens and Combined and the   
requisite vote of shareholders of Combined. Approval by shareholders of Citizens
is not required.                                                                

FIFTH: The Board of Directors of Combined by [minutes at the  
__________, 2001 meeting or by unanimous written action signed by all of the    
directors] duly authorized and adopted a resolution declaring that the Plan and 
Agreement of Exchange as herein set forth and the performance of its terms is   
duly authorized and advisable and directing that these Articles of Exchange be  
submitted for action thereon by the shareholders of Combined, all in the manner 
and by the vote required by the Texas Business Corporation Act and the Articles 
of Incorporation of Combined.                                                   

SIXTH: At a meeting of common shareholders of Combined held on
________, 2001, _______ shares were outstanding and entitled to vote on the     
matters set forth in these Articles of Exchange. ________ shares voted in favor 
of the Plan and Agreement of Exchange and ______ shares voted against the Plan  
and Agreement of Exchange; ________ shares abstained. The number of shares      
voting on the Plan and Agreement of Exchange was sufficient for approval by the 
common shareholders.                                                            

SEVENTH: The Board of Directors of Citizens by [minutes at the
________, 2001 meeting or by unanimous written action signed by all of the      
directors] duly authorized and adopted a resolution declaring that the Plan and 
Agreement of Exchange as herein set forth and the performance of its terms is   
duly authorized and advisable, all in the manner and by the vote required by the
Colorado Business Corporation Act and the Articles of Incorporation of Citizens.

      EIGHTH: An executed Plan and Agreement of Exchange is on file at the
principal place of business of Citizens located at 400 E. Anderson Lane, Austin,
Texas 78752.                                                                    

       NINTH: A copy of the Plan and Agreement of Exchange will be furnished
by each surviving, acquiring or new domestic or foreign corporation or other    
entity, on written request and without charge, to any shareholder of Combined.  

      TENTH: The Exchange provided for by these Articles of Exchange shall
become effective at the time of filing the last document required by law (the   
"Effective Date").                                                              

      ELEVENTH: The name and address of the Registered Agent and principal
office of the acquiring entity is:                                              

Agent: CSC                                  Principal Office:                   
                                                              ------------------
1675 Broadway                                                                   
                                                 -------------------------------
Denver, Colorado 80202                                                          
                                                ------------------------------

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         IN WITNESS WHEREOF, Citizens and Combined, parties to these Articles of
Exchange, have caused these Articles of Exchange to be signed and acknowledged  
by their respective Presidents and attested by their respective Secretaries all 
as of the ________ day of _________________, 2001.                              

ATTEST:                                              COMBINED UNDERWRITERS LIFE 
                                           INSURANCE COMPANY

                             By:
----------------------------                            ------------------------
                                                 Gary C. Cole, President

ATTEST:                                              CITIZENS, INC.             

                             By:
---------------------------                              -----------------------
                                                   Mark A. Oliver, President

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                                                                       EXHIBIT B
 COMBINED DISCLOSURE STATEMENT

        Pursuant to the provisions of Article III of the Plan and Agreement of
Exchange ("Agreement") by and between Combined and Citizens, Combined hereby    
makes the following disclosures respecting the similarly numbered sections in   
the Agreement:                                                                  

 3.1 Combined is currently qualified and licensed to conduct its
       business and is in good standing in the following states except where
otherwise indicated:                                          

                       1.       Alabama (not currently marketing in this
                   state due to legal climate)

2.       Arizona          

3.       Arkansas         

                       4.       Florida (not currently marketing in this
                                 state due to rate regulation environment)

5.       Louisiana        

6.       Mississippi      

                       7.       Missouri (see attached Order and Consent
                    effective September 1, 1990)

8.       New Mexico       

9.       Oklahoma         

10.      Texas            

                      11.      Virginia (see attached February 3, 1992
                                Order Suspending License to transact the
                                  business of Insurance and January 17, 1992
              Order to Take Notice.)

3.10     Pending Legal Proceedings                            

              Civil Action no. 600cv442; Nathan L. Johnson et al v. East
               Texas Medical Center Athens, et al v. Aetna Health and Life
                 Insurance Company, et al; In the United States District Court
      for the Eastern District of Texas, Tyler Division.

Regulatory Inquiries                        

                Combined has previously provided Citizens with a copy of its
               June 14, 2001 response to the Texas Department of Insurance
Life Insurance Survey.                      

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                                                                       EXHIBIT C
 CITIZENS DISCLOSURE STATEMENT

       Pursuant to the provisions of Article IV of the Plan and Agreement of
Exchange ("Agreement") by and between Citizens and Combined, Citizens hereby    
makes the following disclosures respecting the similarly numbered sections in   
the Agreement:                                                                  

    4.2 Citizens filed a Form S-3 ("Statement") Registration Statement
under the Securities Act of 1933 with the Securities and Exchange Commission    
("SEC") which became effective on August 30, 2001. The Statement registers      
2,000,000 shares of Citizens Class A Common Stock for sale to the public through
the Citizens, Inc. Stock Investment Plan ("the Plan"), the creation of which is 
included in the Statement. Although the Statement by definition registers shares
for sale to the public, the activities of the Plan involve the acquisition of   
Citizens Class A Common Stock through the public market, rather than directly   
from the public. The Plan provides for the participation by owners of insurance 
policies issued by the Citizens' subsidiaries, existing holders of Citizens     
Class A Common Stock, employees of Citizens, Inc., members of the marketing     
force of any of Citizens' subsidiaries, or any member of the public in general  
who elects to participate. The Plan is sponsored by Citizens, Inc. and will be  
administered by Mellon Bank.                                                    

   4.7 Delia Bolanos Andrade, Luis Martin Tapia Alberti, Sonio Lucia
Montoya Botero, Luisa F. Botero and Carlos A Botero, Roberto Carlos Paniagua    
Cardona, Luis Rberto Paniagua Grisales, Blanca Numbia Cardona, and Fernando     
Hakim Daccach v. Citizens Insurance Company of America, Citizens, Inc., Negocios
Savoy, S.A., Harold E. Riley, and Mark A. Oliver, Cause Number 99-09099 Travis  
County, Texas. A lawsuit seeking class action status with Fernando Hakim as the 
class representative and naming a class of all persons who made premium payments
who are not residents of the United States as potential members of the class.   
The suit alleges that the policies are unregistered securities in violation of  
the Texas Blue Sky laws. In addition, the other plaintiffs made individual      
claims primarily under the Texas Deceptive Trade Practices Act. The DTPA claims 
relate to limitations and exclusions stated in the policies, excessive surrender
charges stated in the policies, and the amount of premiums charged. The         
individual claimants also claim breach of contract (failure to provide the      
insurance as represented, not alleged but stated), fraud in the inducement,     
negligent misrepresentation, breach of duty of good faith and fair dealing. The 
plaintiffs have filed a motion for class certification. Defendants have filed an
answering motion denying that the case is properly certifiable. Additionally, a 
motion for summary judgment has been filed by defendants on the issue of whether
insurance policies issued to members of the putative class are unregistered     
securities in violation of the Texas Blue Sky laws. A hearing was held on       
October 16, 2001, regarding defendants' motion for summary judgment. On October 
29, 2001, a hearing on the Class Certification was held.                        

    Velma U Bayhi and David Bayhi v. Donald G. Welsh, Funeral Homes of
Louisiana, Inc. dba Baker Funeral Home, Citizens, Inc., Lumbermens Mutual       
casualty Company and Kemper Insurance Companies, Cause number 468864 division M 
in the 19th District Court, Parish of East Baton Rouge, Louisiana. The funeral  
home is a subsidiary of Citizens Insurance Company of America. Mrs. Bayhi is    
making a claim for injuries from a collision between a hearse driven by Mr.     
Welsh and her stalled car. The hearse was insured with Lumbermens through       
Kemper. Mr. Bayhi also claims that he suffered emotional distress because he    
observed the crash. Kemper is defending Baker Funeral Home in this matter.      

     George M. Campbell v. American Liberty Life Insurance Company, Case
number 94-1625. Originally filed in the Parish of Ouachita, Louisiana in        
1994--re-filed in 1998. Mr. Campbell had a                                      

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hospitalization policy covering cancer. He filed a claim for two hospital stays 
at a V. A. hospital, but did not submit any bills from the hospital. The claim  
was denied because the policy required that the hospital provide services       
"...for compensation from its patients...." There was no activity in the case,  
until July, 2001, when defendant received a Request for Production of a         
certified copy of Mr. Campbell's policy.                                        

                 Juanita Hall v. Citizens Insurance Company of America and Rex
Beverly, Civil Action Number CV 99-190, Marengo County, Alabama. Mrs. Hall      
claims that Rex Beverly and Assured Investors Life Insurance Company            
misrepresented the death benefit payable upon her husband's death. Following    
defendant's motion for summary judgment the court dismissed all tort claims and 
left open only a contract claim that the amount of the death benefit paid was   
incorrect. A rehearing was granted, however plaintiff's motion was denied.      

                 Velma Jenkins v. United Security Life Insurance Company, Jack
Lane, and fictitious defendants. Filed as Cause Number 2001-142 in the Circuit  
Court of Noxubee County, Mississippi and removed to the United States District  
Court for the Southern District of Mississippi Eastern Division as Civil Action 
Number 4:01-CV-156LN. Remanded to County Court and all claims above $75,000 have
been dismissed with prejudice. Plaintiff alleges that she intended to purchase a
supplement to her major medical insurance coverage, but was sold a              
hospitalization policy. Plaintiff alleges that the agent and the insurance      
company engaged in a pattern and practice of misrepresentation and fraud as to  
the benefits and coverage on policies sold to consumers in the State of         
Mississippi. Plaintiff made claims under her policy for medication and for out  
patient treatments all of which were denied because the policy covered          
hospitalization. Plaintiff filed Interrogatories and Requests for Production    
with her original complaint. No hearings have been set.                         

       Mary Hart Whittington, Mayoda C. Parker, Sharon P. Browning, Patricia
M. Brown, Mary Catherine Rawles, and Barry Maricelli v. Citizens Insurance      
Company of America f/k/a United Security Life Insurance Company, American       
Investment Network f/k/a Great American Investment Network, Larry T. Reynolds,  
Virgil Styles, and Jesse L. Byrd. Cause number 251-01-713CIV, filed in the      
Circuit Court of the First Judicial District of Hinds County, Mississippi.      
Plaintiffs allege that the whole-life nature of the insurance policies was      
misrepresented to them as an investment because the policies would pay          
dividends. The plaintiff's allege fraud, negligent misrepresentation,           
negligence, civil conspiracy, breach of contract, conversion, and violation of  
Mississippi Securities laws.                                                    

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                                                                       EXHIBIT D
 APPROVALS REQUIRED BY LAW

1.       Texas Insurance Department                                             

2.       U.S. Securities and Exchange Commission                                
      (approval not required; however, must declare Registration Statement
Effective)                                                    

3.       Colorado Division of Insurance                                         
      (approval not required; however, notice required pursuant to Form B)

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                                                                       EXHIBIT E

 _____________, 2001

Citizens, Inc.                                                                  
Citizens Insurance Company of America                                           
400 East Anderson Lane                                                          
Austin, Texas 78752                                                             

    Re:      Plan and Agreement of Exchange between Citizens, Inc. and
Combined Underwriters Life Insurance Company

Ladies and Gentlemen:                                                           

  We have acted as counsel to Combined Underwriters Life Insurance
Company ("Combined") in connection with the above referenced agreement. This    
letter is provided to you pursuant to Paragraph 7.6(3) of the Plan and Agreement
of Exchange, dated as of ____________________, 2001 (the "Agreement"), between  
Citizens, Inc. ("Citizens") and Combined. Except as otherwise indicated herein, 
capitalized terms used in this letter are defined as set forth in the Agreement 
or the Accord (see below).                                                      

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

        Our opinions are limited in all respects to the substantive law of the
State of Texas, and the federal law of the United States, and we assume no      
responsibility as to the applicability thereto, or the effect thereon, of the   
laws of any other jurisdiction.                                                 

         We have relied upon factual representations made by Combined in Article
III of the Agreement and we have reviewed such documents and given consideration
to such matters of law and fact as we have deemed appropriate to render this    
opinion. We have been furnished with, and examined originals or copies,         
certified or otherwise identified to our satisfaction, of all such records of   
Combined, agreements and other instruments, certificates of officers and        
representatives of Combined, certificates of public officials, and other        
documents, as we have deemed necessary or desirable as a basis for the opinions 
hereinafter expressed. As to questions of fact material to such opinions, we    
have, where relevant facts were not independently verified or established,      
relied upon certificates of officers of Combined.                               

      Based upon and subject to the foregoing and the other qualifications
and limitations stated in this letter, we are of the opinion that:              

 1. To our knowledge, execution, delivery and performance of the
Agreement by Combined shall not result in a breach of, or constitute a default  
(or an event which, with or without notice or lapse of time or both, would      
constitute a default) under any contract, commitment, agreement, indenture,     
mortgage, pledge                                                                

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agreement, note, bond, license, or other instrument or obligation to which      
Combined is a party or by which Combined is bound or the charter or bylaws of   
Combined or other governing instruments of Combined.                            

      2. The Agreement has been duly authorized, executed and delivered by
Combined and is a legal, valid and binding obligation of Combined enforceable   
against Combined in accordance with its terms (subject to the applicability of  
equitable principles or the effect of bankruptcy or creditors' rights laws on   
the enforceability of the Agreement);                                           

      3. Combined is a Texas insurance corporation validly existing and in
good standing under the laws of the State of Texas;                             

      4. Combined has full corporate power and authority to enter into the
Agreement and to carry out the transactions contemplated by the Agreement;      

     5. To our knowledge, there are no civil or criminal actions, suits,
arbitrations, administrative or other proceedings or governmental investigations
pending or threatened against Combined which will constitute a breach of the    
representations, warranties or covenants under the Agreement or will prevent    
Combined from consummating the transactions contemplated by the Agreement;      

       6. The authorized and, to our knowledge, outstanding capital stock of
Combined is as stated in Section 3.3 of the Agreement.                          

       7. To our knowledge, except as set forth in the Agreement or Combined
Disclosure Statement, there are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, privileges or other         
arrangements, preemptive or contractual, calling for or requiring the           
acquisition of, or the issuance, transfer, sale or other disposition of any     
shares of the capital stock of Combined, or calling for or requiring the        
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of Combined; and                                               

       8. The execution, delivery, and performance of the Agreement, and the
performance by Combined of its obligations thereunder, are not in contravention 
of any law, ordinance, rule or regulation of Texas or of the United States and  
will not contravene any order, writ, judgment, injunction, decree,              
determination, or award of any court or other authority having jurisdiction, and
will not cause the suspension or revocation of any authorization, consent,      
approval, or license presently in effect, which affects or binds Combined or any
of its material properties, and will not have a material adverse effect on the  
validity of the Agreement or on the validity of the consummation of the         
transactions contemplated by the Agreement or constitute grounds for the loss or
suspension of any permits, licenses, or other authorizations used in the        
business of Combined.                                                           

        This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. This opinion is 
rendered pursuant to Section 7.6(3) of the Agreement and, to the extent, if any,
that the law of the State of Texas permits you to rely upon it, it is to be     
limited in its use to reliance by you in consummating the transactions described
herein and no other person or entity may rely or claim reliance upon this       
opinion.                                                                        

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      This opinion is rendered as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any changes in or new      
developments which might affect any matters or opinions set forth herein.       

         The use of the words "to our knowledge" means that during the course of
our current and past representation of Combined no information has come to the  
attention of the attorneys involved in the transaction described herein that    
could give any such attorney actual knowledge of the existence of the documents 
or facts so qualified. Except as set forth herein, this Firm has not undertaken 
any investigation to determine the existence of such documents or facts, and no 
inference as to our knowledge thereof shall be drawn from the fact of our       
representation of any party or otherwise.                                       

                                               Very truly yours,

                                                     Sneed Vine & Perry P.C.

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                                                                       EXHIBIT F

 AFFILIATE AGREEMENT

Citizens, Inc.                                                                  
400 East Anderson Lane                                                          
Austin, Texas 78752                                                             

Ladies and Gentlemen:                                                           

I have been advised that I have been identified as a possible 
"affiliate" of Combined Underwriters Life Insurance Company, a Texas corporation
(the "Company"), as that term is defined for purposes of paragraphs (c) and (d) 
of Rule 145 of the General Rules and Regulations (the "Rules and Regulations")  
of the Securities and Exchange Commission (the "Commission") under the          
Securities Act of 1933 (the "Securities Act"), although nothing contained herein
should be construed as an admission of such fact.                               

       Pursuant to the terms of that certain Plan and Agreement of Exchange,
dated as of _______________, 2001 (the "Exchange Agreement"), between the       
Company and Citizens, Inc., a Colorado corporation ("Citizens"), Citizens shall 
acquire all of the issued and outstanding $1.00 par value common stock of the   
Company ("Company Stock") for shares of no par value Class A Common Stock of    
Citizens ("Citizens Stock") pursuant to a share exchange (the "Exchange"). As a 
result of the Exchange, I will receive shares of Citizens Stock in exchange for 
shares of Company Stock owned by me on the Effective Date (as defined in the    
Exchange Agreement) of the Exchange as determined pursuant to the Exchange      
Agreement.                                                                      

  A. In connection therewith, I represent, warrant and agree that:

                 1. I will not make any sale, transfer or other disposition of
Citizens Stock I receive as a result of the Exchange in violation of the        
Securities Act or the Rules and Regulations.                                    

