| PERPETUAL CARE TRUSTS |
At September 30, 2020 and December 31, 2019, 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 14 Fair Value of Financial Instruments. There were no Level 3 assets. 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 nine months ended September 30, 2020 and 2019 is presented below (in thousands):
|
|
|
Nine months ended September 30, |
|
|
|
|
2020 |
|
|
2019 |
|
|
Balance—beginning of period |
|
$ |
343,619 |
|
|
$ |
330,562 |
|
|
Contributions |
|
|
6,568 |
|
|
|
5,520 |
|
|
Distributions |
|
|
(32,147 |
) |
|
|
(16,709 |
) |
|
Interest and dividends |
|
|
16,071 |
|
|
|
15,621 |
|
|
Capital gain distributions |
|
|
447 |
|
|
|
1,134 |
|
|
Realized gains and losses, net |
|
|
(1,416 |
) |
|
|
2,303 |
|
|
Other than temporary impairment |
|
|
(930 |
) |
|
|
(1,297 |
) |
|
Taxes |
|
|
(610 |
) |
|
|
(634 |
) |
|
Fees |
|
|
(1,817 |
) |
|
|
(2,388 |
) |
|
Unrealized change in fair value |
|
|
(22,109 |
) |
|
|
8,916 |
|
|
Total |
|
|
307,676 |
|
|
|
343,028 |
|
|
Less: Assets held for sale |
|
|
(6,938 |
) |
|
|
— |
|
|
Balance—end of period |
|
$ |
300,738 |
|
|
$ |
343,028 |
|
During the nine months ended September 30, 2020 and 2019, purchases of available for sale securities were approximately $27.1 million and $42.5 million, respectively. During the nine months ended September 30, 2020 and 2019, sales, maturities and paydowns of available for sale securities were approximately $108.9 million and $28.1 million, respectively. Cash flows from perpetual care trust related contracts are presented as operating cash flows in Company’s unaudited condensed consolidated statements of cash flows.
The cost and market value associated with the assets held in the perpetual care trusts as of September 30, 2020 and December 31, 2019 were as follows (in thousands):
|
September 30, 2020 |
|
Fair Value
Hierarchy
Level |
|
Cost |
|
|
Gross
Unrealized
Gains |
|
|
Gross
Unrealized
Losses |
|
|
Fair
Value |
|
|
Short-term investments |
|
1 |
|
$ |
9,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,500 |
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities |
|
2 |
|
|
1,012 |
|
|
|
64 |
|
|
|
(50 |
) |
|
|
1,026 |
|
|
Corporate debt securities |
|
2 |
|
|
3,129 |
|
|
|
278 |
|
|
|
(144 |
) |
|
|
3,263 |
|
|
Other debt securities |
|
2 |
|
|
416 |
|
|
|
— |
|
|
|
(13 |
) |
|
|
403 |
|
|
Total fixed maturities |
|
|
|
|
4,557 |
|
|
|
342 |
|
|
|
(207 |
) |
|
|
4,692 |
|
|
Mutual funds—debt securities |
|
1 |
|
|
17,406 |
|
|
|
274 |
|
|
|
(402 |
) |
|
|
17,278 |
|
|
Mutual funds—equity securities |
|
1 |
|
|
16,712 |
|
|
|
2,012 |
|
|
|
(5,355 |
) |
|
|
13,369 |
|
|
Other investment funds(1) |
|
|
|
|
236,701 |
|
|
|
17,637 |
|
|
|
(12,929 |
) |
|
|
241,409 |
|
|
Equity securities |
|
1 |
|
|
35,768 |
|
|
|
741 |
|
|
|
(15,090 |
) |
|
|
21,419 |
|
|
Other invested assets |
|
2 |
|
|
8 |
|
|
|
1 |
|
|
|
— |
|
|
|
9 |
|
|
Total investments |
|
|
|
$ |
320,652 |
|
|
$ |
21,007 |
|
|
$ |
(33,983 |
) |
|
$ |
307,676 |
|
|
Less: Assets held for sale |
|
|
|
|
