PERPETUAL CARE TRUSTS

12 Months Ended

Dec. 31, 2021

Investments Debt And Equity Securities [Abstract]

At December 31, 2021 and 2020 the Company’s perpetual care trusts consisted of investments in debt and equity marketable securities and cash equivalents, both directly as well as through mutual and investment funds. All of these investments are carried at fair value. All of the investments subject to the fair value hierarchy are considered either Level 1 or Level 2 assets pursuant to the three-level hierarchy described in Note 16 Fair Value. There were no Level 3 assets in the Company’s perpetual care trusts. The perpetual care trusts are VIEs for which the Company is the primary beneficiary.

A reconciliation of the Company’s perpetual care trust activities for the year ended December 31, 2021 and 2020 is presented below (in thousands):


	Year ended December 31,
	2021			2020
Balance—beginning of period	$	316,746		$	346,089
Contributions		9,233			8,500
Distributions		(45,395	)		(48,820	)
Interest and dividends		36,003			24,746
Capital gain distributions		6,362			844
Realized gains and losses, net		16,611			(301	)
Other than temporary impairment		(55	)		(14,710	)
Taxes		(1,202	)		(616	)
Fees		(2,959	)		(3,161	)
Unrealized change in fair value		3,794			4,175
Total		339,138			316,746
Less: Assets held for sale		—			(4,518	)
Balance—end of period	$	339,138		$	312,228

During the years ended December 31, 2021 and 2020, purchases of available for sale securities were approximately $30.2 million and $16.1 million, respectively. During the years ended December 31, 2021 and 2020, sales, maturities and paydowns of available for sale securities were approximately $12.5 million and $42.1 million, respectively. Cash flows from perpetual care trust related contracts are presented as operating cash flows in the Company’s consolidated statements of cash flows.

The cost and market value associated with the assets held in the perpetual care trusts as of December 31, 2021 and 2020 were as follows (in thousands):


December 31, 2021	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	25,674	$	—	$	—		$	25,674
Fixed maturities:
U.S. governmental securities	2		12		2		—			14
Corporate debt securities	2		—		—		—			—
Other debt securities	2		—		—		—			—
Total fixed maturities			12		2		—			14
Mutual funds—debt securities	1		2,306		28		(35	)		2,299
Mutual funds—equity securities	1		3,894		1,341		(63	)		5,172
Other investment funds(1)			285,826		14,554		(2,776	)		297,604
Equity securities	1		6,817		1,661		(113	)		8,365
Other invested assets	2		9		1		—			10
Total investments		$	324,538	$	17,587	$	(2,987	)	$	339,138

(1)

Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Company’s consolidated balance sheet. This asset class is includes fixed income funds and equity funds, which have a redemption period ranging from 1 to 30 days, and private credit funds, which have lockup periods ranging from zero to fifteen years with four potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2021 there were $67.3 million in unfunded investment commitments to the private credit funds, which are callable at any time. This asset class also includes $79.7 million of direct loans which are accounted for at amortized cost, net of unamortized origination fees, if any, and are categorized as Level 3 investments in

the fair value hierarchy. The interest rates on these direct loans are consistent with market rates, and their amortized cost approximates fair value.


December 31, 2020	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	21,217	$	—	$	—		$	21,217
Fixed maturities:
U.S. governmental securities	2		48		4		—			52
Corporate debt securities	2		505		92		(44	)		553
Other debt securities	2		433		—		(28	)		405
Total fixed maturities			986		96		(72	)		1,010
Mutual funds—debt securities	1		2,386		62		(9	)		2,439
Mutual funds—equity securities	1		9,240		1,244		(7	)		10,477
Other investment funds(1)			247,845		21,952		(10,813	)		258,984
Equity securities	1		21,748		873		(19	)		22,602
Other invested assets	2		16		1		—			17
Total investments		$	303,438	$	24,228	$	(10,920	)	$	316,746
Less: Assets held for sale										(4,518	)
Total		$	303,438	$	24,228	$	(10,920	)	$	312,228

(1)

Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Company’s consolidated balance sheet. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 1 to 30 days, and private credit funds, which have lockup periods ranging from zero to six years with three potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2020 there were $41.1 million in unfunded investment commitments to the private credit funds, which are callable at any time.