                 2. I have been advised that the issuance of Citizens Stock to
me as a result of the Exchange has been registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. However, I have also    
been advised that, because at the time the Exchange was submitted for a vote of 
the stockholders of the Company I may have been an "affiliate" of the Company,  
and the distribution by me of the shares of Citizens Stock I receive as a result
of the Exchange has not been registered under the Securities Act, such shares   
must be held by me indefinitely unless (i) such distribution of such shares has 
been registered under the Securities Act, (ii) a sale of such shares is made in 
conformity with the provisions of Rule 145 promulgated by the Commission under  
the Securities Act or (iii) such sale is pursuant to a transaction which, in the
opinion of counsel reasonably satisfactory to Citizens or as described in a     
"no-action" or interpretive letter from the staff of the Commission, is not     
required to be registered under the Securities Act.                             

         3. I have carefully read this letter and the Exchange
Agreement and have discussed the requirements of the Exchange Agreement and     
other limitations upon the sale, transfer or other disposition                  

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of the shares of Citizens Stock to be received by me, to the extent I have felt 
necessary, with my counsel or with counsel for the Company.                     

    B. Furthermore, in connection with the matters set forth herein, I
understand and agree that:                                                      

              1. Citizens is under no further obligation to register the
sale, transfer or other disposition of the shares of Citizens Stock received by 
me as a result of the Exchange or to take any other action necessary in order to
make compliance with an exemption from registration available, except as set    
forth in paragraph C below.                                                     

               2. Stop transfer instructions will be given to the transfer
agent of Citizens with respect to the shares of Citizens Stock I will receive as
a result of the Exchange, and there will be placed on the certificates          
representing such shares, or any certificates delivered in substitution         
therefor, a legend stating in substance:                                        

         The shares represented by this certificate were issued in a transaction
        to which Rule 145 under the Securities Act of 1933 applies. The shares
       represented by this certificate may be transferred only in accordance
    with the terms of an agreement dated , 2001 between the registered
        holder hereof and Citizens, Inc., a copy of which agreement is on file
at the principal offices of Citizens, Inc.                    

                  3. Unless the transfer by me of my shares of Citizens Stock is
a sale made in conformity with the provisions of Rule 145 of the Rules and      
Regulations or made pursuant to a registration under the Securities Act,        
Citizens reserves the right to put on the certificates issued to my transferee a
legend stating in substance:                                                    

     The shares represented by this certificate have not been registered
      under the Securities Act of 1933 and were acquired by the holder not
    with a view to, or for resale in connection with, any distribution
         thereof within the meaning of the Securities Act of 1933 and may not be
sold, pledged or otherwise transferred except pursuant to a   
    registration statement or in accordance with an exemption from the
registration requirements of the Securities Act of 1933.      

       It is understood and agreed that the legends set forth above shall be
removed, and substitute certificates shall be delivered without any such legend,
and the transfer agent will be instructed to effectuate transfers of shares of  
Citizens Stock if the undersigned delivers to Citizens a letter from the staff  
of the Commission or an opinion of counsel in form and substance reasonably     
satisfactory to Citizens to the effect that such legend is not required for the 
purposes of the Securities Act.                                                 

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         C. By Citizens's acceptance of this letter, Citizens hereby agrees with
me as follows:                                                                  

                 1. For so long as and to the extent necessary to permit me to
sell the Citizens Stock pursuant to Rule 145 and, to the extent applicable, Rule
144 under the Act, Citizens will: (a) use its reasonable efforts to (i) file, on
a timely basis, all reports and data required to be filed with the Commission by
it pursuant to Section 13 of the Securities Exchange of 1934, as amended (the   
"1934 Act"), and (ii) furnish to me upon request a written statement as to      
whether Citizens has complied with such reporting requirements during the 12    
months preceding any proposed sale of the Citizens Stock by me under Rule 145;  
and (b) otherwise use its reasonable efforts to permit such sales pursuant to   
Rule 145 and Rule 144. Citizens hereby represents to me that it has filed all   
reports required to be filed with the Commission under Section 13 of the 1934   
Act during the preceding 12 months.                                             

             2. It is understood and agreed that certificates with the
legends set forth in paragraphs B.2. and B.3. above will be substituted by      
delivery of certificates without such legend if (i) one year shall have elapsed 
from the date the undersigned acquired the Citizens Stock received in the       
Exchange and the provisions of Rule 145(d)(2) are then available to the         
undersigned, (ii) two years shall have elapsed from the date the undersigned    
acquired the Citizens Stock received in the Exchange and the provisions of Rule 
145(d)(3) are then applicable to the undersigned, or (iii) Citizens has received
either an opinion of counsel, which opinion and counsel shall be reasonably     
satisfactory to Citizens, or a "no action" letter obtained by the undersigned   
from the staff of the Commission, to the effect that the restrictions imposed by
Rule 145 under the Act no longer apply to the undersigned.                      

                                 Very truly yours,

Date:                                           [Name of Affiliate]             
-------------------------                                           

ACCEPTED:                                                                       

CITIZENS, INC.                                                                  

By:                                                                             
---------------------------                                             
Mark A. Oliver, President                                           

Date:                                                                           
-------------------------                                           

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                                                                       EXHIBIT G

 _____________, 2001

Combined Underwriters Life Insurance Company                                    
307 N. Glenwood                                                                 
Tyler, Texas 75702                                                              

    Re:      Plan and Agreement of Exchange between Citizens, Inc. and
Combined Underwriters Life Insurance Company

Ladies and Gentlemen:                                                           

       We have acted as counsel to Citizens, Inc. ("Citizens") in connection
with the above referenced agreement. This letter is provided to you pursuant to 
Paragraph 7.7(2) of the Plan and Agreement of Exchange, dated as of             
____________________, 2001 (the "Agreement") between Citizens, Inc. ("Citizens")
and Combined Underwriters Life Insurance Company ("Combined"). Except as        
otherwise indicated herein, capitalized terms used in this letter are defined as
set forth in the Agreement or the Accord (see below).                           

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

        In giving the opinion expressed below, insofar as such opinion relates
to other than Federal law or the laws of jurisdiction other than the State of   
Colorado, we advise that our opinion is with respect to Federal law and the laws
of the State of Colorado only and that, to the extent such opinion is derived   
from laws of other jurisdictions, the statements are based on examinations of   
relevant authorities and are believed to be correct, but we have obtained no    
legal opinions as to such matters from attorneys licensed to practice in such   
other jurisdictions. Accordingly, the law covered by the opinion expressed      
herein is limited to the Federal law of the United States and the law of the    
State of Colorado.                                                              

         We have relied upon factual representations made by Citizens in Article
IV of the Agreement and we have reviewed such documents and given consideration 
to such matters of law and fact as we have deemed appropriate to render this    
opinion. We have been furnished with, and examined originals or copies,         
certified or otherwise identified to our satisfaction, of all such records of   
Citizens, agreements and other instruments, certificates of officers and        
representatives of Citizens, certificates of public officials, and other        
documents, as we have deemed necessary or desirable as a basis for the opinions 
hereinafter expressed. As to questions of fact material to such opinions, we    
have, where relevant facts were not independently verified or established,      
relied upon certificates of officers of Citizens.                               

      Based upon and subject to the foregoing and the other qualifications
and limitations stated in this letter, we are of the opinion that:              

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 1. To our knowledge, execution, delivery and performance of the
Agreement by Citizens shall not result in a breach of, or constitute a default  
(or an event which, with or without notice or lapse of time or both, would      
constitute a default) under any contract, commitment, agreement, indenture,     
mortgage, pledge agreement, note, bond, license, or other instrument or         
obligation to which Citizens is a party or by which Citizens is bound or the    
charter or bylaws of Citizens or other governing instruments of Citizens.       

      2. The Agreement has been duly authorized, executed and delivered by
Citizens and is a legal, valid and binding obligation of Citizens enforceable   
against Citizens in accordance with its terms (subject to the applicability of  
equitable principles or the effect of bankruptcy or creditors' rights laws on   
the enforceability of the Agreement);                                           

    3. Citizens is a Colorado corporation validly existing and in good
standing under the laws of the State of Colorado;                               

      4. Citizens has full corporate power and authority to enter into the
Agreement and to carry out the transactions contemplated by the Agreement;      

     5. To our knowledge, there are no civil or criminal actions, suits,
arbitrations, administrative or other proceedings or governmental investigations
pending or threatened against Citizens which will constitute a breach of the    
representations, warranties or covenants under the Agreement or will prevent    
Citizens from consummating the transactions contemplated by the Agreement;      

       6. The authorized and, to our knowledge, outstanding capital stock of
Citizens is as stated in Section 4.2 of the Agreement;                          

        7. To our knowledge, except as set forth in the Agreement or Citizens'
Disclosure Statement, there are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, privileges or other         
arrangements, preemptive or contractual, calling for or requiring the           
acquisition of, or the issuance, transfer, sale or other disposition of any     
shares of the capital stock of Citizens, or calling for or requiring the        
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of Citizens; and                                               

       8. The execution, delivery, and performance of the Agreement, and the
performance by Citizens of its obligations thereunder, are not in contravention 
of any law, ordinance, rule or regulation of Colorado or of the United States   
and will not contravene any order, writ, judgment, injunction, decree,          
determination, or award of any court or other authority having jurisdiction, and
will not cause the suspension or revocation of any authorization, consent,      
approval, or license presently in effect, which affects or binds Citizens or any
of its subsidiaries or any of their material properties, and will not have a    
material adverse effect on the validity of the Agreement or on the validity of  
the consummation of the transactions contemplated by the Agreement or constitute
grounds for the loss or suspension of any permits, licenses, or other           
authorizations used in the business of Citizens.                                

        This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. This opinion is 
rendered pursuant to Section 7.7(2) of the Agreement and, to the extent, if any,
that the law of the State of Colorado permits you to rely upon it, it is to be  
limited                                                                         

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in its use to reliance by you in consummating the transactions described herein 
and no other person or entity may rely or claim reliance upon this opinion.     

      This opinion is rendered as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any changes in or new      
developments which might affect any matters or opinions set forth herein.       

         The use of the words "to our knowledge" means that during the course of
our current and past representation of Citizens and our past representation of  
Citizens no information has come to the attention of the attorneys involved in  
the transaction described herein that could give any such attorney actual       
knowledge of the existence of the documents or facts so qualified. Except as set
forth herein, this Firm has not undertaken any investigation to determine the   
existence of such documents or facts, and no inference as to our knowledge      
thereof shall be drawn from the fact of our representation of any party or      
otherwise.                                                                      

     Very truly yours,

        Jones & Keller, P.C.

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                                                                       EXHIBIT H

                                                           November_______, 2001

Combined Underwriters Life Insurance Company                                    
307 N. Glenwood                                                                 
Tyler, Texas 75702                                                              

Ladies and Gentlemen:                                                           

Our opinions as expressed below are based solely upon: (1) the
information contained in the Proxy- Information Statement dated                 
_______________________ (hereafter "Proxy Statement") as filed with the         
Securities and Exchange Commission; (2) the Plan and Agreement of Exchange ("the
Plan") dated __________________ between Citizens, Inc. ("Citizens") and Combined
Underwriters Life Insurance Company ("Combined"), together with Exhibits        
thereto; (3) the Lease Extension Agreement dated __________ between Combined and
Little, Rooney & Little Associates; (4) the Marketing Development Agreement     
dated __________ between Combined, Lifeline Underwriters Life Insurance Company 
and the Red Little Combined Agency, Inc. (the "Agency"); (5) relevant           
information provided by the principals; (6) the Internal Revenue Code of 1986,  
as amended (hereinafter "IRC"), the regulations promulgated thereunder and the  
current administrative positions of the Internal Revenue Service ("IRS")        
contained in published Revenue Rulings and Revenue Procedures; and (7) existing 
judicial decisions. All of the above are subject to change or modification by   
subsequent legislative, regulatory, administrative or judicial decisions which  
could adversely affect our opinions.                                            

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

         "Exchange" refers to the transaction set forth in the Plan. Capitalized
terms herein have the same meaning as in the Plan.                              

    Shareholders residing or conducting business in foreign countries,
states or municipalities having tax laws could be required to pay tax with      
respect to transactions in that country, state or municipality. We do not       
express any opinion as to foreign, state or local tax consequences of the       
Exchange. We do not express any opinion regarding alternative minimum tax       
consequences of the Exchange to any shareholder or as to any other income tax   
consequences to any shareholder except as expressly provided herein.            

     The consequences described herein are not applicable to nonresident
aliens, to foreign corporations, to debtors under the jurisdiction of a court in
a case under Title 11 of the United States Code or in a receivership,           
foreclosure, or similar proceeding, to shareholders that are real estate        
investment trusts, to shareholders that are regulated investment companies, to  
shareholders that are tax exempt persons, to shareholders that are persons that 
hold their Combined Common Stock as part of a position in a "straddle" or as    
part of a "hedging" or other integrated transaction, to shareholders that are   
investment companies within the meaning of IRC Section 351(e), to shareholders  
who are dealers in securities, to shareholders who                              

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do not hold their common stock as capital assets, to shareholders who are       
financial institutions, or to shareholders who acquired or will acquire their   
shares in connection with stock option or stock purchase plans or in other      
compensatory transactions.                                                      

      The principal reasons for the Exchange can be summarized as follows:

                  (1) to become part of a combined entity with greater financial
  strength and an enhanced competitive position as compared to the
separate entities;                                            

                  (2) to achieve improved capitalization and economies of scale;
and                                                           

              (3) to provide greater liquidity and diversity to Combined
shareholders.                                                 

        This letter is conditioned on the accuracy of the factual information,
assumptions and representations contained in the Proxy Statement and provided by
Citizens and Combined, including the principal reasons for the Exchange         
expressed above and the following:                                              

                  (1) that Citizens and Combined, in arriving at the method used
       to determine the number of shares of Citizens Class A Common Stock to
      be received by each Combined shareholder, attempted in good faith to
    value the Combined Common Stock to be transferred and to value the
        Citizens Class A Common Stock to be Exchanged for such Combined Common
       Stock in an effort to ensure that each shareholder receiving Citizens
    Class A Common Stock pursuant to the Exchange received a number of
   shares of such stock approximately equal in value to the Combined
Common Stock exchanged therefor;                              

                  (2) that Combined has no plan or intention to issue additional
     shares of its stock that would result in Citizens losing control of
Combined within the meaning of Section 368(c) of the IRC;     

           (3) that none of Citizens, Combined, any entity related
       thereto, or shareholder thereof, have any plan or intention to redeem
       or otherwise reacquire any Citizens Class A Common Stock to be issued
     to Combined shareholders in the Exchange, and will not so redeem or
otherwise reacquire such stock;                               

           (4) that Citizens has no plan or intention to liquidate
        Combined; to merge Combined with or into another corporation; to cause
        Combined to sell or otherwise dispose of any of its assets, except for
     dispositions made in the ordinary course of business; or to sell or
 otherwise dispose of the stock of Combined except for transfers
        described in Section 368(a)(2)(C) of the IRC; preserving the nature of
    Combined's charter makes avoidance of such transactions necessary;

               (5) that following the Exchange, Citizens will continue the
   historic business of Combined or use a significant portion of its
historic business assets in a business;                       

            (6) that Citizens and Combined will assume and pay their
         respective reorganization expenses, if any, incurred in connection with
the Plan and Exchange;                                        

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                (7) that there is no corporate indebtedness between Citizens
         or Combined that was issued, acquired or will be settled at a discount;

                  (8) that in the Exchange, shares of Combined Common Stock will
    be exchanged solely for Citizens Class A voting Common Stock, with
      Citizens thereby obtaining control of Combined as defined in Section
368(c) of the IRC;                                            

                 (9) that on the Effective Date of the Exchange, Combined will
       not have outstanding any warrants, options, convertible securities or
    any other type of right pursuant to which any person could acquire
 stock in Combined that, if exercised or converted, would affect
       Citizens' acquisition or retention of control of Combined, as defined
in Section 368(c) of the IRC;                                 

                (10) that Citizens does not own, nor has it owned during the
     past five (5) years, directly or indirectly, any shares of Combined
stock;                                                        

          (11) that neither Citizens nor Combined are investment
        companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC;

         (12) that neither Citizens nor Combined are under the
  jurisdiction of a court in a Title 11 or similar case within the
meaning of IRC Section 368(a)(3) (A);                         

               (13) that the Exchange will be consummated and qualify as a
  statutory exchange in full compliance with Texas law and will be
consummated in accordance with the terms of the Plan;         

       (14) that in the event more than 2.5 percent of the
  shareholders of Combined dissent to the Exchange, Citizens would
    exercise its option not to proceed with the Exchange (as permitted
         under the Plan) and the Exchange consequently would not be consummated;

           (15) that no Combined Common Stock will be acquired for
         consideration other than solely Citizens Class A Common Stock. Further,
         no liabilities of Combined or the Combined shareholders will be assumed
      by Citizens, nor will any of the Combined Common Stock be subject to
any liabilities;                                              

                  (16) that Citizens will not assume nor repay any Combined debt
       guaranteed by Combined shareholders nor will Citizens assume or repay
any outstanding loans between Combined and its shareholders;  

                (17) that no compensation or agreement for services received
     by any shareholder of Combined, or any entity related to a Combined
       shareholder, will be separate consideration for, or allocable to, any
         of their shares of Combined Common Stock; no shares of Citizens Class A
  Common Stock received by any Combined shareholder, or any entity
     related to any Combined shareholder, will be separate consideration
for, or allocable to, any employment agreement or compensation
      agreement; and the compensation paid to any Combined shareholder, or
    any entity related to a Combined shareholder, will be for services
actually performed and/or property actually leased and will be
commensurate with amounts paid to third parties bargaining at 
arm's-length for similar services;                            

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               (18) that Combined will pay its dissenting shareholders the
     value of their Combined Common Stock out of its own funds. No funds
       will be supplied or are required to be supplied (by law or otherwise)
 for that purpose, directly or indirectly, by Citizens, nor will
       Citizens, directly or indirectly, reimburse Combined for any payments
to dissenters;                                                

             (19) that on the Effective Date of the Exchange, the fair
   market value of the assets of Combined will exceed the sum of its
   liabilities plus the liabilities, if any, to which its assets are
subject;                                                      

                (20) that the Marketing Development Allowance Agreement (the
         "MDA Agreement") between Combined, Lifeline Underwriters Life Insurance
 Company and the Red Little Combined Agency, Inc. ("Agency") was
 negotiated at arms-length; that the consideration to be paid by
  Combined to the Agency pursuant to the MDA Agreement will be for
     services actually to be performed and is reasonable in light of the
      services to be performed and the benefit to Combined and Citizens of
     retaining the Agency to preserve and increase the business in-force
issued by Combined;                                           

                (21) that Combined has sufficient cash-flow to make payments
  required to be made to the Agency pursuant to the MDA Agreement;

               (22) that Citizens will not render Combined unable to honor
  its payments under the MDA Agreement such that Citizens would be
required to make payments thereunder; and                     

                  (23) that after the Exchange, the space leased pursuant to the
         two (2) real estate leases between Combined and Little, Rooney & Little
       Associates, will continue to be used for business purposes, including
  the occupancy by businesses or agencies of Combined, Citizens or
        related entities and the profitable sublease of any space not so used,
    and the lease payments are commensurate with amounts paid to third
parties bargaining at arms-length.                            

