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Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets
 6 Months Ended
Jun. 30, 2023
Cemetery Perpetual Care Trust Investments And Obligation And Restricted Assets  
Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

 

Cemetery Perpetual Care Trust Investments and Obligation

 

State law requires the Company to pay into endowment care trusts a portion of the proceeds from the sale of certain cemetery property interment rights for cemeteries that have established an endowment care trust. These endowment care trusts are defined as variable interest entities pursuant to GAAP. Also, management has determined that the Company is the primary beneficiary of these trusts, as it absorbs both a majority of the losses and returns associated with the trusts. The Company has consolidated cemetery endowment care trust investments with a corresponding amount recorded as Cemetery Perpetual Care Obligation in the accompanying consolidated balance sheets.

 

The components of the cemetery perpetual care investments and obligation as of June 30, 2023, are as follows:

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
June 30, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
U.S. Treasury securities and obligations of U.S. Government agencies  $258,053   $658   $(2,402)  $-   $256,309 
Obligations of states and political subdivisions   95,348    -    (1,182)   -    94,166 
Corporate securities including public utilities   76,509    -    (6,359)   -    70,150 
Total fixed maturity securities available for sale  $429,910   $658   $(9,943)  $-   $420,625 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $3,379,217   $705,343   $(189,253)       $3,895,307 
Total equity securities at estimated fair value  $3,379,217   $705,343   $(189,253)       $3,895,307 
                          
Mortgage loans held for investment at amortized cost:                         
Residential construction  $2,272,969                     
Less: Allowance for credit losses  $(1,453)                    
Total mortgage loans held for investment  $2,271,516                     
                          
Real estate held for investment: Residential  $1,172                     
                          
Cash and cash equivalents  $1,077,601                     
                          
Total cemetery perpetual care trust investments  $7,666,221                     
                          
Cemetery perpetual care obligation  $(5,207,198)                    
                          
Trust investments in excess of trust obligations  $2,459,023                             

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligations and Restricted Assets (Continued)

 

The components of the cemetery perpetual care investments and obligation as of December 31, 2022, are as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
U.S. Treasury securities and obligations of U.S. Government agencies  $89,004   $42   $(38)  $89,008 
Obligations of states and political subdivisions   174,201    -    (8,478)   165,723 
Total fixed maturity securities available for sale  $263,205   $42   $(8,516)  $254,731 
                     
Equity securities at estimated fair value:                    
Common stock:                    
Industrial, miscellaneous and all other  $3,195,942   $584,383   $(175,163)  $3,605,162 
Total equity securities at estimated fair value  $3,195,942   $584,383   $(175,163)  $3,605,162 
                     
Mortgage loans held for investment at amortized cost:                     

Residential construction		  $1,506,517                
                     
Real estate held for investment: Residential  $(16,178)               
                     
Cash and cash equivalents  $1,925,978                
                     
Total cemetery perpetual care trust investments  $7,276,210                
                     
Cemetery perpetual care obligation  $(5,099,542)               
                     
Trust investments in excess of trust obligations  $2,176,668                

 

Fixed Maturity Securities

 

The table below summarizes unrealized losses on fixed maturities securities that were carried at estimated fair value at June 30, 2023 and at December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations and inflation. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

   Unrealized Losses for Less than Twelve Months   Fair Value   Unrealized Losses for More than Twelve Months   Fair Value   Total Unrealized Loss   Fair Value 
At June 30, 2023                              
U.S. Treasury securities and obligations of U.S. Government agencies  $2,402   $176,593   $-   $-   $2,402   $176,593 
Obligations of states and political subdivisions   -    -    1,182    94,166    1,182    94,166 
Corporate securities including public utilities   -    -    6,359    70,150    6,359    70,150 
Total unrealized losses  $2,402   $176,593   $7,541   $164,316   $9,943   $340,909 
                               
At December 31, 2022                              
U.S. Treasury securities and obligations of U.S. Government agencies  $38   $59,392   $-   $-   $38   $59,392 
Obligations of states and political subdivisions   1,845    94,612    6,633    71,112    8,478    165,724 
Total unrealized losses  $1,883   $154,004   $6,633   $71,112   $8,516   $225,116 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligations and Restricted Assets (Continued)

 

Relevant holdings were comprised of 5 securities with fair value of 97.2% of amortized cost at June 30, 2023. Relevant holdings were comprised of 5 securities with fair value of 96.4% of amortized cost at December 31, 2022. No credit losses have been recognized for the three and six month periods ended June 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increases in interest and inflation rates.