(7,923 |
) |
|
|
— |
|
|
|
985 |
|
|
|
(6,938 |
) |
|
Total |
|
|
|
$ |
312,729 |
|
|
$ |
21,007 |
|
|
$ |
(32,998 |
) |
|
$ |
300,738 |
|
|
(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 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 September 30, 2020 there were $50.8 million in unfunded investment commitments to the private credit funds, which are callable at any time. |
|
December 31, 2019 |
|
Fair Value
Hierarchy
Level |
|
Cost |
|
|
Gross
Unrealized
Gains |
|
|
Gross
Unrealized
Losses |
|
|
Fair
Value |
|
|
Short-term investments |
|
1 |
|
$ |
50,358 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
50,358 |
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities |
|
2 |
|
|
1,069 |
|
|
|
32 |
|
|
|
(52 |
) |
|
|
1,049 |
|
|
Corporate debt securities |
|
2 |
|
|
2,020 |
|
|
|
22 |
|
|
|
(142 |
) |
|
|
1,900 |
|
|
Total fixed maturities |
|
|
|
|
3,089 |
|
|
|
54 |
|
|
|
(194 |
) |
|
|
2,949 |
|
|
Mutual funds—debt securities |
|
1 |
|
|
49,963 |
|
|
|
1,439 |
|
|
|
(38 |
) |
|
|
51,364 |
|
|
Mutual funds—equity securities |
|
1 |
|
|
16,698 |
|
|
|
1,617 |
|
|
|
(66 |
) |
|
|
18,249 |
|
|
Other investment funds(1) |
|
|
|
|
186,355 |
|
|
|
10,526 |
|
|
|
(5,472 |
) |
|
|
191,409 |
|
|
Equity securities |
|
1 |
|
|
30,423 |
|
|
|
1,333 |
|
|
|
(12 |
) |
|
|
31,744 |
|
|
Other invested assets |
|
2 |
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
Total investments |
|
|
|
$ |
336,902 |
|
|
$ |
14,969 |
|
|
$ |
(5,782 |
) |
|
$ |
346,089 |
|
|
Less: Assets held for sale |
|
|
|
|
(2,416 |
) |
|
|
(54 |
) |
|
|
— |
|
|
|
(2,470 |
) |
|
Total |
|
|
|
$ |
334,486 |
|
|
$ |
14,915 |
|
|
$ |
(5,782 |
) |
|
$ |
343,619 |
|
|
(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 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 one to seven years with three potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2019, there were $62.4 million in unfunded investment commitments to the private credit funds, which are callable at any time. |
The contractual maturities of debt securities as of September 30, 2020 and December 31, 2019 were as follows (in thousands):
|
September 30, 2020 |
|
Less than
1 year |
|
|
1 year through
5 years |
|
|
6 years through
10 years |
|
|
More than
10 years |
|
|
U.S. governmental securities |
|
$ |
25 |
|
|
$ |
450 |
|
|
$ |
490 |
|
|
$ |
61 |
|
|
Corporate debt securities |
|
|
81 |
|
|
|
1,856 |
|
|
|
1,326 |
|
|
|
— |
|
|
Other debt securities |
|
|
403 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total fixed maturities |
|
$ |
509 |
|
|
$ |
2,306 |
|
|
$ |
1,816 |
|
|
$ |
61 |
|
|
December 31, 2019 |
|
Less than
1 year |
|
|
1 year through
5 years |
|
|
6 years through
10 years |
|
|
More than
10 years |
|
|
U.S. governmental securities |
|
$ |
60 |
|
|
$ |
192 |
|
|
$ |
684 |
|
|
$ |
114 |
|
|
Corporate debt securities |
|
|
294 |
|
|
|
1,522 |
|
|
|
84 |
|
|
|
- |
|
|
Total fixed maturities |
|
$ |
354 |
|
|
$ |
1,714 |
|
|
$ |
768 |
|
|
$ |
114 |
|