    We have relied on the truthfulness and accuracy of certificates of
officers of Combined and Citizens regarding the above factual information,      
assumptions and representations. In the course of our representation of Citizens
in connection with the transaction described herein, no facts have come to our  
attention that would give us actual knowledge that the certificates are not     
accurate. However, we have not undertaken any independent investigation to      
verify the accuracy of such factual information, assumptions and                
representations, and no inference as to our knowledge thereof shall be drawn    
from the fact of our representation of any party or otherwise.                  

        In rendering an opinion on the federal income tax consequences of such
a transaction, reasonable steps have been taken to assure that all material tax 
issues are considered in light of the facts, and that all of such issues        
involving a reasonable possibility of challenge by the IRS are fully and fairly 
addressed. A "material tax issue" includes any tax issue that could have a      
significant impact (either beneficial or adverse) on any Combined shareholder   
participating in the Exchange under any reasonably foreseeable circumstances.   

    The opinions expressed below are rendered only with respect to the
specific matters described herein, and we express no opinion with respect to any
other federal income tax aspects of the Exchange. Should any of the facts,      
circumstances or assumptions specified herein be subsequently determined        
incorrect or inaccurate, our conclusions may vary from those set forth below and
such variance could be material. In                                             

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addition, we do not opine as to the taxable or nontaxable status of any previous
transactions not considered to be part of the Exchange.                         

   Accordingly, in our opinion, the material tax consequences of the
Exchange are as follows:                                                        

                (1) The Exchange will constitute a reorganization within the
         meaning of IRC Section 368(a)(1)(B) and Citizens and Combined will each
    be a "party to a reorganization" within the meaning of IRC Section
   368(b). No gain or loss will be recognized by the shareholders of
         Combined upon the exchange of their shares of Combined Common Stock for
shares of Citizens Class A Common Stock. IRC Section 354(a).  

              (2) The tax basis of the shares of Citizens Class A Common
     Stock received by a shareholder of Combined will be the same as the
       basis of the Combined Common Stock surrendered by that shareholder in
      the Exchange. IRC Section 358(a); IRC Regulation Section 1.358-1(a).

            (3) The holding period of the shares of Citizens Class A
     Common Stock received by a shareholder of Combined will include the
     period during which such shareholder held the Combined Common Stock
   exchanged therefor, to the extent that such stock was held by the
       shareholder as a capital asset on the date of the consummation of the
Exchange. IRC Section 1223(1).                                

           (4) Cash received by Combined shareholders who properly
  exercise their dissenters' rights will be treated as having been
     received in redemption of the shares so cashed out, and will likely
     result in taxable gain or loss, measured by the difference (if any)
         between the amount of cash received and such shareholder's basis in the
        Combined Common Stock. Provided the shares were held as capital assets
  at the time of the redemption, such gain or loss will constitute
       capital gain or loss, and such gain or loss will be long term capital
         gain or loss if the holding period for such shares was greater than one
year. It is possible, that for some Combined shareholders, the
       distribution of cash may be treated as a dividend taxable as ordinary
income. IRC Sections 302, 301.                                

                  (5) No material gain or loss will be recognized by Citizens or
  Combined as a result of the Exchange. IRC Sections 361 and 1032.

                (6) Section 382 limits the Net Operating Loss carryover of a
        company following an ownership change. Combined will be deemed to have
      an ownership change. After an ownership change, the amount of income
      that a corporation may offset each year by Net Operating Losses that
         occurred before the change is generally limited to an amount determined
       by multiplying the value of the equity of the corporation immediately
         prior to this change by the federal long-term tax exempt rate in effect
         on the date of the change. Any unused limitation may be carried forward
and added to the next year's limitation, subject to certain   
         limitations. To the extent Combined also has built-in losses as defined
       in IRC Section 382(h) as of the date of the Exchange, IRC Section 382
       limits the utilization of such losses after the ownership change. IRC
         Section 383 will similarly limit the utilization of excess credits, net
      capital losses, and foreign tax credits, if any, after the ownership
       change. In addition, IRC Section 384 limits the use of preacquisition
      losses to offset built-in gains, if any, after the ownership change.
 Regulations under IRC Sections 382 and 1502 implement the above
restrictions.                                                 

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              (7) Each shareholder of Combined must file pursuant to IRS
       Regulation 1.368-3(b), with his or her income tax return for the year
  in which the Exchange is consummated, a statement which provides
         details relating to the property transferred and securities received in
the Exchange.                                                 

        The preceding discussion and opinions are based on our interpretations
of the facts and assumptions, based on the IRC, the regulations thereunder and  
judicial and administrative interpretations thereof. They are subject to change 
by subsequent regulatory, administrative, legislative or judicial actions which 
could have an adverse effect on the validity of our opinions. Our opinions are  
effective as of the Effective Date for the Exchange as described in the Plan.   

        We do not express an opinion on the valuations of Combined or Citizens
assets or common stock or the ratio of exchange of Combined Common Stock for    
Citizens Class A Common Stock.                                                  

   If the Exchange is transacted as outlined in the facts given, the
material tax issues addressed singularly and in the aggregate will more likely  
than not be upheld under challenge by the IRS.                                  

        Each Combined shareholder should consult his own qualified tax advisor
to evaluate the tax effects of the Exchange based on his personal facts and     
circumstances.                                                                  

                                   Very truly yours,

                                      JONES & KELLER, P.C.

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                                                                      APPENDIX B

PLAN AND AGREEMENT OF EXCHANGE

CITIZENS, INC.
 AND
LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY

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                                                                      APPENDIX B

PLAN AND AGREEMENT OF EXCHANGE

CITIZENS, INC.
 AND
LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY

     This Plan and Agreement of Exchange ("Agreement") is by and between
Citizens, Inc. ("Citizens"), a Colorado corporation and Lifeline Underwriters   
Life Insurance Company ("Lifeline"), a Texas insurance corporation.             

 WITNESSETH:

        WHEREAS, Lifeline is a stock life insurance company duly organized and
existing under the laws of the State of Texas; and                              

      WHEREAS, Citizens is a corporation duly organized and existing under
the laws of the State of Colorado; and                                          

      WHEREAS, the respective Boards of Directors of Lifeline and Citizens
have voted to effect a statutory exchange under both the Texas Business         
Corporation Act and the Colorado Business Corporation Act whereby Citizens will 
acquire all of the issued and outstanding common stock of Lifeline in exchange  
for shares of Class A Common Stock of Citizens upon the conditions hereinafter  
stated;                                                                         

       NOW, THEREFORE, for good and valuable consideration consisting of the
premises below it is agreed between the parties as follows:                     

 ARTICLE I
 THE TRANSACTION

         1.1 Subject to approval of this Agreement by the Insurance Commissioner
of the State of Texas, and subject to the conditions set forth herein, on the   
"Effective Date" as herein defined, Citizens shall acquire all of the issued and
outstanding common stock of Lifeline for shares of Citizens Class A Common Stock
pursuant to a share exchange (the "Exchange") under Part Five of the Texas      
Business Corporation Act and Article 111 of the Colorado Business Corporation   
Act as set forth herein, and for no cash or other property. The Exchange shall  
be completed at a closing ("Closing") on a date ("Closing Date") which shall be 
as soon as reasonably possible, and as mutually agreed between the parties, on  
or before the tenth business day after regulatory and stockholder approvals are 
obtained in accordance with applicable law.                                     

         1.2 On the Effective Date, the separate corporate existence of Lifeline
shall be unaffected and unimpaired and it shall continue to be a Texas life     
insurance corporation subject to and governed by the laws of the State of Texas,
with all of its rights, powers, duties, purposes, franchises and licenses as are
in existence on the Effective Date. Articles of Exchange, in the form attached  
hereto as Exhibit A subject to any modifications as may be authorized or        
required in accordance with applicable law (collectively the                    

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"Exchange Filings"), shall be completed and executed by the parties and filed by
Citizens as contemplated by this Agreement as soon as reasonably possible, and  
on or before the tenth business day after all regulatory and shareholder        
approvals are obtained in accordance with applicable law.                       

       1.3 If this Agreement is duly adopted by the holders of the requisite
number of shares of Lifeline, in accordance with the applicable laws and subject
to the other provisions hereof, such documents as may be required by law to     
accomplish the acquisition of Lifeline by Citizens shall be delivered to and    
filed with the Commissioner of Insurance of the State of Texas (and any other   
governmental entity with which a filing is required), by Citizens and upon the  
approval of this Agreement as required by requisite states' laws, the           
appropriate documents to accomplish the Exchange shall then be filed as required
by law to effectuate the transactions contemplated hereby, and the Exchange     
shall become effective at the Closing Date. The Closing Date shall be the       
Effective Date for the Exchange.                                                

ARTICLE II
 ISSUANCE AND EXCHANGE OF SHARES

         2.1 The manner and basis of exchanging shares of Lifeline into Citizens
pursuant to the Exchange is as follows: As set forth in Section 2.2 and Section 
2.4, on the Effective Date each shareholder of Lifeline shall receive a number  
of shares of Citizens Class A Common Stock equal in market value ("Market       
Value") to the Lifeline stock owned by such shareholder. For purposes of this   
Agreement, the per share Market Value of Citizens Class A Common Stock shall be 
equal to the average closing price of such stock as reported by the American    
Stock Exchange for the 20 trading days immediately preceding (but not including)
the Effective Date; and the Market Value of the Lifeline stock shall be $5.00   
per share. The offer and sale of the Citizens Class A Common Stock to be issued 
hereunder shall be registered by Citizens pursuant to the Securities Act of 1933
and applicable state securities laws, as provided in Section 5.3 hereof.        

2.2 Upon the Effective Date, each holder of a certificate or  
certificates representing shares of Lifeline, upon presentation and surrender of
such certificate or certificates to the Exchange Agent of Citizens, shall be    
entitled to receive the consideration set forth herein, except that holders of  
those shares as to which dissenters' rights shall have been asserted and        
perfected pursuant to Texas law shall not be converted into shares of Citizens  
Class A Common Stock, but shall represent only such rights as are permitted     
under the Texas Business Corporation Act. Lifeline shall pay or otherwise       
satisfy payment relating to shares as to which dissenters' rights have been     
asserted and perfected pursuant to Texas law solely out of its own funds;       
Citizens shall not contribute or otherwise be liable for any payments to such   
persons arising from the Exchange. Upon such presentation, surrender, and       
exchange as provided in this Section 2.2, certificates representing shares of   
Lifeline previously held shall be canceled. Until so presented and surrendered, 
each certificate or certificates which represented issued and outstanding shares
of Lifeline at the Effective Date shall be deemed for all purposes to evidence  
the right to receive the consideration set forth in Section 2.1 of this         
Agreement. If a certificate or the certificates representing shares of Lifeline 
have been lost, stolen, mutilated or destroyed, the Exchange Agent shall require
the submission of an indemnity agreement and may require the submission of a    
bond in lieu of such certificate.                                               

         2.3 The stock transfer books of Lifeline shall be closed on the Closing
Date, and thereafter no transfers of the common stock of Lifeline will be made. 

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        2.4 No fractional shares of Citizens stock shall be issued as a result
of the Exchange. In the event the exchange of shares results in any shareholder 
being entitled to a fraction of a whole share of Citizens stock, the number of  
shares to be issued to such shareholder shall be rounded up to the nearest whole
share.                                                                          

 ARTICLE III
 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LIFELINE

      To the best of its knowledge and belief, Lifeline hereby represents,
warrants and covenants to Citizens as follows, except as stated in the Lifeline 
Disclosure Statement attached hereto as Exhibit B:                              

      3.1 Lifeline is a life insurance corporation duly organized, validly
existing and in good standing under the insurance laws of Texas with full       
corporate power and authority to own the respective properties which it now     
owns; and is qualified or licensed to conduct its business and is in good       
standing in all states where such qualifications or licensing is required, and  
has full corporate power to enter into and, upon the appropriate approvals as   
required by law, to consummate the transactions contemplated by this Agreement. 

     3.2 The Articles of Incorporation and Bylaws of Lifeline, copies of
which have been delivered to Citizens, are complete and accurate and the minute 
books of Lifeline contain a record of all meetings and corporate actions of the 
shareholders and Board of Directors of Lifeline that is complete and accurate in
all material respects.                                                          

    3.3 The aggregate number of shares which Lifeline is authorized to
issue is 700,000 shares of $1.00 par value common stock and 700,000 such shares 
are issued and outstanding, fully paid and non- assessable. Lifeline has no     
outstanding options, warrants or other rights to purchase, or subscribe to, or  
securities convertible into or exchange for any shares of capital stock.        

     3.4 Lifeline has complete and unrestricted power to enter into and,
upon the appropriate approvals as required by law, to consummate the            
transactions contemplated by this Agreement.                                    

 3.5 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated  
herein by Lifeline will conflict with or result in a breach or violation of the 
Articles of Incorporation or Bylaws of Lifeline or any contracts, agreements,   
pledges, loans or any other obligations of Lifeline.                            

        3.6 Lifeline has delivered to Citizens its annual convention statement
for the year ended December 31, 2000. Also, Lifeline has delivered to Citizens  
its quarterly financial statement for the quarter and six months ended June 30, 
2001. All such statements, herein sometimes called "Lifeline Financial          
Statements", present fairly, in all material respects, the admitted assets,     
liabilities and surplus of Lifeline as of the dates thereof, and the results of 
operations and its cash flows for the year then ended, in conformity with the   
accounting practices prescribed or permitted by the Insurance Department of the 
State of Texas.                                                                 

         3.7 The assets of Lifeline have admissible values at least equal to the
amounts attributed to them on its June 30, 2001 statutory financial statement   
and will have a value at least equal to those set forth in the December 31, 2000
annual convention statement.                                                    

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      3.8 Lifeline has delivered to Citizens a copy of each of the Federal
income tax returns of Lifeline for the years ended December 31, 1999 and        
December 31, 2000. The provisions for taxes paid by Lifeline are believed by    
Lifeline to be sufficient for payment of all accrued and unpaid Federal, state, 
county and local taxes of Lifeline (including any penalties or interest payable)
whether or not disputed for the periods then ended and for all prior fiscal     
periods. All returns and reports of information required or requested by        
Federal, state, county and local tax authorities have been filed or supplied in 
a timely fashion and all such information is true and correct in all material   
respects. Provision has been made in Lifeline financial statements for the      
payment of all taxes due to date by Lifeline, including accrued taxes for the   
current year ended December 31, 2001. No Federal income tax return of Lifeline  
is currently under audit.                                                       

      3.9 Since December 31, 2000, there has not been any material adverse
change in the business or condition, financial or otherwise, of Lifeline,       
including any loss or damages to any of its assets, properties or rights as     
shown on December 31, 2000 Lifeline statutory statement as filed with the Texas 
Department of Insurance that would be material to Lifeline taken as a whole.    

3.10 Attached to Exhibit B is a listing of all pending legal  
proceedings or known regulatory inquiries involving Lifeline and, except for    
these proceedings, there are no legal proceedings or regulatory proceedings     
involving claims pending, or to the knowledge of the officers of Lifeline,      
threatened against Lifeline or affecting any of its assets, or properties.      
Lifeline is not in any breach or violation of or default under any contract or  
instrument to which Lifeline is a party, and no event has occurred which with   
the lapse of time or action by a third party could result in a breach or        
violation of or default by Lifeline under any contract or other instrument to   
which Lifeline is a party or by which it or any of its property may be bound or 
affected, or under its Articles of Incorporation or Bylaws, or any court order, 
statute, ruling or regulation applicable to Lifeline which breach or violation  
of or default could have a material adverse effect on Lifeline.                 