 

The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2023, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

   Amortized   Estimated Fair 
   Cost   Value 
Due in 1 year  $79,058   $79,716 
Due in 2-5 years   255,504    246,743 
Due in 5-10 years   41,086    40,513 
Due in more than 10 years   54,262    53,653 
Total  $429,910   $420,625 

 

Restricted Assets

 

The Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection with its pre-need sales for its cemetery and mortuary segment.

 

Restricted cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development projects. Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included this amount as a component of restricted cash. These restricted cash items are for the Company’s life insurance and mortgage segments.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligations and Restricted Assets (Continued)

 

Restricted assets as of June 30, 2023, are summarized as follows:

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
June 30, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
U.S. Treasury securities and obligations of U.S. Government agencies  $389,640   $-   $(4,212)  $-   $385,428 
Obligations of states and political subdivisions   654,307    291    (9,570)   -    645,028 
Corporate securities including public utilities   526,586    38    (6,112)   -    520,512 
Total fixed maturity securities available for sale  $1,570,533   $329   $(19,894)  $-   $1,550,968 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $5,688,802   $858,975   $(318,583)            $6,229,194 
Total equity securities at estimated fair value  $5,688,802   $858,975   $(318,583)       $6,229,194 
                          
Mortgage loans held for investment at amortized cost:                         
Residential construction  $1,379,943                     
Less: Allowance for credit losses  $(2,760)                    
Total mortgage loans held for investment  $1,377,183                     
                          
Cash and cash equivalents (1)  $10,276,918                     
                          
Total restricted assets  $19,434,263                     

 

 

(1)Including cash and cash equivalents of $8,006,323 or the life insurance and mortgage segments.

 

Restricted assets as of December 31, 2022, are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
Obligations of states and political subdivisions  $1,033,047   $866   $(15,360)  $1,018,553 
Corporate securities including public utilities   201,771    -    (3,016)   198,755 
Total fixed maturity securities available for sale  $1,234,818   $866   $(18,376)  $1,217,308 
                     
Equity securities at estimated fair value:                    
Common stock:                    
Industrial, miscellaneous and all other  $4,955,360   $703,049   $(310,165)  $5,348,244 
Total equity securities at estimated fair value  $4,955,360   $703,049   $(310,165)  $5,348,244 
                     
Mortgage loans held for investment at amortized cost:                     
Residential construction  $1,731,469                
                     
Cash and cash equivalents (1)  $10,638,034                
                     
Total restricted assets  $18,935,055                

 

 

(1)Including cash and cash equivalents of $8,527,620 for the life insurance and mortgage segments.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligations and Restricted Assets (Continued)

 

Fixed Maturity Securities

 

The table below summarizes unrealized losses on fixed maturities securities that were carried at estimated fair value at June 30, 2023 and at December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations and inflation. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities.

   Unrealized Losses for Less than Twelve Months   Fair Value   Unrealized Losses for More than Twelve Months   Fair Value   Total Unrealized Loss   Fair Value 
At June 30, 2023                              
U.S. Treasury securities and obligations of U.S. Government agencies  $4,212   $385,429   $-   $-   $4,212   $385,429 
Obligations of states and political subdivisions   1,266    150,501    8,304    392,384    9,570    542,885 
Corporate securities including public utilities   1,787    216,540    4,325    228,121    6,112    444,661 
Total unrealized losses  $7,265   $752,470   $12,629   $620,505   $19,894   $1,372,975 
                               
At December 31, 2022                              
Obligations of states and political subdivisions  $11,891   $760,255   $3,469   $58,072   $15,360   $818,327 
Corporate securities including public utilities   3,016    198,755    -    -    3,016    198,755 
Total unrealized losses  $14,907   $959,010   $3,469   $58,072   $18,376   $1,017,082 

 

Relevant holdings were comprised of 18 securities with fair value of 98.6% of amortized cost at June 30, 2023. Relevant holdings were comprised of 17 securities with fair value of 98.2% of amortized cost at December 31, 2022. No credit losses have been recognized for the three and six month periods ended June 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increase in interest and inflation rates.

 

The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale at June 30, 2023, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties:

   Amortized   Estimated Fair 
   Cost   Value 
Due in 1 year  $-   $- 
Due in 2-5 years   705,807    694,536 
Due in 5-10 years   111,301    110,683 
Due in more than 10 years   753,425    745,749 
Total  $1,570,533   $1,550,968 

 

See Notes 3 and 8 for additional information regarding restricted assets and cemetery perpetual care trust investments.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 (Unaudited)