The contractual maturities of debt securities as of December 31, 2021 and 2020, were as follows (in thousands):


December 31, 2021	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	1	$	—	$	13
Corporate debt securities		—		—		—		—
Other debt securities		—		—		—		—
Total fixed maturities	$	—	$	1	$	—	$	13


December 31, 2020	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	25	$	6	$	—	$	21
Corporate debt securities		—		553		—		—
Other debt securities		405		—		—		—
Total fixed maturities	$	430	$	559	$	—	$	21

Temporary Declines in Fair Value

The Company evaluates declines in fair value below cost of each individual asset held in the perpetual care trusts on a quarterly basis.

An aging of unrealized losses on the Company’s investments in debt and equity securities within the perpetual care trusts as of December 31, 2021 and 2020 is presented below (in thousands):


	Less than 12 months				12 months or more				Total
December 31, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	990	$	—	$	990	$	—
Corporate debt securities		—		—		1,959		—		1,959		—
Other debt securities		—		—		—		—		—		—
Total fixed maturities		—		—		2,949		—		2,949		—
Mutual funds—debt securities		863		25		454		10		1,317		35
Mutual funds—equity securities		661		60		1		3		662		63
Other investment funds		26,533		2,776		—		—		26,533		2,776
Equity securities		962		112		1		1		963		113
Total	$	29,019	$	2,973	$	3,405	$	14	$	32,424	$	2,987


	Less than 12 months				12 months or more				Total
December 31, 2020	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	990	$	—	$	990	$	—
Corporate debt securities		—		—		1,959		44		1,959		44
Other debt securities		405		28		—		—		405		28
Total fixed maturities		405		28		2,949		44		3,354		72
Mutual funds—debt securities		600		9		—		—		600		9
Mutual funds—equity securities		288		7		—		—		288		7
Other investment funds		74,885		10,813		—		—		74,885		10,813
Equity securities		45		4		19		15		64		19
Total	$	76,223	$	10,861	$	2,968	$	59	$	79,191	$	10,920

For all securities in an unrealized loss position, the Company evaluated the severity of the impairment and length of time that a security has been in a loss position and concluded the decline in fair value below the asset’s cost was temporary in nature. In addition, the Company is not aware of any circumstances that would prevent the future market value recovery for these securities.

Other-Than-Temporary Impairment of Trust Assets

The Company assesses its perpetual care trust assets for other-than-temporary declines in fair value on a quarterly basis. During the year ended December 31, 2021, the Company determined that there were 6 securities with an aggregate cost basis of approximately $84,000 and an aggregate fair value of approximately $30,000, resulting in an impairment of $54,000, with such impairment considered to be other-than-temporary. During the year ended December 31, 2020, the Company determined that there were 49 securities with an aggregate cost basis of approximately $63.6 million and an aggregate fair value of approximately $48.9 million, resulting in an impairment of $14.7 million, with such impairment considered to be other-than-temporary. Accordingly, the Company adjusted the cost basis of these assets to their current value with the offset going against the liability for perpetual care trust corpus in its consolidated balance sheet.

Impairment of Direct Loans

On a quarterly basis, the perpetual care trusts evaluate the carrying value of each direct loan for impairment. A direct loan is considered impaired when, based on current information and events, it is determined that the trusts will not be able to collect the amounts due according to the loan contract, including scheduled interest payments. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The trusts would generally place direct loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the direct loan is both well-secured and in the process of collection. When placed on nonaccrual, the trusts would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the trusts would return a direct loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement and collectability of remaining principal and interest is no longer doubtful. In certain circumstances, the trusts may place a direct loan on nonaccrual status but conclude

it is not impaired. The trusts may retain independent third-party valuations on such nonaccrual positions to support impairment decisions.

When the trusts identify a direct loan as impaired, they measure the impairment based on the present value of expected future cash flows, discounted at the receivable’s effective interest rate, or the estimated fair value of the collateral, less estimated costs to sell. If it is determined that the value of an impaired receivable is less than the recorded investment, the trusts would recognize impairment with a charge to deferred revenue. When the value of the impaired loan is calculated by discounting expected cash flows, interest income would be recognized using the loan’s effective interest rate over the remaining life of the loan.

The trusts individually develop the allowance for credit losses for any identified impaired loans. In developing the allowance for credit losses, the trusts consider, among other things, the following credit quality indicators:

•

business characteristics and financial conditions of obligors;

•

current economic conditions and trends;

•

actual charge-off experience;

•

current delinquency levels;

•

value of underlying collateral and guarantees;

•

regulatory environment; and

•

any other relevant factors predicting investment recovery.

There were no such impairments during the years ended December 31, 2021 and 2020.