 3.11 The execution and delivery of this Agreement has been duly
authorized and approved by Lifeline's Board of Directors.                       

   3.12 Lifeline has provided Citizens a copy of Lifeline's employee
manual and related documents which include a description of Lifeline's employee 
benefits. Except as shown in the material provided, Lifeline has no employment  
agreements.                                                                     

        3.13 Lifeline will call and hold a meeting of its shareholders as soon
as practicable after the date hereof, at which meeting the Board of Directors   
will, subject to its fiduciary obligations to shareholders, submit and recommend
the Agreement and transactions described herein to its shareholders, and, if the
requisite approval by such shareholders is obtained, will undertake promptly to 
consummate the Exchange as set forth herein.                                    

         3.14 Lifeline shall not enter into or consummate any transactions prior
to the Effective Date other than in the ordinary course of business, will pay no
shareholder dividend and will not intentionally enter into any agreement or     
transaction that would materially and adversely affect its financial condition, 
and will not increase the compensation of any of its employees other than in the
usual course of business consistent with past practices.                        

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  3.15 Lifeline has provided to Citizens all contracts, other than
insurance policies issued or assumed by Lifeline, to which Lifeline is a party. 

       3.16 The representations and warranties of Lifeline shall be true and
correct as of the Effective Date as well as the date hereof.                    

       3.17 Lifeline has delivered, or will deliver to Citizens, any reports
relating to the financial and business condition of Lifeline which are prepared 
after the date of this Agreement and sent to regulators after the execution date
of this Agreement.                                                              

       3.18 No representation or warranty by Lifeline in this Agreement, the
Lifeline Disclosure Statement or any certificate delivered pursuant hereto      
contains any untrue statement of a material fact or omits to state any material 
fact necessary to make such representation or warranty not misleading.          

ARTICLE IV
 REPRESENTATIONS, WARRANTIES AND COVENANTS OF CITIZENS

      To the best of its knowledge and belief, Citizens hereby represents,
warrants and covenants to Lifeline as follows, except as stated in the Citizens 
Disclosure Statement attached hereto as Exhibit C:                              

       4.1 Citizens is a corporation duly organized, validly existing and in
good standing under the laws of Colorado, with full power and authority to own  
the respective properties which it now owns; and is qualified or licensed to    
conduct its business and is in good standing in all states where such           
qualifications or licensing is required.                                        

       4.2 The total number of shares of both classes of capital stock which
Citizens is authorized to issue is 50,000,000 shares of Class A Common Stock    
with no par value and 1,000,000 shares of Class B common stock of no par value. 
As of the date hereof, there are 26,642,938 shares of Class A Common Stock      
issued, of which 24,417,118 are outstanding and 711,040 shares of Class B common
stock are issued and outstanding. Citizens has no outstanding options, warrants 
or other rights to purchase, or subscribe to, or securities convertible into or 
exchangeable for any shares of capital stock. The shares to be issued in        
connection with the Exchange shall be, and all Citizens stock currently issued  
or outstanding is, validly issued, fully paid and nonassessable.                

 4.3 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated  
herein by Citizens will conflict with or result in a breach or violation of the 
Articles of Incorporation or Bylaws of Citizens.                                

  4.4 The execution of this Agreement has been duly authorized and
approved by Citizens' Board of Directors. Citizens has complete and unrestricted
power to enter into and, upon the appropriate approvals as required by law      
(which such approvals are listed on the attached Exhibit D), to consummate the  
transaction contemplated by this Agreement.                                     

4.5 Citizens has delivered to Lifeline its annual consolidated
financial statement for the year ended December 31, 2000. Also, Citizens has    
delivered to Lifeline its consolidated financial statements for                 

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the quarter and six months ended June 30, 2001. All such statements, herein     
sometimes called "Citizens Financial Statements", are complete and correct in   
all material respects and, together with the notes to these financial           
statements, present fairly the financial position and results of operations of  
Citizens for the period included and have been prepared in accordance with      
generally accepted accounting principles consistently applied.                  

      4.6 Since December 31, 2000, there has not been any material adverse
change in the business or condition, financial or otherwise, of Citizens and its
subsidiaries taken as a whole, including any material loss or damages to any of 
its assets, properties or rights from that shown on the Citizens Financial      
Statements.                                                                     

       4.7 Citizens has delivered to Lifeline a listing of all pending legal
proceedings involving Citizens and its consolidated subsidiaries as set forth on
Exhibit C and, except for these proceedings, there are no legal proceedings     
pending, or to the knowledge of the officers of Citizens, threatened against    
Citizens or affecting any of its assets or properties and Citizens is not in any
material breach or violation of or default under any contract or instrument to  
which Citizens is a party, and no event has occurred which with the lapse of    
time or action by a third party could result in a material breach or violation  
of or default by Citizens under any contract or other instrument to which       
Citizens is a party or by which it or any of its properties may be bound or     
affected, or under its Articles of Incorporation or Bylaws, or any court order, 
statute, ruling or regulation applicable to Citizens. The execution, delivery   
and performance of the Agreement by Citizens will not with the lapse of time or 
action by a third party result in a material breach or violation of or default  
by Citizens under any contract or other instrument to which Citizens is a party 
or by which it or any of its properties may be bound of affected, or under its  
Articles of Incorporation or Bylaws, or any court order, statute, ruling or     
regulation applicable to Citizens.                                              

        4.8 Citizens' shareholders are not required to approve the issuance of
shares pursuant to this Agreement.                                              

         4.9 Citizens is the owner of all of the issued and outstanding stock of
Citizens Insurance Company of America.                                          

    4.10 Citizens has delivered to Lifeline true and correct copies of
Citizens Annual Report to Shareholders for the years ended December 31, 1999 and
2000 and each of its other reports to shareholders and filings with the         
Securities and Exchange Commission ("SEC") for the years ended December 31,     
1998, 1999, and for 2000. Citizens will also deliver to Lifeline on or before   
the Closing Date any reports relating to the financial and business condition of
Citizens which are filed with the SEC after the date of this Agreement and any  
other reports sent generally to its shareholders after the date of this         
Agreement.                                                                      

     4.11 Citizens has duly filed all reports required to be filed by it
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended, (the "Federal Securities Laws"). No such reports, or any      
reports sent to the shareholders of Citizens generally, contained any untrue    
statement of material fact or omitted to state any material fact required to be 
stated therein or necessary to make the statements in such report, in light of  
the circumstances and time under which they were made, not misleading.          

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   4.12 Citizens has received, and to the extent it deems necessary,
reviewed the various agent contracts, commission agreements and the other       
contracts included in Exhibit B between Lifeline and Little & Rooney Insurance  
Agency.                                                                         

       4.13 The representations and warranties of Citizens shall be true and
correct as of the Effective Date as well as the date hereof.                    

 ARTICLE V
 OBLIGATIONS OF THE PARTIES PENDING THE EFFECTIVE DATE

   5.1 This Agreement shall be duly submitted to the shareholders of
Lifeline for the purpose of considering and acting upon this Agreement in the   
manner required by law at a meeting of shareholders on a date selected by       
Lifeline, such date to be the earliest practicable date after the proxy         
statement may first be sent to Lifeline shareholders without objection by       
applicable governmental authorities, provided that Lifeline will have at least  
30 days to solicit proxies. Citizens will furnish to Lifeline the information   
relating to Citizens required by the Federal Securities Laws to be included in  
the proxy statement. Citizens represents and warrants that at the time of the   
Lifeline shareholders' meeting, the proxy statement, insofar as it relates to   
Citizens and contains information furnished by Citizens specifically for use in 
such proxy statement, (a) will comply in all material respects with the         
provisions of the Federal Securities Laws and (b) will not contain any untrue   
statement of a material fact or omit to state a material fact required to be    
stated therein or necessary to make the statements therein, in light of the     
circumstances under which they were made, not misleading. Lifeline represents   
and warrants that at the time of the Lifeline shareholder meeting, the proxy    
statement, insofar as it relates to Lifeline and contains information furnished 
by Lifeline specifically for use in such proxy statement, will not contain any  
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the  
circumstances under which they were made, not misleading. The Board of Directors
of Lifeline, subject to its fiduciary obligations to shareholders, shall use    
reasonable efforts to obtain the requisite approval of Lifeline shareholders of 
this Agreement and the transactions contemplated herein. Citizens and Lifeline  
shall take all reasonable and necessary steps and actions to comply with and to 
secure Lifeline's shareholder approval of this Agreement and the transactions   
contemplated herein as may be required by applicable law.                       

  5.2 At all times prior to the Effective Date, but during regular
business hours, each party will permit the other to examine its books and       
records and the books and records of its affiliates and will furnish copies     
thereof on request. It is recognized that, during the performance of this       
Agreement, each party may provide the other party with information that is      
confidential or proprietary in nature. During the term of this Agreement, and   
for four years following the termination of this Agreement, the recipient of    
such information shall protect such information from disclosure to persons,     
other than members of its own or affiliated organizations and its professional  
advisers, in the same manner as it protects its own confidential or proprietary 
information from unauthorized disclosure and shall not use such information to  
the competitive detriment of the disclosing party. In addition, if this         
Agreement is terminated for any reason, each party shall promptly return or     
cause to be returned all documents or other written records of such confidential
or proprietary information together with all copies of such writings and, in    
addition, shall destroy or shall maintain the information with the standard of  
care that is exercised with respect to its own confidential or proprietary      
information. No information shall be considered confidential or proprietary if  
it is (a) information already in the possession of the party to whom disclosure 
is made, (b) information acquired by                                            

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the party to whom the disclosure is made from other sources, or (c) information 
in the public domain or generally available to interested persons or which at a 
later date passes into the public domain or becomes available to the party to   
whom disclosure is made without any wrongdoing by the party or any of its       
affiliates or any third party to whom the disclosure is made.                   

  5.3 Citizens and Lifeline shall promptly provide each other with
information as to any significant developments that materially hinder the       
performance of this Agreement, and shall promptly notify the other if it        
discovers that any of its representations, warranties and covenants contained in
this Agreement or in any document delivered in connection with this Agreement   
was not true and correct in all material respects or became untrue or incorrect 
in any material respect.                                                        

   As promptly as practicable after the execution of this Agreement,
Citizens will prepare and file with the Securities and Exchange Commission      
("Commission") a registration statement on Form S-4 (the "Registration          
Statement") covering the issuance of Citizens shares in the Exchange. Each of   
Citizens and Lifeline will use all reasonable efforts to have or cause the      
Registration Statement to become effective as promptly as practicable, and will 
take any action required to be taken under any applicable federal or state      
securities laws in connection with the issuance of shares of Citizens Common    
Stock in the Exchange. Citizens will use all reasonable efforts to cause the    
Registration Statement to remain effective through the Effective Date. Citizens 
and Lifeline will furnish all information concerning it and the holders of its  
capital stock as the other may reasonably request in connection with such       
actions.                                                                        

        Citizens will use all reasonable efforts to obtain all necessary state
securities laws or "blue sky" permits, approvals and registrations in connection
with the issuance of the Citizens Class A Common Stock in the Exchange.         

        As promptly as practicable after the Registration Statement shall have
become effective, Lifeline will mail a notice of special meeting to its         
stockholders entitled to notice of and to vote at the Lifeline Stockholders'    
Meeting.                                                                        

      If at any time prior to the Effective Date any event or circumstance
relating to Lifeline or any of its Affiliates, or its or their respective       
officers or directors should be discovered by Lifeline that should be set forth 
in an amendment to the Registration Statement, Lifeline will promptly inform    
Citizens, and Citizens will undertake to amend or supplement the Registration   
Statement and the prospectus contained therein accordingly.                     

      If at any time prior to the Effective Date any event or circumstance
relating to Citizens or any of its Affiliates, or to their respective officers  
or directors, should be discovered by Citizens that should be set forth in an   
amendment to the Registration Statement, Citizens will promptly inform Lifeline,
and Citizens will undertake to amend or supplement the Registration Statement   
and the prospectus contained therein accordingly.                               

       No amendment or supplement to the Registration Statement will be made
by Citizens without prior consultation with Lifeline. Citizens and Lifeline each
will advise the other, promptly after it receives notice thereof, of the time   
when the Registration Statement has become effective or any supplement or       
amendment has been filed, the issuance of any stop order suspending the         
effectiveness of the Registration Statement, the suspension of the qualification
of Citizens Common Stock issuable in connection with the Exchange for           

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offering or sale in any jurisdiction, any request by the staff of the Commission
for amendment of the Registration Statement or the Proxy Statement, the receipt 
from the staff of the Commission of comments thereon or any request by the staff
of the Commission for additional information with respect thereto.              

 Citizens will use all reasonable efforts to cause the shares of
Citizens Common Stock to be issued in the Exchange to be approved for listing   
(subject to official notice of issuance) on the American Stock Exchange prior to
the Effective Date. To the knowledge of Citizens, there are no facts and        
circumstances that would preclude Citizens Common Stock to be issued in the     
Exchange from being approved for listing on the American Stock Exchange.        

        5.4 The parties to this Agreement shall take all such action as may be
reasonably necessary and appropriate and shall use their best efforts in order  
to consummate the transactions contemplated hereby as promptly as reasonably    
practicable.                                                                    

ARTICLE VI
REGULATORY FILINGS

    6.1 Within 15 days after the execution of this Agreement, Citizens
shall file with the Insurance Commissioner of Texas all of the regulatory       
approval documents required by Texas law in order to close this Agreement.      

 ARTICLE VII
CONDITIONS PRECEDENT TO THE CONSUMMATION OF THE EXCHANGE

   The following are conditions precedent to the consummation of the
Exchange, on or before the Effective Date:                                      

         7.1 Citizens and Lifeline shall have performed and complied with all of
their respective obligations hereunder which are to be complied with or         
performed on or before the Effective Date and shall provide one another at the  
Closing with a certificate to the effect that such party has performed each of  
the acts and undertakings required to be performed by it on or before the       
Closing Date pursuant to the terms of this Agreement.                           

 7.2 This Agreement shall have been duly and validly authorized,
approved and adopted, at a meeting of the shareholders of Lifeline duly and     
properly called for such purpose in accordance with the applicable law.         

      7.3 This Agreement is in all things subject to the provisions of the
applicable insurance laws and the regulations promulgated thereunder, and shall 
not become effective until approval of the Exchange is obtained from the        
Commissioner of Insurance of the State of Texas (and any other governmental     
entity with jurisdiction over the transaction) in accordance with the provisions
of the laws of said state. Citizens and Lifeline agree, as soon as practical    
after the execution and delivery of this Agreement, to file and to use          
commercially reasonable efforts to obtain such approval of the transactions     
contemplated by this Agreement. Neither Citizens nor Lifeline shall be obligated
to file a suit or to appeal from any adverse ruling by the                      

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Commissioner of Insurance of the State of Texas, and neither Citizens nor       
Lifeline shall be obligated to make any material changes in any lawful, good    
faith management policy in order to gain such approval.                         

       7.4 No action, suit or proceeding shall have been instituted or shall
have been threatened in writing before any court or other governmental body or  
by any public authority to restrain, enjoin or prohibit the Exchange, or which  
might subject any of the parties hereto or their directors or officers to any   
material liability, fine, forfeiture or penalty on the ground that the          
transactions contemplated hereby, the parties hereto or their directors or      
officers, have violated any applicable law or regulation, or have otherwise     
acted improperly in connection with the transactions contemplated hereby, and   
the parties hereto have been advised by counsel that, in the opinion of such    
counsel, such action, suit or proceeding raises substantial questions of law or 
fact which could reasonably be decided adversely to any party hereto or its     
directors or officers.                                                          

         7.5 The representations and warranties made by Citizens and Lifeline in
this Agreement shall be true in all material respects as though such            
representation and warranties had been made or given on and as of the Closing   
Date, except to the extent that such representations and warranties may be      
untrue on and as of the Closing Date because of (1) changes caused by           
transactions suggested or approved in writing by each party hereto or (2) events
or changes (which shall not, in the aggregate, have materially and adversely    
affected the business, assets, or financial condition of Citizens or Lifeline)  
during or arising after the date of this Agreement.                             

7.6 Lifeline shall have furnished Citizens with:              

            (1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Lifeline approving this Agreement and the  
transactions contemplated by it and directing the submission thereof to a vote  
of the shareholders of Lifeline;                                                

            (2) a certified copy of a resolution or resolutions duly
adopted by the requisite number of shareholders of Lifeline approving this      
Agreement and the transactions contemplated by it in accordance with applicable 
law;                                                                            

           (3) an opinion of Sneed, Vine & Perry, P.C., counsel to
Lifeline. dated as of the Effective Date as set forth in Exhibit E attached     
hereto; and                                                                     

              (4) an agreement from each "affiliate" of Lifeline, in the
form attached as Exhibit F.                                                     

7.7 Citizens shall furnish Lifeline with:                     

            (1) a certified copy of a resolution or resolutions duly
adopted by the Board of Directors of Citizens, approving this Agreement and the 
transactions contemplated by it; and                                            

               (2) opinions of Jones & Keller, P.C., counsel for Citizens,
dated as of the Effective Date, as set forth in Exhibits G and H attached       
hereto.                                                                         

  7.8 Citizens and Lifeline shall approve and file the Articles of
Exchange, consistent with this Agreement, for this transaction with the         
requisite governmental authorities.                                             

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      7.9 The Closing of the Plan and Agreement of Exchange for the common
stock of Combined Underwriters Life Insurance Company ("Combined") shall occur  
simultaneously with the closing of the Exchange.                                

