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Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets
 9 Months Ended
Sep. 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. The Company is the primary beneficiary of these trusts, as it absorbs both the losses and any expenses 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 September 30, 2023, are as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
September 30, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
U.S. Treasury securities and obligations of U.S. Government agencies  $208,568   $668   $(2,297)  $-   $206,939 
Obligations of states and political subdivisions   129,509    -    (9,169)   -    120,340 
Corporate securities including public utilities   41,086    -    (973)   -    40,113 
Total fixed maturity securities available for sale  $379,163   $668   $(12,439)  $-   $367,392 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $3,507,720   $624,037   $(275,952)       $3,855,805 
Total equity securities at estimated fair value  $3,507,720   $624,037   $(275,952)       $3,855,805 
                          
Mortgage loans held for investment at amortized cost:                         
Residential construction  $1,966,520                     
Less: Allowance for credit losses   (3,933)                    
Total mortgage loans held for investment  $1,962,587                     
                          
Real estate held for investment: Residential  $30,632                     
                          
Cash and cash equivalents  $1,424,574                     
                          
Total cemetery perpetual care trust investments  $7,640,990                     
                          
Cemetery perpetual care obligation  $(5,265,166)                    
                          
Trust investments in excess of trust obligations  $2,375,824                     

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 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 maturity securities available for sale that were carried at estimated fair value as of September 30, 2023 and December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations. 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 
September 30, 2023                              
U.S. Treasury securities and obligations of U.S. Government agencies  $2,297   $139,633   $-   $-   $2,297   $139,633 
Obligations of states and political subdivisions   -    -    9,169    120,340    9,169    120,340 
Corporate securities including public utilities   -    -    973    40,113    973    40,113 
Total unrealized losses  $2,297   $139,633   $10,142   $160,453   $12,439   $300,086 
                               
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

September 30, 2023 (Unaudited)

 

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

 

Relevant holdings were comprised of four securities with fair values aggregating 96.0% of the aggregate amortized cost as of September 30, 2023. Relevant holdings were comprised of five securities with fair values aggregating 96.4% of aggregate amortized cost as of December 31, 2022. No credit losses have been recognized for the three and nine month periods ended September 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increases in interest and inflation rates. See Note 3 for additional information regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.

 

The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of September 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  $29,573   $30,000 
Due in 2-5 years   254,242    245,011 
Due in 5-10 years   41,086    40,113 
Due in more than 10 years   54,262    52,268 
Total  $379,163   $367,392 

 

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

September 30, 2023 (Unaudited)

 

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

 

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

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
September 30, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
U.S. Treasury securities and obligations of U.S. Government agencies  $389,641   $924   $(4,002)  $-   $386,563 
Obligations of states and political subdivisions   771,564    201    (19,526)   -    752,239 
Corporate securities including public utilities   405,171    -    (9,447)   -    395,724 
Total fixed maturity securities available for sale  $1,566,376   $1,125   $(32,975)  $-   $1,534,526 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $6,011,816   $739,197   $(438,403)       $6,312,610 
Total equity securities at estimated fair value  $6,011,816   $739,197   $(438,403)       $6,312,610 
                          
Mortgage loans held for investment at amortized cost:                         
Residential construction  $1,116,202                     
Less: Allowance for credit losses   (2,232)                    
Total mortgage loans held for investment  $1,113,970                     
                          
Cash and cash equivalents (1)  $10,946,379                     
                          
Total restricted assets  $19,907,485                     

 

 

(1) Including cash and cash equivalents of $8,224,592 for 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

September 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 maturity securities available for sale that were carried at estimated fair value as of September 30, 2023 and December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations. 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 
September 30, 2023                              
U.S. Treasury securities and obligations of U.S. Government agencies  $4,002   $243,232   $-   $-   $4,002   $243,232 
Obligations of states and political subdivisions   3,189    71,811    16,337    580,227    19,526    652,038 
Corporate securities including public utilities   1,016    101,649    8,431    294,075    9,447    395,724 
Total unrealized losses  $8,207   $416,692   $24,768   $874,302   $32,975   $1,290,994 
                               
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 16 securities with fair values aggregating 97.5% of the aggregate amortized cost as of September 30, 2023. Relevant holdings were comprised of 17 securities with fair values aggregating 98.2% of the aggregate amortized cost as of December 31, 2022. No credit losses have been recognized for the three and nine month periods ended September 30, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent increase in interest and inflation rates. See Note 3 for additional information regarding the Company’s evaluation of the allowance for credit losses for fixed maturity securities available for sale.

 

The table below presents the amortized cost and estimated fair value of fixed maturity securities available for sale as of September 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   702,873    692,458 
Due in 5-10 years   111,301    110,090 
Due in more than 10 years   752,202    731,978 
Total  $1,566,376   $1,534,526 

 

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

September 30, 2023 (Unaudited)