Preneed Activities Level 1 (Notes)

6 Months Ended

Jun. 30, 2020

Preneed Activities [Abstract]

Preneed Activities Text Block

Preneed Activities

Preneed receivables, net and trust investments

The components of Preneed receivables, net and trust investments in our unaudited Condensed Consolidated Balance Sheet were as follows:

	June 30, 2020		December 31, 2019
	(In thousands)
Preneed receivables, net	$	977,021	$	947,232
Trust investments, at market	4,993,442		5,258,319
Insurance-backed fixed income securities and other	251,836		265,160
Trust investments	5,245,278		5,523,479
Less: Cemetery perpetual care trust investments	(1,599,599)		(1,681,149)
Preneed trust investments	3,645,679		3,842,330
Preneed receivables, net and trust investments	$	4,622,700	$	4,789,562

Preneed receivables, net comprised the following:

	June 30, 2020
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	136,880	$	900,938	$	1,037,818
Unearned finance charges	(15,583)		(26,937)		(42,520)
Preneed receivables, at amortized cost	121,297		874,001		995,298
Reserve for credit losses	(10,350)		(7,927)		(18,277)
Preneed receivables, net	$	110,947	$	866,074	$	977,021
	December 31, 2019
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	130,971	$	907,973	$	1,038,944
Unearned finance charges	(16,328)		(34,242)		(50,570)
Preneed receivables, at amortized cost	114,643		873,731		988,374
Allowance for cancellation	(1,452)		(39,690)		(41,142)
Preneed receivables, net	$	113,191	$	834,041	$	947,232

At June 30, 2020, the amortized cost basis of our preneed receivables by year of origination was as follows:

	2020		2019		2018		2017		2016		Prior		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	32,928	$	47,157	$	18,298	$	9,076	$	3,685	$	10,153	$	121,297
Cemetery	182,018		287,452		188,393		116,902		60,871		38,365		874,001
Total preneed receivables, at amortized cost	$	214,946	$	334,609	$	206,691	$	125,978	$	64,556	$	48,518	$	995,298

At June 30, 2020, the payment status of our preneed receivables was as follows:

	Past Due
	<30 Days		30-90 Days		90-180 Days		>180 Days		Total		Current		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	3,835	$	2,233	$	1,331	$	14,790	$	22,189	$	99,108	$	121,297
Cemetery	23,097		22,616		11,191		2,590		59,494		814,507		874,001
Total preneed receivables, at amortized cost	$	26,932	$	24,849	$	12,522	$	17,380	$	81,683	$	913,615	$	995,298

The following table summarizes the activity for the reserve for credit losses on preneed receivables for the six months ended June 30, 2020:

	January 1, 2020		Provision for Expected Credit Losses		Acquisitions (Divestitures), Net		Write Offs		Effect of Foreign Currency		June 30, 2020
	(In thousands)
Funeral	$	(8,057)	$	(3,777)	$	13	$	1,452	$	19	$	(10,350)
Cemetery	(6,700)		(1,498)		—		250		21		(7,927)
Total reserve for credit losses on preneed receivables	$	(14,757)	$	(5,275)	$	13	$	1,702	$	40	$	(18,277)

The table below sets forth certain investment-related activities associated with our trusts:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Deposits	$	98,341	$	112,905	$	203,894	$	213,357
Withdrawals	$	99,264	$	116,680	$	213,856	$	224,036
Purchases of securities	$	456,639	$	240,376	$	905,291	$	689,534
Sales of securities	$	441,743	$	240,599	$	793,569	$	562,390
Realized gains from sales of securities(1)	$	92,435	$	54,756	$	144,592	$	98,281
Realized losses from sales of securities(1)	$	(61,756)	$	(16,251)	$	(147,158)	$	(48,882)

⁽¹⁾All realized gains and losses are recognized in Other income (expense), net for our trust investments and are offset by a corresponding reclassification in Other income (expense), net to Deferred receipts held in trust and Care trusts’ corpus.