ARTICLE VIII
 TERMINATION AND ABANDONMENT

8.1 Anything contained in this Agreement to the contrary      
notwithstanding, the Exchange may be terminated and abandoned at any time       
(whether before or after the approval and adoption thereof by the shareholders  
of Lifeline) prior to the Effective Date of such Exchange:                      

           (1) By mutual written consent of Citizens and Lifeline;

              (2) By Citizens or Lifeline, if any condition set forth in
Article VII has not been met or has not been waived;                            

             (3) By Citizens or Lifeline, if any suit, action or other
proceeding shall be pending or threatened by the federal or a state government  
before any court or governmental agency, in which it is sought to restrain,     
prohibit or otherwise affect the consummation of the Exchange;                  

           (4) By Citizens or Lifeline, if there is discovered any
material error, misstatement or omission in the representations and warranties  
of another party made herein;                                                   

                (5) By Citizens or Lifeline, if more than 2.5% of the shares
of Lifeline are properly perfected as to rights to dissent to the Exchange under
Section 5.11 of the Texas Business Corporation Act;                             

              (6) If the Texas Commissioner of Insurance issues an order
denying the application of Citizens to acquire control of Lifeline or Combined  
or fails to approve both applications within 120 days from its filing, this     
Agreement shall terminate in totality; or                                       

               (7) Any of the terms or conditions of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, by    
action taken by its Board of Directors; provided, however, that such action     
shall be taken only if, in the judgment of the Board of Directors taking the    
action, such waiver will not have a material adverse effect on the benefits     
intended under this Agreement to the party (or shareholders of the party)       
waiving such term or condition.                                                 

ARTICLE IX
TERMINATION OF REPRESENTATIONS AND WARRANTIES AND CERTAIN AGREEMENTS

9.1 The respective representations, warranties, covenants and 
agreements of the parties hereto, shall expire with, and be terminated and      
extinguished by, the Exchange or at the time of the consummation thereof.       
Neither Party shall be under any liability whatsoever with respect to any such  
representation, warranty, covenant or agreement which does not so survive, it   
being intended that the sole remedy of the parties for a breach of any such     
representation, warranty, covenant or agreement shall be to elect not to        

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proceed with the Exchange if such breach has resulted in the failure to satisfy 
a condition precedent to such party's obligation to consummate the transactions 
contemplated hereby.                                                            

 ARTICLE X
 MISCELLANEOUS

        10.1 This Agreement embodies the entire agreement between the parties,
and there have been and are no agreements, representations or warranties among  
the parties other than those set forth herein or those provided for herein.     

   10.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed  
to be an original instrument, but all such counterparts shall constitute but one
instrument.                                                                     

    10.3 Each of the parties hereto will pay its own fees and expenses
incurred in connection with the transactions contemplated by this Agreement.    
Citizens and Lifeline each represent to the other that it has not employed any  
investment bankers, brokers, finders or intermediaries in connection with the   
transaction contemplated hereby who might be entitled to any fee or other       
payment from Citizens or Lifeline or any subsidiary of any of them because of   
the consummation of the transactions contemplated by this Agreement.            

       10.4 All parties to this Agreement agree that if it becomes necessary
or desirable to execute further instruments or to make such other assurances as 
are deemed necessary, the party requested to do so will use its best efforts to 
provide such executed instruments or do all things necessary or proper to carry 
out the purpose of this Agreement.                                              

  10.5 This Agreement may be amended upon approval of the Board of
Directors of each party; provided that the definition of Market Value for the   
stock of Lifeline and/or Citizens shall not be amended without approval of the  
requisite shareholders of Lifeline.                                             

 10.6 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier  
service, fees prepaid, addressed as follows:                                    

                                                                [Download Table]
                                                                     
To Citizens:             To Lifeline:                                

Citizens, Inc.         . Lifeline Underwriters Life Insurance Company
400 E. Anderson Lane     307 N. Glenwood                             
Austin, Texas 78752      Tyler, Texas 75702                          

Attn:  Mark A. Oliver    Attn: Gary C. Cole                          
         President              President                            

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with copies to:                                      with copies to:            

Jones & Keller, P.C.                                 Sneed, Vine & Perry, P.C.  
1625 Broadway, Suite 1600                            901 Congress Ave.          
Denver, CO 80202                                     Austin, Texas 78701        
Attn: Reid Godbolt, Esq.                             Attn: Jim Shawn, Esq.      

or such other addresses as shall be furnished in writing by any party, and any  
such notice or communication shall be deemed to have been given as of the date  
received.                                                                       

      10.7 No press release or public statement will be issued relating to
the transaction contemplated by this Agreement without prior approval of        
Citizens or Lifeline. However, either Citizens or Lifeline may issue at any time
any press release or other public statement it believes on the advice of its    
counsel it is obligated to issue to avoid liability under the law relating to   
disclosures, but the party issuing such press release or public statement shall 
make a reasonable effort to give the other party prior notice of and opportunity
to participate in such release or statement.                                    

  10.8 This Agreement shall be governed, construed and enforced in
accordance with the laws of Texas, without regard to any conflicts of law       
provisions.                                                                     

  10.9 This Agreement shall be deemed to have been drafted by both
parties, and therefore the rule against construing ambiguities against the party
drafting a contract shall be inapplicable to this Agreement.                    

10.10 If any provision of this Agreement is held invalid or   
unenforceable by any court of competent jurisdiction, the other provisions of   
this Agreement will remain in full force and effect. Any provision of this      
Agreement held invalid or unenforceable only in part or degree will remain in   
full force and effect to the extent not held invalid or unenforceable.          

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         IN WITNESS THEREOF, the parties have set their hands and seals this the
20th day of November, 2001.                                                     

                                        LIFELINE UNDERWRITERS LIFE INSURANCE
               COMPANY

                            By: /s/ Gary C. Cole
                                               ---------------------------------
                                       Gary C. Cole, President

                      CITIZENS, INC.

                              By: /s/ Mark A. Oliver
                                               ---------------------------------
                                         Mark A. Oliver, President

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                                                                       EXHIBIT A
ARTICLES OF EXCHANGE

CITIZENS, INC.
 AND
LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY

         ARTICLES OF EXCHANGE entered into this ___ day of ___________, 2001, by
and between Citizens, Inc., a Colorado corporation ("Citizens") and Lifeline    
Underwriters Life Insurance Company, a Texas corporation ("Lifeline").          

THIS IS TO CERTIFY:                                                             

        FIRST: The parties which are parties to these Articles of Exchange are
Lifeline Underwriters Life Insurance Company, a Texas corporation and Citizens, 
Inc., a Colorado corporation, and each of said corporations agrees to have the  
$1.00 par value common stock of Lifeline (hereinafter the "Common Stock")       
acquired by Citizens in a share exchange (the "Exchange") as provided by these  
Articles of Exchange.                                                           

    SECOND: The name and state of incorporation of each party to these
Articles of Exchange are as follows: Lifeline Underwriters Life Insurance       
Company is a corporation incorporated under the laws of the State of Texas, and 
Citizens, Inc. is a corporation incorporated under the laws of the State of     
Colorado.                                                                       

THIRD: As to the Common Stock:                                

        A. On the Effective Date (as defined in Article TENTH below), each one
share of the Common Stock of Lifeline issued and outstanding immediately prior  
thereto shall automatically be converted into and shall be exchanged for        
________ shares of the Citizens' Class A Common Stock subject to D. below.      

B. Upon the Effective Date, each holder of a certificate or   
certificates representing shares of Common Stock, upon presentation and         
surrender of such certificate or certificates to the exchange agent for         
Citizens, shall be entitled to receive the consideration set forth in this      
Article THIRD, except that holders of those shares as to which dissenters'      
rights shall have been asserted and perfected pursuant to Texas law shall not be
converted into shares of Citizens' Common Stock, but shall represent only such  
rights as are perfected under the Texas Business Corporation Act. Upon such     
presentation, surrender and exchange as provided in this Article THIRD,         
certificates representing shares of Common Stock previously held shall be       
canceled. Until so presented and surrendered, each certificate or certificates  
which represented issued and outstanding shares of Common Stock at the Effective
Date shall be deemed for all purposes to evidence the right to receive the      
consideration set forth in this Article THIRD. If the certificate or            
certificates representing shares of Common Stock have been lost, stolen,        
mutilated or destroyed, the exchange agent of Citizens shall require the        
submission of an indemnity agreement and may require the submission of a bond in
lieu of such certificate.                                                       

C. The stock transfer books of Lifeline shall be closed on the
Effective Date, and thereafter no transfers of the Lifeline Common Stock will be
made.                                                                           

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   D. No fractional shares of Citizens' Class A Common Stock will be
issued as a result of the Exchange. In the event the exchange of shares results 
in any shareholder being entitled to a fraction less than whole share of        
Citizens' Class A Common Stock, such fraction will be rounded up to the nearest 
whole share.                                                                    

        FOURTH: A Plan and Agreement of Exchange between Citizens and Lifeline
has been approved by the boards of directors of Citizens and Lifeline and the   
requisite vote of shareholders of Lifeline. Approval by shareholders of Citizens
is not required.                                                                

FIFTH: The Board of Directors of Lifeline by [minutes at the  
__________, 2001 meeting or by unanimous written action signed by all of the    
directors] duly authorized and adopted a resolution declaring that the Plan and 
Agreement of Exchange as herein set forth and the performance of its terms is   
duly authorized and advisable and directing that these Articles of Exchange be  
submitted for action thereon by the shareholders of Lifeline, all in the manner 
and by the vote required by the Texas Business Corporation Act and the Articles 
of Incorporation of Lifeline.                                                   

SIXTH: At a meeting of common shareholders of Lifeline held on
________, 2001, _______ shares were outstanding and entitled to vote on the     
matters set forth in these Articles of Exchange. ________ shares voted in favor 
of the Plan and Agreement of Exchange and ______ shares voted against the Plan  
and Agreement of Exchange; ________ shares abstained. The number of shares      
voting on the Plan and Agreement of Exchange was sufficient for approval by the 
common shareholders.                                                            

SEVENTH: The Board of Directors of Citizens by [minutes at the
________, 2001 meeting or by unanimous written action signed by all of the      
directors] duly authorized and adopted a resolution declaring that the Plan and 
Agreement of Exchange as herein set forth and the performance of its terms is   
duly authorized and advisable, all in the manner and by the vote required by the
Colorado Business Corporation Act and the Articles of Incorporation of Citizens.

      EIGHTH: An executed Plan and Agreement of Exchange is on file at the
principal place of business of Citizens located at 400 E. Anderson Lane, Austin,
Texas 78752.                                                                    

       NINTH: A copy of the Plan and Agreement of Exchange will be furnished
by each surviving, acquiring or new domestic or foreign corporation or other    
entity, on written request and without charge, to any shareholder of Lifeline.  

      TENTH: The Exchange provided for by these Articles of Exchange shall
become effective at the time of filing the last document required by law (the   
"Effective Date").                                                              

      ELEVENTH: The name and address of the Registered Agent and principal
office of the acquiring entity is:                                              

Agent:                                            Principal Office:             
       ------------------                                           ------------

-------------------------                         ------------------------------

-------------------------                         ------------------------------

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         IN WITNESS WHEREOF, Citizens and Lifeline, parties to these Articles of
Exchange, have caused these Articles of Exchange to be signed and acknowledged  
by its Chairman and attested by the Secretary all as of the ________ day of     
_________________, 2001.                                                        

ATTEST:                                         LIFELINE UNDERWRITERS LIFE      
                                 INSURANCE COMPANY

                   By:
----------------------------                        ----------------------------
                                       Gary C. Cole, President

ATTEST:                                         CITIZENS, INC.                  

                   By:
---------------------------                         ----------------------------
                                         Mark A. Oliver, President

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                                                                       EXHIBIT B
 LIFELINE DISCLOSURE STATEMENT

        Pursuant to the provisions of Article III of the Plan and Agreement of
Exchange ("Agreement") by and between Lifeline and Citizens, Lifeline hereby    
makes the following disclosures respecting the similarly numbered sections in   
the Agreement:                                                                  

 (No Additional Disclosure Required)

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                                                                       EXHIBIT C
 CITIZENS DISCLOSURE STATEMENT

       Pursuant to the provisions of Article IV of the Plan and Agreement of
Exchange ("Agreement") by and between Citizens and Lifeline, Citizens hereby    
makes the following disclosures respecting the similarly numbered sections in   
the Agreement:                                                                  

    4.2 Citizens filed a Form S-3 ("Statement") Registration Statement
under the Securities Act of 1933 with the Securities and Exchange Commission    
("SEC") which became effective on August 30, 2001. The Statement registers      
2,000,000 shares of Citizens Class A Common Stock for sale to the public through
the Citizens, Inc. Stock Investment Plan ("the Plan"), the creation of which is 
included in the Statement. Although the Statement by definition registers shares
for sale to the public, the activities of the Plan involve the acquisition of   
Citizens Class A Common Stock through the public market, rather than directly   
from the public. The Plan provides for the participation by owners of insurance 
policies issued by the Citizens' subsidiaries, existing holders of Citizens     
Class A Common Stock, employees of Citizens, Inc., members of the marketing     
force of any of Citizens' subsidiaries, or any member of the public in general  
who elects to participate. The Plan is sponsored by Citizens, Inc. and will be  
administered by Mellon Bank.                                                    

   4.7 Delia Bolanos Andrade, Luis Martin Tapia Alberti, Sonio Lucia
Montoya Botero, Luisa F. Botero and Carlos A Botero, Roberto Carlos Paniagua    
Cardona, Luis Rberto Paniagua Grisales, Blanca Numbia Cardona, and Fernando     
Hakim Daccach v. Citizens Insurance Company of America, Citizens, Inc., Negocios
Savoy, S.A., Harold E. Riley, and Mark A. Oliver, Cause Number 99-09099 Travis  
County, Texas. A lawsuit seeking class action status with Fernando Hakim as the 
class representative and naming a class of all persons who made premium payments
who are not residents of the United States as potential members of the class.   
The suit alleges that the policies are unregistered securities in violation of  
the Texas Blue Sky laws. In addition, the other plaintiffs made individual      
claims primarily under the Texas Deceptive Trade Practices Act. The DTPA claims 
relate to limitations and exclusions stated in the policies, excessive surrender
charges stated in the policies, and the amount of premiums charged. The         
individual claimants also claim breach of contract (failure to provide the      
insurance as represented, not alleged but stated), fraud in the inducement,     
negligent misrepresentation, breach of duty of good faith and fair dealing. The 
plaintiffs have filed a motion for class certification. Defendants have filed an
answering motion denying that the case is properly certifiable. Additionally, a 
motion for summary judgment has been filed by defendants on the issue of whether
insurance policies issued to members of the putative class are unregistered     
securities in violation of the Texas Blue Sky laws. A hearing was held on       
October 16, 2001, regarding defendants' motion for summary judgment. On October 
29, 2001, a hearing on the Class Certification was held.                        

    Velma U Bayhi and David Bayhi v. Donald G. Welsh, Funeral Homes of
Louisiana, Inc. dba Baker Funeral Home, Citizens, Inc., Lumbermens Mutual       
casualty Company and Kemper Insurance Companies, Cause number 468864 division M 
in the 19th District Court, Parish of East Baton Rouge, Louisiana. The funeral  
home is a subsidiary of Citizens Insurance Company of America. Mrs. Bayhi is    
making a claim for injuries from a collision between a hearse driven by Mr.     
Welsh and her stalled car. The hearse was insured with Lumbermens through       
Kemper. Mr. Bayhi also claims that he suffered emotional distress because he    
observed the crash. Kemper is defending Baker Funeral Home in this matter.      

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     George M. Campbell v. American Liberty Life Insurance Company, Case
number 94-1625. Originally filed in the Parish of Ouachita, Louisiana in        
1994--re-filed in 1998. Mr. Campbell had a hospitalization policy covering      
cancer. He filed a claim for two hospital stays at a V. A. hospital, but did not
submit any bills from the hospital. The claim was denied because the policy     
required that the hospital provide services "...for compensation from its       
patients...." There was no activity in the case, until July, 2001, when         
defendant received a Request for Production of a certified copy of Mr.          
Campbell's policy.                                                              

        Juanita Hall v. Citizens Insurance Company of America and Rex Beverly,
Civil Action Number CV 99-190, Marengo County, Alabama. Mrs. Hall claims that   
Rex Beverly and Assured Investors Life Insurance Company misrepresented the     
death benefit payable upon her husband's death. Following defendant's motion for
summary judgment the court dismissed all tort claims and left open only a       
contract claim that the amount of the death benefit paid was incorrect. A       
rehearing was granted, however plaintiff's motion was denied.                   

         Velma Jenkins v. United Security Life Insurance Company, Jack Lane, and
fictitious defendants. Filed as Cause Number 2001-142 in the Circuit Court of   
Noxubee County, Mississippi and removed to the United States District Court for 
the Southern District of Mississippi Eastern Division as Civil Action Number    
4:01-CV-156LN. Remanded to County Court and all claims above $75,000 have been  
dismissed with prejudice. Plaintiff alleges that she intended to purchase a     
supplement to her major medical insurance coverage, but was sold a              
hospitalization policy. Plaintiff alleges that the agent and the insurance      
company engaged in a pattern and practice of misrepresentation and fraud as to  
the benefits and coverage on policies sold to consumers in the State of         
Mississippi. Plaintiff made claims under her policy for medication and for out  
patient treatments all of which were denied because the policy covered          
hospitalization. Plaintiff filed Interrogatories and Requests for Production    
with her original complaint. No hearings have been set.                         