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 September 30, 2020 and December 31, 2019 is presented below (in thousands):
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
September 30, 2020 |
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities |
|
$ |
119 |
|
|
$ |
— |
|
|
$ |
990 |
|
|
$ |
50 |
|
|
$ |
1,109 |
|
|
$ |
50 |
|
|
Corporate debt securities |
|
|
395 |
|
|
|
2 |
|
|
|
1,959 |
|
|
|
142 |
|
|
|
2,354 |
|
|
|
144 |
|
|
Other debt securities |
|
|
403 |
|
|
|
13 |
|
|
|
— |
|
|
|
— |
|
|
|
403 |
|
|
|
13 |
|
|
Total fixed maturities |
|
|
917 |
|
|
|
15 |
|
|
|
2,949 |
|
|
|
192 |
|
|
|
3,866 |
|
|
|
207 |
|
|
Mutual funds—debt securities |
|
|
9,643 |
|
|
|
237 |
|
|
|
2 |
|
|
|
165 |
|
|
|
9,645 |
|
|
|
402 |
|
|
Mutual funds—equity securities |
|
|
5,835 |
|
|
|
5,135 |
|
|
|
3 |
|
|
|
220 |
|
|
|
5,838 |
|
|
|
5,355 |
|
|
Other investment funds |
|
|
86,383 |
|
|
|
12,929 |
|
|
|
— |
|
|
|
— |
|
|
|
86,383 |
|
|
|
12,929 |
|
|
Equity securities |
|
|
18,902 |
|
|
|
15,067 |
|
|
|
15 |
|
|
|
23 |
|
|
|
18,917 |
|
|
|
15,090 |
|
|
Total |
|
$ |
121,680 |
|
|
$ |
33,383 |
|
|
$ |
2,969 |
|
|
$ |
600 |
|
|
$ |
124,649 |
|
|
$ |
33,983 |
|
|
|
|
Less than 12 months |
|
|
12 months or more |
|
|
Total |
|
|
December 31, 2019 |
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fair
Value |
|
|
Unrealized
Losses |
|
|
Fixed maturities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. governmental securities |
|
$ |
291 |
|
|
$ |
4 |
|
|
$ |
942 |
|
|
$ |
48 |
|
|
$ |
1,233 |
|
|
$ |
52 |
|
|
Corporate debt securities |
|
|
463 |
|
|
|
46 |
|
|
|
1,887 |
|
|
|
96 |
|
|
|
2,350 |
|
|
|
142 |
|
|
Total fixed maturities |
|
|
754 |
|
|
|
50 |
|
|
|
2,829 |
|
|
|
144 |
|
|
|
3,583 |
|
|
|
194 |
|
|
Mutual funds—debt securities |
|
|
2,856 |
|
|
|
38 |
|
|
|
— |
|
|
|
— |
|
|
|
2,856 |
|
|
|
38 |
|
|
Mutual funds—equity securities |
|
|
566 |
|
|
|
66 |
|
|
|
— |
|
|
|
— |
|
|
|
566 |
|
|
|
66 |
|
|
Other investment funds |
|
|
53,426 |
|
|
|
5,472 |
|
|
|
— |
|
|
|
— |
|
|
|
53,426 |
|
|
|
5,472 |
|
|
Equity securities |
|
|
121 |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
121 |
|
|
|
12 |
|
|
Total |
|
$ |
57,723 |
|
|
$ |
5,638 |
|
|
$ |
2,829 |
|
|
$ |
144 |
|
|
$ |
60,552 |
|
|
$ |
5,782 |
|
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 nine months ended September 30, 2020, the Company determined, based on its review, that there were 2 securities with an aggregate cost basis of approximately $9.4 million and an aggregate fair value of approximately $8.5 million, resulting in an impairment of $0.9 million, with such impairment considered to be other than temporary due to credit indicators. During the nine months ended September 30, 2019, the Company determined that there were 68 securities with an aggregate cost basis of approximately $35.8 million and an aggregate fair value of approximately $34.5 million, resulting in an impairment of $1.3 million, with such impairment considered to be other-than-temporary due to credit indicators. 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.
|