       Mary Hart Whittington, Mayoda C. Parker, Sharon P. Browning, Patricia
M. Brown, Mary Catherine Rawles, and Barry Maricelli v. Citizens Insurance      
Company of America f/k/a United Security Life Insurance Company, American       
Investment Network f/k/a Great American Investment Network, Larry T. Reynolds,  
Virgil Styles, and Jesse L. Byrd. Cause number 251-01-713CIV, filed in the      
Circuit Court of the First Judicial District of Hinds County, Mississippi.      
Plaintiffs allege that the whole-life nature of the insurance policies was      
misrepresented to them as an investment because the policies would pay          
dividends. The plaintiff's allege fraud, negligent misrepresentation,           
negligence, civil conspiracy, breach of contract, conversion, and violation of  
Mississippi Securities laws.                                                    

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                                                                       EXHIBIT D
 APPROVALS REQUIRED BY LAW

1.       Texas Insurance Department                           

2.       U.S. Securities and Exchange Commission              
      (approval not required; however, must declare Registration Statement
Effective)                                                    

3.       Colorado Division of Insurance                       
      (approval not required; however, notice required pursuant to Form B)

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                                                                       EXHIBIT E

 _____________, 2001

Citizens, Inc.                                                                  
Citizens Insurance Company of America                                           
400 East Anderson Lane                                                          
Austin, Texas 78752                                                             

    Re:      Plan and Agreement of Exchange between Citizens, Inc. and
Lifeline Underwriters Life Insurance Company

Ladies and Gentlemen:                                                           

  We have acted as counsel to Lifeline Underwriters Life Insurance
Company ("Lifeline") in connection with the above referenced agreement. This    
letter is provided to you pursuant to Paragraph 7.6(3) of the Plan and Agreement
of Exchange, dated as of ____________________, 2001 (the "Agreement"), between  
Citizens, Inc. ("Citizens") and Lifeline. Except as otherwise indicated herein, 
capitalized terms used in this letter are defined as set forth in the Agreement 
or the Accord (see below).                                                      

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

        Our opinions are limited in all respects to the substantive law of the
State of Texas, and the federal law of the United States, and we assume no      
responsibility as to the applicability thereto, or the effect thereon, of the   
laws of any other jurisdiction.                                                 

         We have relied upon factual representations made by Lifeline in Article
III of the Agreement and we have reviewed such documents and given consideration
to such matters of law and fact as we have deemed appropriate to render this    
opinion. We have been furnished with, and examined originals or copies,         
certified or otherwise identified to our satisfaction, of all such records of   
Lifeline, agreements and other instruments, certificates of officers and        
representatives of Lifeline, certificates of public officials, and other        
documents, as we have deemed necessary or desirable as a basis for the opinions 
hereinafter expressed. As to questions of fact material to such opinions, we    
have, where relevant facts were not independently verified or established,      
relied upon certificates of officers of Lifeline.                               

      Based upon and subject to the foregoing and the other qualifications
and limitations stated in this letter, we are of the opinion that:              

 1. To our knowledge, execution, delivery and performance of the
Agreement by Lifeline shall not result in a breach of, or constitute a default  
(or an event which, with or without notice or lapse of time or both, would      
constitute a default) under any contract, commitment, agreement, indenture,     
mortgage, pledge                                                                

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agreement, note, bond, license, or other instrument or obligation to which      
Lifeline is a party or by which Lifeline is bound or the charter or bylaws of   
Lifeline or other governing instruments of Lifeline.                            

      2. The Agreement has been duly authorized, executed and delivered by
Lifeline and is a legal, valid and binding obligation of Lifeline enforceable   
against Lifeline in accordance with its terms (subject to the applicability of  
equitable principles or the effect of bankruptcy or creditors' rights laws on   
the enforceability of the Agreement);                                           

      3. Lifeline is a Texas insurance corporation validly existing and in
good standing under the laws of the State of Texas;                             

      4. Lifeline has full corporate power and authority to enter into the
Agreement and to carry out the transactions contemplated by the Agreement;      

     5. To our knowledge, there are no civil or criminal actions, suits,
arbitrations, administrative or other proceedings or governmental investigations
pending or threatened against Lifeline which will constitute a breach of the    
representations, warranties or covenants under the Agreement or will prevent    
Lifeline from consummating the transactions contemplated by the Agreement;      

       6. The authorized and, to our knowledge, outstanding capital stock of
Lifeline is as stated in Section 3.3 of the Agreement.                          

       7. To our knowledge, except as set forth in the Agreement or Lifeline
Disclosure Statement, there are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, privileges or other         
arrangements, preemptive or contractual, calling for or requiring the           
acquisition of, or the issuance, transfer, sale or other disposition of any     
shares of the capital stock of Lifeline, or calling for or requiring the        
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of Lifeline; and                                               

       8. The execution, delivery, and performance of the Agreement, and the
performance by Lifeline of its obligations thereunder, are not in contravention 
of any law, ordinance, rule or regulation of Texas or of the United States and  
will not contravene any order, writ, judgment, injunction, decree,              
determination, or award of any court or other authority having jurisdiction, and
will not cause the suspension or revocation of any authorization, consent,      
approval, or license presently in effect, which affects or binds Lifeline or any
of its material properties, and will not have a material adverse effect on the  
validity of the Agreement or on the validity of the consummation of the         
transactions contemplated by the Agreement or constitute grounds for the loss or
suspension of any permits, licenses, or other authorizations used in the        
business of Lifeline.                                                           

        This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. This opinion is 
rendered pursuant to Section 7.6(3) of the Agreement and, to the extent, if any,
that the law of the State of Texas permits you to rely upon it, it is to be     
limited in its use to reliance by you in consummating the transactions described
herein and no other person or entity may rely or claim reliance upon this       
opinion.                                                                        

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      This opinion is rendered as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any changes in or new      
developments which might affect any matters or opinions set forth herein.       

         The use of the words "to our knowledge" means that during the course of
our current and past representation of Lifeline no information has come to the  
attention of the attorneys involved in the transaction described herein that    
could give any such attorney actual knowledge of the existence of the documents 
or facts so qualified. Except as set forth herein, this Firm has not undertaken 
any investigation to determine the existence of such documents or facts, and no 
inference as to our knowledge thereof shall be drawn from the fact of our       
representation of any party or otherwise.                                       

                                           Very truly yours,

                                                 Sneed Vine & Perry P.C.

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                                                                       EXHIBIT F

 AFFILIATE AGREEMENT

Citizens, Inc.                                                                  
400 East Anderson Lane                                                          
Austin, Texas 78752                                                             

Ladies and Gentlemen:                                                           

I have been advised that I have been identified as a possible 
"affiliate" of Lifeline Underwriters Life Insurance Company, a Texas corporation
(the "Company"), as that term is defined for purposes of paragraphs (c) and (d) 
of Rule 145 of the General Rules and Regulations (the "Rules and Regulations")  
of the Securities and Exchange Commission (the "Commission") under the          
Securities Act of 1933 (the "Securities Act"), although nothing contained herein
should be construed as an admission of such fact.                               

       Pursuant to the terms of that certain Plan and Agreement of Exchange,
dated as of _______________, 2001 (the "Exchange Agreement"), between the       
Company and Citizens, Inc., a Colorado corporation ("Citizens"), Citizens shall 
acquire all of the issued and outstanding $1.00 par value common stock of the   
Company ("Company Stock") for shares of no par value Class A Common Stock of    
Citizens ("Citizens Stock") pursuant to a share exchange (the "Exchange"). As a 
result of the Exchange, I will receive shares of Citizens Stock in exchange for 
shares of Company Stock owned by me on the Effective Date (as defined in the    
Exchange Agreement) of the Exchange as determined pursuant to the Exchange      
Agreement.                                                                      

  A. In connection therewith, I represent, warrant and agree that:

                 1. I will not make any sale, transfer or other disposition of
Citizens Stock I receive as a result of the Exchange in violation of the        
Securities Act or the Rules and Regulations.                                    

                 2. I have been advised that the issuance of Citizens Stock to
me as a result of the Exchange has been registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. However, I have also    
been advised that, because at the time the Exchange was submitted for a vote of 
the stockholders of the Company I may have been an "affiliate" of the Company,  
and the distribution by me of the shares of Citizens Stock I receive as a result
of the Exchange has not been registered under the Securities Act, such shares   
must be held by me indefinitely unless (i) such distribution of such shares has 
been registered under the Securities Act, (ii) a sale of such shares is made in 
conformity with the provisions of Rule 145 promulgated by the Commission under  
the Securities Act or (iii) such sale is pursuant to a transaction which, in the
opinion of counsel reasonably satisfactory to Citizens or as described in a     
"no-action" or interpretive letter from the staff of the Commission, is not     
required to be registered under the Securities Act.                             

     3. I have carefully read this letter and the Exchange Agreement and
have discussed the requirements of the Exchange Agreement and other limitations 
upon the sale, transfer or other disposition                                    

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of the shares of Citizens Stock to be received by me, to the extent I have felt 
necessary, with my counsel or with counsel for the Company.                     

    B. Furthermore, in connection with the matters set forth herein, I
understand and agree that:                                                      

              1. Citizens is under no further obligation to register the
sale, transfer or other disposition of the shares of Citizens Stock received by 
me as a result of the Exchange or to take any other action necessary in order to
make compliance with an exemption from registration available, except as set    
forth in paragraph C below.                                                     

               2. Stop transfer instructions will be given to the transfer
agent of Citizens with respect to the shares of Citizens Stock I will receive as
a result of the Exchange, and there will be placed on the certificates          
representing such shares, or any certificates delivered in substitution         
therefor, a legend stating in substance:                                        

               The shares represented by this certificate were issued in a
                  transaction to which Rule 145 under the Securities Act of 1933
              applies. The shares represented by this certificate may be
                 transferred only in accordance with the terms of an agreement
         dated , 2001 between the registered holder hereof and
               Citizens, Inc., a copy of which agreement is on file at the
principal offices of Citizens, Inc.         

                  3. Unless the transfer by me of my shares of Citizens Stock is
a sale made in conformity with the provisions of Rule 145 of the Rules and      
Regulations or made pursuant to a registration under the Securities Act,        
Citizens reserves the right to put on the certificates issued to my transferee a
legend stating in substance:                                                    

            The shares represented by this certificate have not been
                 registered under the Securities Act of 1933 and were acquired
                 by the holder not with a view to, or for resale in connection
            with, any distribution thereof within the meaning of the
          Securities Act of 1933 and may not be sold, pledged or
           otherwise transferred except pursuant to a registration
         statement or in accordance with an exemption from the
            registration requirements of the Securities Act of 1933.

       It is understood and agreed that the legends set forth above shall be
removed, and substitute certificates shall be delivered without any such legend,
and the transfer agent will be instructed to effectuate transfers of shares of  
Citizens Stock if the undersigned delivers to Citizens a letter from the staff  
of the Commission or an opinion of counsel in form and substance reasonably     
satisfactory to Citizens to the effect that such legend is not required for the 
purposes of the Securities Act.                                                 

         C. By Citizens's acceptance of this letter, Citizens hereby agrees with
me as follows:                                                                  

                 1. For so long as and to the extent necessary to permit me to
sell the Citizens Stock pursuant to Rule 145 and, to the extent applicable, Rule
144 under the Act, Citizens will: (a) use its reasonable efforts to (i) file, on
a timely basis, all reports and data required to be filed with the Commission   

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by it pursuant to Section 13 of the Securities Exchange of 1934, as amended (the
"1934 Act"), and (ii) furnish to me upon request a written statement as to      
whether Citizens has complied with such reporting requirements during the 12    
months preceding any proposed sale of the Citizens Stock by me under Rule 145;  
and (b) otherwise use its reasonable efforts to permit such sales pursuant to   
Rule 145 and Rule 144. Citizens hereby represents to me that it has filed all   
reports required to be filed with the Commission under Section 13 of the 1934   
Act during the preceding 12 months.                                             

             2. It is understood and agreed that certificates with the
legends set forth in paragraphs B.2. and B.3. above will be substituted by      
delivery of certificates without such legend if (i) one year shall have elapsed 
from the date the undersigned acquired the Citizens Stock received in the       
Exchange and the provisions of Rule 145(d)(2) are then available to the         
undersigned, (ii) two years shall have elapsed from the date the undersigned    
acquired the Citizens Stock received in the Exchange and the provisions of Rule 
145(d)(3) are then applicable to the undersigned, or (iii) Citizens has received
either an opinion of counsel, which opinion and counsel shall be reasonably     
satisfactory to Citizens, or a "no action" letter obtained by the undersigned   
from the staff of the Commission, to the effect that the restrictions imposed by
Rule 145 under the Act no longer apply to the undersigned.                      

                                           Very truly yours,

Date:                                                [Name of Affiliate]        
----------------------------                                        
ACCEPTED:                                                                       

CITIZENS, INC.                                                                  

By:                                                                             
-------------------------------                                           
Mark A. Oliver, President                                             

Date:                                                                           
----------------------------                                        

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                                                                       EXHIBIT G

 _____________, 2001

Lifeline Underwriters Life Insurance Company.                                   
307 N. Glenwood                                                                 
Tyler, Texas 75702                                                              

    Re:      Plan and Agreement of Exchange between Citizens, Inc. and
Lifeline Underwriters Life Insurance Company

Ladies and Gentlemen:                                                           

       We have acted as counsel to Citizens, Inc. ("Citizens") in connection
with the above referenced agreement. This letter is provided to you pursuant to 
Paragraph 7.7(2) of the Plan and Agreement of Exchange, dated as of             
____________________, 2001 (the "Agreement") between Citizens, Inc. ("Citizens")
and Lifeline Underwriters Life Insurance Company ("Lifeline"). Except as        
otherwise indicated herein, capitalized terms used in this letter are defined as
set forth in the Agreement or the Accord (see below).                           

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

        In giving the opinion expressed below, insofar as such opinion relates
to other than Federal law or the laws of jurisdiction other than the State of   
Colorado, we advise that our opinion is with respect to Federal law and the laws
of the State of Colorado only and that, to the extent such opinion is derived   
from laws of other jurisdictions, the statements are based on examinations of   
relevant authorities and are believed to be correct, but we have obtained no    
legal opinions as to such matters from attorneys licensed to practice in such   
other jurisdictions. Accordingly, the law covered by the opinion expressed      
herein is limited to the Federal law of the United States and the law of the    
State of Colorado.                                                              

         We have relied upon factual representations made by Citizens in Article
IV of the Agreement and we have reviewed such documents and given consideration 
to such matters of law and fact as we have deemed appropriate to render this    
opinion. We have been furnished with, and examined originals or copies,         
certified or otherwise identified to our satisfaction, of all such records of   
Citizens, agreements and other instruments, certificates of officers and        
representatives of Citizens, certificates of public officials, and other        
documents, as we have deemed necessary or desirable as a basis for the opinions 
hereinafter expressed. As to questions of fact material to such opinions, we    
have, where relevant facts were not independently verified or established,      
relied upon certificates of officers of Citizens.                               

      Based upon and subject to the foregoing and the other qualifications
and limitations stated in this letter, we are of the opinion that:              

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 1. To our knowledge, execution, delivery and performance of the
Agreement by Citizens shall not result in a breach of, or constitute a default  
(or an event which, with or without notice or lapse of time or both, would      
constitute a default) under any contract, commitment, agreement, indenture,     
mortgage, pledge agreement, note, bond, license, or other instrument or         
obligation to which Citizens is a party or by which Citizens is bound or the    
charter or bylaws of Citizens or other governing instruments of Citizens.       

      2. The Agreement has been duly authorized, executed and delivered by
Citizens and is a legal, valid and binding obligation of Citizens enforceable   
against Citizens in accordance with its terms (subject to the applicability of  
equitable principles or the effect of bankruptcy or creditors' rights laws on   
the enforceability of the Agreement);                                           

    3. Citizens is a Colorado corporation validly existing and in good
standing under the laws of the State of Colorado;                               

      4. Citizens has full corporate power and authority to enter into the
Agreement and to carry out the transactions contemplated by the Agreement;      

     5. To our knowledge, there are no civil or criminal actions, suits,
arbitrations, administrative or other proceedings or governmental investigations
pending or threatened against Citizens which will constitute a breach of the    
representations, warranties or covenants under the Agreement or will prevent    
Citizens from consummating the transactions contemplated by the Agreement;      

       6. The authorized and, to our knowledge, outstanding capital stock of
Citizens is as stated in Section 4.2 of the Agreement;                          

        7. To our knowledge, except as set forth in the Agreement or Citizens'
Disclosure Statement, there are no outstanding subscriptions, options, warrants,
rights, convertible securities, calls, commitments, privileges or other         
arrangements, preemptive or contractual, calling for or requiring the           
acquisition of, or the issuance, transfer, sale or other disposition of any     
shares of the capital stock of Citizens, or calling for or requiring the        
issuance of any securities or rights convertible into or exchangeable for shares
of capital stock of Citizens; and                                               

       8. The execution, delivery, and performance of the Agreement, and the
performance by Citizens of its obligations thereunder, are not in contravention 
of any law, ordinance, rule or regulation of Colorado or of the United States   
and will not contravene any order, writ, judgment, injunction, decree,          
determination, or award of any court or other authority having jurisdiction, and
will not cause the suspension or revocation of any authorization, consent,      
approval, or license presently in effect, which affects or binds Citizens or any
of its subsidiaries or any of their material properties, and will not have a    
material adverse effect on the validity of the Agreement or on the validity of  
the consummation of the transactions contemplated by the Agreement or constitute
grounds for the loss or suspension of any permits, licenses, or other           
authorizations used in the business of Citizens.                                

        This opinion is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. This opinion is 
rendered pursuant to Section 7.7(2) of the Agreement and, to the extent, if any,
that the law of the State of Colorado permits you to rely upon it, it is to be  
limited                                                                         

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in its use to reliance by you in consummating the transactions described herein 
and no other person or entity may rely or claim reliance upon this opinion.     

      This opinion is rendered as of the date hereof, and we undertake no,
and hereby disclaim any, obligation to advise you of any changes in or new      
developments which might affect any matters or opinions set forth herein.       

         The use of the words "to our knowledge" means that during the course of
our current and past representation of Citizens and our past representation of  
Citizens no information has come to the attention of the attorneys involved in  
the transaction described herein that could give any such attorney actual       
knowledge of the existence of the documents or facts so qualified. Except as set
forth herein, this Firm has not undertaken any investigation to determine the   
existence of such documents or facts, and no inference as to our knowledge      
thereof shall be drawn from the fact of our representation of any party or      
otherwise.                                                                      

       Very truly yours,

          Jones & Keller, P.C.

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                                                                       EXHIBIT H

 _____________, 2001

Lifeline Underwriters Life Insurance Company.                                   
307 N. Glenwood                                                                 
Tyler, Texas 75702                                                              

    Re:      Plan and Agreement of Exchange between Citizens, Inc. and
Lifeline Underwriters Life Insurance Company

Ladies and Gentlemen:                                                           

Our opinions as expressed below are based solely upon: (1) the
information contained in the Proxy- Information Statement dated                 
_______________________ (hereafter "Proxy Statement") as filed with the         
Securities and Exchange Commission; (2) the Plan and Agreement of Exchange ("the
Plan") dated __________________ between Citizens, Inc. ("Citizens") and Lifeline
Underwriters Life Insurance Company ("Lifeline"), together with Exhibits        
thereto; (3) the Marketing Development Agreement dated __________ between       
Lifeline, Combined Underwriters Life Insurance Company and the Red Little       
Combined Agency, Inc. (the "Agency"); (4) relevant information provided by the  
principals; (5) the Internal Revenue Code of 1986, as amended (hereinafter      
"IRC"), the regulations promulgated thereunder and the current administrative   
positions of the Internal Revenue Service ("IRS") contained in published Revenue
Rulings and Revenue Procedures; and (7) existing judicial decisions. All of the 
above are subject to change or modification by subsequent legislative,          
regulatory, administrative or judicial decisions which could adversely affect   
our opinions.                                                                   

    This letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,          
exceptions, definitions, limitations on coverage and other limitations, all as  
more particularly described in the Accord, and this letter should be read in    
conjunction therewith.                                                          

         "Exchange" refers to the transaction set forth in the Plan. Capitalized
terms herein have the same meaning as in the Plan.                              

    Shareholders residing or conducting business in foreign countries,
states or municipalities having tax laws could be required to pay tax with      
respect to transactions in that country, state or municipality. We do not       
express any opinion as to foreign, state or local tax consequences of the       
Exchange. We do not express any opinion regarding alternative minimum tax       
consequences of the Exchange to any shareholder.                                

     The consequences described herein are not applicable to nonresident
aliens, to foreign corporations, to debtors under the jurisdiction of a court in
a case under Title 11 of the United States Code or in a receivership,           
foreclosure, or similar proceeding, to shareholders that are real estate        
investment trusts, to shareholders that are regulated investment companies, to  
shareholders that are tax exempt persons, to shareholders that are persons that 
hold their Lifeline Common Stock as part of a position in a "straddle" or as    
part of a "hedging" or other integrated transaction, to shareholders that are   
investment companies within                                                     

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the meaning of IRC Section 351(e), to shareholders who are dealers in           
securities, to shareholders who do not hold their common stock as capital       
assets, to shareholders who are financial institutions, or to sharehold ers who 
acquired or will acquire their shares in connection with stock option or stock  
purchase plans or in other compensatory transactions.                           

      The principal reasons for the Exchange can be summarized as follows:

                  (1) to become part of a combined entity with greater financial
  strength and an enhanced competitive position as compared to the
separate entities;                                            

                  (2) to achieve improved capitalization and economies of scale;
and                                                           

              (3) to provide greater liquidity and diversity to Lifeline
shareholders.                                                 

        This letter is conditioned on the accuracy of the factual information,
assumptions and representations contained in the Proxy Statement and provided by
Citizens and Lifeline, including the principal reasons for the Exchange         
expressed above and the following:                                              

                  (1) that Citizens and Lifeline, in arriving at the method used
       to determine the number of shares of Citizens Class A Common Stock to
      be received by each Lifeline shareholder, attempted in good faith to
    value the Lifeline Common Stock to be transferred and to value the
        Citizens Class A Common Stock to be Exchanged for such Lifeline Common
       Stock in an effort to ensure that each shareholder receiving Citizens
    Class A Common Stock pursuant to the Exchange received a number of
   shares of such stock approximately equal in value to the Lifeline
Common Stock exchanged therefor;                              

                  (2) that Lifeline has no plan or intention to issue additional
     shares of its stock that would result in Citizens losing control of
Lifeline within the meaning of Section 368(c) of the IRC;     

           (3) that none of Citizens, Lifeline, any entity related
       thereto, or shareholder thereof, have any plan or intention to redeem
       or otherwise reacquire any Citizens Class A Common Stock to be issued
     to Lifeline shareholders in the Exchange, and will not so redeem or
otherwise reacquire such stock;                               

           (4) that Citizens has no plan or intention to liquidate
        Lifeline; to merge Lifeline with or into another corporation; to cause
        Lifeline to sell or otherwise dispose of any of its assets, except for
     dispositions made in the ordinary course of business; or to sell or
 otherwise dispose of the stock of Lifeline except for transfers
described in Section 368(a)(2)(C) of the IRC;                 

               (5) that following the Exchange, Citizens will continue the
   historic business of Lifeline or use a significant portion of its
historic business assets in a business;                       

            (6) that Citizens and Lifeline will assume and pay their
         respective reorganization expenses, if any, incurred in connection with
the Plan and Exchange;                                        

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                (7) that there is no corporate indebtedness between Citizens
         or Lifeline that was issued, acquired or will be settled at a discount;

                  (8) that in the Exchange, shares of Lifeline Common Stock will
    be exchanged solely for Citizens Class A voting Common Stock, with
      Citizens thereby obtaining control of Lifeline as defined in Section
368(c) of the IRC;                                            

                 (9) that on the Effective Date of the Exchange, Lifeline will
       not have outstanding any warrants, options, convertible securities or
    any other type of right pursuant to which any person could acquire
 stock in Lifeline that, if exercised or converted, would affect
       Citizens' acquisition or retention of control of Lifeline, as defined
in Section 368(c) of the IRC;                                 

                (10) that Citizens does not own, nor has it owned during the
     past five (5) years, directly or indirectly, any shares of Lifeline
stock;                                                        

          (11) that neither Citizens nor Lifeline are investment
        companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the IRC;

         (12) that neither Citizens nor Lifeline are under the
  jurisdiction of a court in a Title 11 or similar case within the
meaning of IRC Section 368(a)(3) (A);                         

               (13) that the Exchange will be consummated and qualify as a
  statutory exchange in full compliance with Texas law and will be
consummated in accordance with the terms of the Plan;         

       (14) that in the event more than 2.5 percent of the
  shareholders of Lifeline dissent to the Exchange, Citizens would
    exercise its option not to proceed with the Exchange (as permitted
         under the Plan) and the Exchange consequently would not be consummated;

           (15) that no Lifeline Common Stock will be acquired for
    consideration other than solely Citizens Class A Common Stock. For
     purposes of this representation, Lifeline Common Stock redeemed for
    cash or other property furnished by Citizens will be considered as
  acquired by Citizens. Further, no liabilities of Lifeline or the
        Lifeline shareholders will be assumed by Citizens, nor will any of the
Lifeline Common Stock be subject to any liabilities;          

                  (16) that Citizens will not assume nor repay any Lifeline debt
       guaranteed by Lifeline shareholders nor will Citizens assume or repay
any outstanding loans between Lifeline and its shareholders;  

                (17) that no compensation or agreement for services received
     by any shareholder of Lifeline, or any entity related to a Lifeline
       shareholder, will be separate consideration for, or allocable to, any
         of their shares of Lifeline Common Stock; no shares of Citizens Class A
  Common Stock received by any Lifeline shareholder, or any entity
     related to any Lifeline shareholder, will be separate consideration
for, or allocable to, any employment agreement or compensation
      agreement; and the compensation paid to any Lifeline shareholder, or
    any entity related to a Lifeline shareholder, will be for services
        actually performed and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services;      

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               (18) that Lifeline will pay its dissenting shareholders the
     value of their Lifeline Common Stock out of its own funds. No funds
       will be supplied or are required to be supplied (by law or otherwise)
 for that purpose, directly or indirectly, by Citizens, nor will
       Citizens, directly or indirectly, reimburse Lifeline for any payments
to dissenters;                                                

             (19) that on the Effective Date of the Exchange, the fair
   market value of the assets of Lifeline will exceed the sum of its
   liabilities plus the liabilities, if any, to which its assets are
subject;                                                      

                (20) that the Marketing Development Allowance Agreement (the
         "MDA Agreement") between Lifeline, Combined Underwriters Life Insurance
   Company and the Red Little Lifeline Combined, Inc. ("Agency") was
 negotiated at arms-length; that the consideration to be paid by
  Lifeline to the Agency pursuant to the MDA Agreement will be for
     services actually to be performed and is reasonable in light of the
      services to be performed and the benefit to Lifeline and Citizens of
     retaining the Agency to preserve and increase the business in-force
issued by Lifeline;                                           

                (21) that Lifeline has sufficient cash-flow to make payments
      required to be made to the Agency pursuant to the MDA Agreement; and

               (22) that Citizens will not render Lifeline unable to honor
  its payments under the MDA Agreement such that Citizens would be
required to make payments thereunder.                         

    We have relied on the truthfulness and accuracy of certificates of
officers of Lifeline and Citizens regarding the above factual information,      
assumptions and representations. In the course of our representation of Citizens
in connection with the transaction described herein, no facts have come to our  
attention that would give us actual knowledge that the certificates are not     
accurate. However, we have not undertaken any independent investigation to      
verify the accuracy of such factual information, assumptions and                
representations, and no inference as to our knowledge thereof shall be drawn    
from the fact of our representation of any party or otherwise.                  

        In rendering an opinion on the federal income tax consequences of such
a transaction, reasonable steps have been taken to assure that all material tax 
issues are considered in light of the facts, and that all of such issues        
involving a reasonable possibility of challenge by the IRS are fully and fairly 
addressed. A "material tax issue" includes any tax issue that could have a      
significant impact (either beneficial or adverse) on any Lifeline shareholder   
participating in the Exchange under any reasonably foreseeable circumstances.   

    The opinions expressed below are rendered only with respect to the
specific matters described herein, and we express no opinion with respect to any
other federal income tax aspects of the Exchange. Should any of the facts,      
circumstances or assumptions specified herein be subsequently determined        
incorrect or inaccurate, our conclusions may vary from those set forth below and
such variance could be material. In addition, we do not opine as to the taxable 
or nontaxable status of any previous transactions not considered to be part of  
the Exchange.                                                                   

   Accordingly, in our opinion, the material tax consequences of the
Exchange are as follows:                                                        

                (1) The Exchange will constitute a reorganization within the
         meaning of IRC Section 368(a)(1)(B) and Citizens and Lifeline will each
be a "party to a reorganization" within the meaning           

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  of IRC Section 368(b). No gain or loss will be recognized by the
        shareholders of Lifeline upon the exchange of their shares of Lifeline
       Common Stock for shares of Citizens Class A Common Stock. IRC Section
354(a).                                                       

              (2) The tax basis of the shares of Citizens Class A Common
     Stock received by a shareholder of Lifeline will be the same as the
       basis of the Lifeline Common Stock surrendered by that shareholder in
      the Exchange. IRC Section 358(a); IRC Regulation Section 1.358-1(a).

            (3) The holding period of the shares of Citizens Class A
     Common Stock received by a shareholder of Lifeline will include the
     period during which such shareholder held the Lifeline Common Stock
   exchanged therefor, to the extent that such stock was held by the
       shareholder as a capital asset on the date of the consummation of the
Exchange. IRC Section 1223(1).                                

           (4) Cash received by Lifeline shareholders who properly
  exercise their dissenters' rights will be treated as having been
     received in redemption of the shares so cashed out, and will likely
     result in taxable gain or loss, measured by the difference (if any)
         between the amount of cash received and such shareholder's basis in the
        Lifeline Common Stock. Provided the shares were held as capital assets
  at the time of the redemption, such gain or loss will constitute
       capital gain or loss, and such gain or loss will be long term capital
         gain or loss if the holding period for such shares was greater than one
year. It is possible, that for some Lifeline shareholders, the
       distribution of cash may be treated as a dividend taxable as ordinary
income. IRC Sections 302, 301.                                

                  (5) No material gain or loss will be recognized by Citizens or
  Lifeline as a result of the Exchange. IRC Sections 361 and 1032.

                (6) Section 382 limits the Net Operating Loss carryover of a
        company following an ownership change. Lifeline will be deemed to have
      an ownership change. After an ownership change, the amount of income
      that a corporation may offset each year by Net Operating Losses that
         occurred before the change is generally limited to an amount determined
       by multiplying the value of the equity of the corporation immediately
         prior to this change by the federal long-term tax exempt rate in effect
         on the date of the change. Any unused limitation may be carried forward
and added to the next year's limitation, subject to certain   
         limitations. To the extent Lifeline also has built-in losses as defined
       in IRC Section 382(h) as of the date of the Exchange, IRC Section 382
       limits the utilization of such losses after the ownership change. IRC
         Section 383 will similarly limit the utilization of excess credits, net
      capital losses, and foreign tax credits, if any, after the ownership
       change. In addition, IRC Section 384 limits the use of preacquisition
      losses to offset built-in gains, if any, after the ownership change.
 Regulations under IRC Sections 382 and 1502 implement the above
restrictions.                                                 

              (7) Each shareholder of Lifeline must file pursuant to IRS
       Regulation 1.368-3(b), with his or her income tax return for the year
  in which the Exchange is consummated, a statement which provides
         details relating to the property transferred and securities received in
the Exchange.                                                 

        The preceding discussion and opinions are based on our interpretations
of the facts and assumptions, based on the IRC, the regulations thereunder and  
judicial and administrative interpretations thereof. They are subject to change 
by subsequent regulatory, administrative, legislative or judicial actions which 
could                                                                           

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have an adverse effect on the validity of our opinions. Our opinions are        
effective as of the Effective Date for the Exchange as described in the Plan.   

        We do not express an opinion on the valuations of Lifeline or Citizens
assets or common stock or the ratio of exchange of Lifeline Common Stock for    
Citizens Class A Common Stock.                                                  

   If the Exchange is transacted as outlined in the facts given, the
material tax issues addressed singularly and in the aggregate will more likely  
than not be upheld under challenge by the IRS.                                  

        Each Lifeline shareholder should consult his own qualified tax advisor
to evaluate the tax effects of the Exchange based on his personal facts and     
circumstances.                                                                  

                         Very truly yours,

                            JONES & KELLER, P.C.

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                                                                      APPENDIX C

TEXAS BUSINESS CORPORATION ACT
 PART FIVE, ARTICLES 5.11, 5.12 AND 5.13

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                                                                      APPENDIX C

TEXAS BUSINESS CORPORATION ACT
 PART FIVE, ARTICLES 5.11, 5.12 AND 5.13

ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE  
ACTIONS                                                                         

A. Any shareholder of a domestic corporation shall have the right to dissent    
from any of the following corporate actions:                                    

(1) Any plan of merger to which the corporation is a party if shareholder       
approval is required by Article 5.03 or 5.16 of this Act and the shareholder    
holds shares of a class or series that was entitled to vote thereon as a class  
or otherwise;                                                                   

(2) Any sale, lease, exchange or other disposition (not including any pledge,   
mortgage, deed of trust or trust indenture unless otherwise provided in the     
articles of incorporation) of all, or substantially all, the property and       
assets, with or without good will, of a corporation if special authorization of 
the shareholders is required by this Act and the shareholders hold shares of a  
class or series that was entitled to vote thereon as a class or otherwise;      

(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the      
shares of the corporation of the class or series held by the shareholder are to 
be acquired.                                                                    

B. Notwithstanding the provisions of Section A of this Article, a shareholder   
shall not have the right to dissent from any plan of merger in which there is a 
single surviving or new domestic or foreign corporation, or from any plan of    
exchange, if:                                                                   

(1) the shares held by the shareholder are part of a class or series, shares of 
which are on the record date fixed to determine the shareholders entitled to    
vote on the plan of merger or plan of exchange:                                 

(a) listed on a national securities exchange;                                   

(b) listed on the Nasdaq Stock Market (or successor quotation system) or        
designated as a national market security on an interdealer quotation system by  
the National Association of Securities Dealers, Inc., or successor entity; or   

(c) held of record by not less than 2,000 holders;                              

(2) the shareholder is not required by the terms of the plan of merger or plan  
of exchange to accept for the shareholder's shares any consideration that is    
different than the consideration (other than cash in lieu of fractional shares  
that the shareholder would otherwise be entitled to receive) to be provided to  
any other holder of shares of the same class or series of shares held by such   
shareholder; and                                                                

(3) the shareholder is not required by the terms of the plan of merger or the   
plan of exchange to accept for the shareholder's shares any consideration other 
than:                                                                           

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(a) shares of a domestic or foreign corporation that, immediately after the     
effective time of the merger or exchange, will be part of a class or series,    
shares of which are:                                                            

(i) listed, or authorized for listing upon official notice of issuance, on a    
national securities exchange;                                                   

(ii) approved for quotation as a national market security on an interdealer     
quotation system by the National Association of Securities Dealers, Inc., or    
successor entity; or                                                            

(iii) held of record by not less than 2,000 holders;                            

(b) cash in lieu of fractional shares otherwise entitled to be received; or     

(c) any combination of the securities and cash described in Subdivisions (a) and
(b) of this subsection.                                                         

Art. 5.12. Procedure for Dissent by Shareholders as to Said Corporate Actions   

A. Any shareholder of any domestic corporation who has the right to dissent from
any of the corporate actions referred to in Article 5.11 of this Act may        
exercise that right to dissent only by complying with the following procedures: 

(1)(a) With respect to proposed corporate action that is submitted to a vote of 
shareholders at a meeting, the shareholder shall file with the corporation,     
prior to the meeting, a written objection to the action, setting out that the   
shareholder's right to dissent will be exercised if the action is effective and 
giving the shareholder's address, to which notice thereof shall be delivered or 
mailed in that event. If the action is effected and the shareholder shall not   
have voted in favor of the action, the corporation, in the case of action other 
than a merger, or the surviving or new corporation (foreign or domestic) or     
other entity that is liable to discharge the shareholder's right of dissent, in 
the case of a merger, shall, within ten (10) days after the action is effected, 
deliver or mail to the shareholder written notice that the action has been      
effected, and the shareholder may, within ten (10) days from the delivery or    
mailing of the notice, make written demand on the existing, surviving, or new   
corporation (foreign or domestic) or other entity, as the case may be, for      
payment of the fair value of the shareholder's shares. The fair value of the    
shares shall be the value thereof as of the day immediately preceding the       
meeting, excluding any appreciation or depreciation in anticipation of the      
proposed action. The demand shall state the number and class of the shares owned
by the shareholder and the fair value of the shares as estimated by the         
shareholder. Any shareholder failing to make demand within the ten (10) day     
period shall be bound by the action.                                            

(b) With respect to proposed corporate action that is approved pursuant to      
Section A of Article 9.10 of this Act, the corporation, in the case of action   
other than a merger, and the surviving or new corporation (foreign or domestic) 
or other entity that is liable to discharge the shareholder's right of dissent, 
in the case of a merger, shall, within ten (10) days after the date the action  
is effected, mail to each shareholder of record as of the effective date of the 
action notice of the fact and date of the action and that the shareholder may   
exercise the shareholder's right to dissent from the action. The notice shall be
accompanied by a copy of this Article and any articles or documents filed by the
corporation with the Secretary of State to effect the action. If the shareholder
shall not have consented to the taking of the action, the shareholder may,      
within twenty (20) days after the mailing of the notice, make written demand on 
the existing, surviving, or new corporation (foreign or domestic) or other      
entity, as the case may be, for payment of the fair value of the shareholder's  

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shares. The fair value of the shares shall be the value thereof as of the date  
the written consent authorizing the action was delivered to the corporation     
pursuant to Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the number   
and class of shares owned by the dissenting shareholder and the fair value of   
the shares as estimated by the shareholder. Any shareholder failing to make     
demand within the twenty (20) day period shall be bound by the action.          

(2) Within twenty (20) days after receipt by the existing, surviving, or new    
corporation (foreign or domestic) or other entity, as the case may be, of a     
demand for payment made by a dissenting shareholder in accordance with          
Subsection (1) of this Section, the corporation (foreign or domestic) or other  
entity shall deliver or mail to the shareholder a written notice that shall     
either set out that the corporation (foreign or domestic) or other entity       
accepts the amount claimed in the demand and agrees to pay that amount within   
ninety (90) days after the date on which the action was effected, and, in the   
case of shares represented by certificates, upon the surrender of the           
certificates duly endorsed, or shall contain an estimate by the corporation     
(foreign or domestic) or other entity of the fair value of the shares, together 
with an offer to pay the amount of that estimate within ninety (90) days after  
the date on which the action was effected, upon receipt of notice within sixty  
(60) days after that date from the shareholder that the shareholder agrees to   
accept that amount and, in the case of shares represented by certificates, upon 
the surrender of the certificates duly endorsed.                                

(3) If, within sixty (60) days after the date on which the corporate action was 
effected, the value of the shares is agreed upon between the shareholder and the
existing, surviving, or new corporation (foreign or domestic) or other entity,  
as the case may be, payment for the shares shall be made within ninety (90) days
after the date on which the action was effected and, in the case of shares      
represented by certificates, upon surrender of the certificates duly endorsed.  
Upon payment of the agreed value, the shareholder shall cease to have any       
interest in the shares or in the corporation.                                   

B. If, within the period of sixty (60) days after the date on which the         
corporate action was effected, the shareholder and the existing, surviving, or  
new corporation (foreign or domestic) or other entity, as the case may be, do   
not so agree, then the shareholder or the corporation (foreign or domestic) or  
other entity may, within sixty (60) days after the expiration of the sixty (60) 
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon 
the filing of any such petition by the shareholder, service of a copy thereof   
shall be made upon the corporation (foreign or domestic) or other entity, which 
shall, within ten (10) days after service, file in the office of the clerk of   
the court in which the petition was filed a list containing the names and       
addresses of all shareholders of the domestic corporation who have demanded     
payment for their shares and with whom agreements as to the value of their      
shares have not been reached by the corporation (foreign or domestic) or other  
entity. If the petition shall be filed by the corporation (foreign or domestic) 
or other entity, the petition shall be accompanied by such a list. The clerk of 
the court shall give notice of the time and place fixed for the hearing of the  
petition by registered mail to the corporation (foreign or domestic) or other   
entity and to the shareholders named on the list at the addresses therein       
stated. The forms of the notices by mail shall be approved by the court. All    
shareholders thus notified and the corporation (foreign or domestic) or other   
entity shall thereafter be bound by the final judgment of the court.            

C. After the hearing of the petition, the court shall determine the shareholders
who have complied with the provisions of this Article and have become entitled  
to the valuation of and payment for their shares, and shall appoint one or more 
qualified appraisers to determine that value. The appraisers shall have power to
examine                                                                         

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any of the books and records of the corporation the shares of which they are    
charged with the duty of valuing, and they shall make a determination of the    
fair value of the shares upon such investigation as to them may seem proper. The
appraisers shall also afford a reasonable opportunity to the parties interested 
to submit to them pertinent evidence as to the value of the shares. The         
appraisers shall also have such power and authority as may be conferred on      
Masters in Chancery by the Rules of Civil Procedure or by the order of their    
appointment.                                                                    

D. The appraisers shall determine the fair value of the shares of the           
shareholders adjudged by the court to be entitled to payment for their shares   
and shall file their report of that value in the office of the clerk of the     
court. Notice of the filing of the report shall be given by the clerk to the    
parties in interest. The report shall be subject to exceptions to be heard      
before the court both upon the law and the facts. The court shall by its        
judgment determine the fair value of the shares of the shareholders entitled to 
payment for their shares and shall direct the payment of that value by the      
existing, surviving, or new corporation (foreign or domestic) or other entity,  
together with interest thereon, beginning 91 days after the date on which the   
applicable corporate action from which the shareholder elected to dissent was   
effected to the date of such judgment, to the shareholders entitled to payment. 
The judgment shall be payable to the holders of uncertificated shares           
immediately but to the holders of shares represented by certificates only upon, 
and simultaneously with, the surrender to the existing, surviving, or new       
corporation (foreign or domestic) or other entity, as the case may be, of duly  
endorsed certificates for those shares. Upon payment of the judgment, the       
dissenting shareholders shall cease to have any interest in those shares or in  
the corporation. The court shall allow the appraisers a reasonable fee as court 
costs, and all court costs shall be allotted between the parties in the manner  
that the court determines to be fair and equitable.                             

E. Shares acquired by the existing, surviving, or new corporation (foreign or   
domestic) or other entity, as the case may be, pursuant to the payment of the   
agreed value of the shares or pursuant to payment of the judgment entered for   
the value of the shares, as in this Article provided, shall, in the case of a   
merger, be treated as provided in the plan of merger and, in all other cases,   
may be held and disposed of by the corporation as in the case of other treasury 
shares.                                                                         

F. The provisions of this Article shall not apply to a merger if, on the date of
the filing of the articles of merger, the surviving corporation is the owner of 
all the outstanding shares of the other corporations, domestic or foreign, that 
are parties to the merger.                                                      

G. In the absence of fraud in the transaction, the remedy provided by this      
Article to a shareholder objecting to any corporate action referred to in       
Article 5.11 of this Act is the exclusive remedy for the recovery of the value  
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other      
entity, as the case may be, complies with the requirements of this Article, any 
shareholder who fails to comply with the requirements of this Article shall not 
be entitled to bring suit for the recovery of the value of his shares or money  
damages to the shareholder with respect to the action.                          

Art. 5.13. Provisions Affecting Remedies of Dissenting Shareholders             

A. Any shareholder who has demanded payment for his shares in accordance with   
either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to vote
or exercise any other rights of a shareholder except the right to receive       
payment for his shares pursuant to the provisions of those articles and the     
right to maintain an                                                            

 C-4

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appropriate action to obtain relief on the ground that the corporate action     
would be or was fraudulent, and the respective shares for which payment has been
demanded shall not thereafter be considered outstanding for the purposes of any 
subsequent vote of shareholders.                                                

B. Upon receiving a demand for payment from any dissenting shareholder, the     
corporation shall make an appropriate notation thereof in its shareholder       
records. Within twenty (20) days after demanding payment for his shares in      
accordance with either Article 5.12 or 5.16 of this Act, each holder of         
certificates representing shares so demanding payment shall submit such         
certificates to the corporation for notation thereon that such demand has been  
made. The failure of holders of certificated shares to do so shall, at the      
option of the corporation, terminate such shareholder's rights under Articles   
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and 
sufficient cause shown shall otherwise direct. If uncertificated shares for     
which payment has been demanded or shares represented by a certificate on which 
notation has been so made shall be transferred, any new certificate issued      
therefor shall bear similar notation together with the name of the original     
dissenting holder of such shares and a transferee of such shares shall acquire  
by such transfer no rights in the corporation other than those which the        
original dissenting shareholder had after making demand for payment of the fair 
value thereof.                                                                  

C. Any shareholder who has demanded payment for his shares in accordance with   
either Article 5.12 or 5.16 of this Act may withdraw such demand at any time    
before payment for his shares or before any petition has been filed pursuant to 
Article 5.12 or 5.16 of this Act asking for a finding and determination of the  
fair value of such shares, but no such demand may be withdrawn after such       
payment has been made or, unless the corporation shall consent thereto, after   
any such petition has been filed. If, however, such demand shall be withdrawn as
hereinbefore provided, or if pursuant to Section B of this Article the          
corporation shall terminate the shareholder's rights under Article 5.12 or 5.16 
of this Act, as the case may be, or if no petition asking for a finding and     
determination of fair value of such shares by a court shall have been filed     
within the time provided in Article 5.12 or 5.16 of this Act, as the case may   
be, or if after the hearing of a petition filed pursuant to Article 5.12 or     
5.16, the court shall determine that such shareholder is not entitled to the    
relief provided by those articles, then, in any such case, such shareholder and 
all persons claiming under him shall be conclusively presumed to have approved  
and ratified the corporate action from which he dissented and shall be bound    
thereby, the right of such shareholder to be paid the fair value of his shares  
shall cease, and his status as a shareholder shall be restored without prejudice
to any corporate proceedings which may have been taken during the interim, and  
such shareholder shall be entitled to receive any dividends or other            
distributions made to shareholders in the interim.                              

 C-5

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 PROXY
COMBINED UNDERWRITERS LIFE INSURANCE COMPANY
 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

     The undersigned shareholder of Combined Underwriters Life Insurance
Company ("Combined") acknowledges receipt of the Notice of Special Meeting of   
Shareholders, to be held on Tuesday, March 19, 2002, at 307 North Glenwood      
Boulevard, Tyler, Texas at 10:00 a.m., Central Standard Time, and hereby        
appoints Walden P. "Red" Little and Betty M. Mitchell, each of them with the    
power of substitution, as attorneys and proxies to vote all the shares of the   
undersigned at said special meeting and at all adjournments thereof, hereby     
ratifying and confirming all that said attorneys and proxies may do or cause to 
be done by virtue hereof. The above-named attorneys and proxies are instructed  
to vote all of the undersigned's shares as follows:                             

THE DIRECTORS RECOMMEND A VOTE FOR THE ITEMS INDICATED BELOW: 

1.       A proposal to approve and adopt the Plan and Agreement of Exchange     
         dated November 20, 2001 under which Combined shareholders will exchange
        their shares for Citizens, Inc. ("Citizens") Class A common stock, and
Combined will become a subsidiary of Citizens.                

FOR                  AGAINST                 ABSTAIN    
        -----                    -----                   -----

2.       To transact such other business as may properly come before the special
meeting or any adjournment thereof.                           

         THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED  
FOR PROPOSAL 1.                                                                 

Dated this        day of                 , 2002.              
------        ----------------          

Number of Shares Voted*                           ------------------------------
                                                     Signature
-----------------                                                             

                                                  ------------------------------
                                                     Signature

*If the number of shares voted is not                                           
indicated, all shares in your name on                                           
Combined's stock register will be voted                                         
for the Combined Exchange.                                                      

                                                 Please sign your name exactly
                                               as it appears on your stock
                                                 certificate(s). If shares are
                                             held jointly, each holder
                                           should sign. Executors,
                                       trustees, and other
                                                  fiduciaries should so indicate
                                 when signing.

                                                Please sign, date and return
                                           this proxy immediately.

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 PROXY
LIFELINE UNDERWRITERS LIFE INSURANCE COMPANY
 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

     The undersigned shareholder of Lifeline Underwriters Life Insurance
Company ("Lifeline") acknowledges receipt of the Notice of Special Meeting of   
Shareholders, to be held on Tuesday, March 19, 2002, at 307 North Glenwood      
Boulevard, Tyler, Texas at 11:00 a.m., Central Standard Time, and hereby        
appoints Walden P. "Red" Little and Betty M. Mitchell, each of them with the    
power of substitution, as attorneys and proxies to vote all the shares of the   
undersigned at said special meeting and at all adjournments thereof, hereby     
ratifying and confirming all that said attorneys and proxies may do or cause to 
be done by virtue hereof. The above-named attorneys and proxies are instructed  
to vote all of the undersigned's shares as follows:                             

THE DIRECTORS RECOMMEND A VOTE FOR THE ITEMS INDICATED BELOW: 

1.       A proposal to approve and adopt the Plan and Agreement of Exchange     
         dated November 20, 2001 under which Lifeline shareholders will exchange
        their shares for Citizens, Inc. ("Citizens") Class A common stock, and
Lifeline will become a subsidiary of Citizens.                

FOR                  AGAINST                 ABSTAIN    
        -----                    -----                   -----

2.       To transact such other business as may properly come before the special
meeting or any adjournment thereof.                           

         THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED  
FOR PROPOSAL 1.                                                                 

Dated this        day of                 , 2002.              
------        ----------------          

Number of Shares Voted*                           ------------------------------
                                                     Signature
-----------------                                                             

                                                  ------------------------------
                                                     Signature

*If the number of shares voted is not                                           
indicated, all shares in your name on                                           
Combined's stock register will be voted                                         
for the Combined Exchange.                                                      

                                                 Please sign your name exactly
                                               as it appears on your stock
                                                 certificate(s). If shares are
                                             held jointly, each holder
                                           should sign. Executors,
                                       trustees, and other
                                                  fiduciaries should so indicate
                                 when signing.

                                                Please sign, date and return
                                           this proxy immediately.

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B4’ Filing		Date		First		Last			Other Filings
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		3/15/02		8
Filed on:		2/15/02
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		2/13/02		4					S-4/A
		2/11/02		1		29
		1/31/02		63
		12/31/01		21		116			10-K
		12/3/01		37		38
		11/26/01		7					8-K
		11/20/01		3		156			8-K
		11/7/01		7					10-Q
		10/29/01		94		131
		10/16/01		94		131
		9/30/01		7		70			10-Q
		9/19/01		32
		9/11/01		26
		8/30/01		94		131			S-3/A
		8/28/01		32
		8/15/01		32
		8/14/01		7					10-Q
		8/9/01		32
		7/18/01		32
		6/30/01		7		118			10-Q
		6/14/01		93
		5/15/01		7					10-Q
		4/16/01		62
		3/31/01		7					10-Q,  4
		3/29/01		7					10-K405
		1/1/01		20		54
		12/31/00		7		118			10-K405
		9/30/00		16		54			10-Q
		12/31/99		17		118			10-K405
		1/1/99		48
		12/31/98		81		118			10-K405,  DEF 14A
		3/16/98		20
		12/31/96		16					10-K,  10-K/A,  DEF 14A
		4/14/94		7
		2/3/92		93
		1/17/92		93
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