The cost and market values associated with trust investments recorded at market value are detailed below. Cost reflects the investment (net of redemptions) of control holders in the trusts. Fair value represents the value of the underlying securities held by the trusts.

		June 30, 2020
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	48,249	$	1,923	$	(249)	$	49,923
Canadian government	2	38,056		58		(727)		37,387
Corporate	2	2,351		6		(81)		2,276
Residential mortgage-backed	2	3,254		168		—		3,422
Asset-backed	2	128		3		(5)		126
Equity securities:
Preferred stock	2	386		—		(35)		351
Common stock:
United States	1	1,368,878		284,456		(118,350)		1,534,984
Canada	1	35,890		7,793		(3,547)		40,136
Other international	1	87,167		19,230		(3,647)		102,750
Mutual funds:
Equity	1	812,202		13,840		(140,573)		685,469
Fixed income	1	1,292,673		23,609		(106,397)		1,209,885
Other	3	391		33		(1)		423
Trust investments, at fair value		3,689,625		351,119		(373,612)		3,667,132
Commingled funds
Fixed income		468,268		15,647		(2,247)		481,668
Equity		261,895		33,768		(243)		295,420
Money market funds		298,674		—		—		298,674
Private equity		211,805		49,716		(10,973)		250,548
Trust investments, at net asset value		1,240,642		99,131		(13,463)		1,326,310
Trust investments, at market		$	4,930,267	$	450,250	$	(387,075)	$	4,993,442

		December 31, 2019
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	49,728	$	752	$	(130)	$	50,350
Canadian government	2	41,093		76		(850)		40,319
Corporate	2	9,694		28		(172)		9,550
Residential mortgage-backed	2	3,210		59		(1)		3,268
Asset-backed	2	129		3		(4)		128
Equity securities:
Preferred stock	2	6,338		804		(115)		7,027
Common stock:
United States	1	1,349,828		303,766		(36,507)		1,617,087
Canada	1	43,866		12,369		(2,075)		54,160
Other international	1	95,257		18,227		(522)		112,962
Mutual funds:
Equity	1	746,581		31,511		(54,020)		724,072
Fixed income	1	1,247,930		16,424		(32,587)		1,231,767
Other	3	7,034		1,184		—		8,218
Trust investments, at fair value		3,600,688		385,203		(126,983)		3,858,908
Commingled funds
Fixed income		444,744		5,077		(1,731)		448,090
Equity		249,980		47,631		—		297,611
Money market funds		397,461		—		—		397,461
Private equity		176,388		80,283		(422)		256,249
Trust investments, at net asset value		1,268,573		132,991		(2,153)		1,399,411
Trust investments, at market		$	4,869,261	$	518,194	$	(129,136)	$	5,258,319

Our private equity investments include several funds that invest in limited partnerships, distressed debt, real estate, and mezzanine financing. These investments can never be redeemed by the funds. Instead, due to the nature of the investments in this category, distributions are received through the liquidation of the underlying assets of the funds. The funds' managers have not communicated the timing of any liquidations.

The change in our market-based trust investments with significant unobservable inputs (Level 3) is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In thousands)
Fair value, beginning balance	$	418	$	7,108	$	8,218	$	9,755
Net realized and unrealized gains (losses) included in Other income (expense), net(1)	717		(322)		(257)		(1,464)
Purchases	4,559		5		4,569		5
Sales	(5,271)		(203)		(5,296)		(1,708)
Transfers	—		—		(6,811)		—
Fair value, ending balance	$	423	$	6,588	$	423	$	6,588

⁽¹⁾All net realized and unrealized gains (losses) recognized in Other income (expense), net for our trust investments are offset by a corresponding reclassification in Other income (expense), net to Deferred receipts held in trust and Care trusts' corpus.

Maturity dates of our fixed income securities range from 2020 to 2040. Maturities of fixed income securities (excluding mutual funds) at June 30, 2020 are estimated as follows:

	Fair Value
	(In thousands)
Due in one year or less	$	57,496
Due in one to five years	26,054
Due in five to ten years	9,494
Thereafter	90
Total estimated maturities of fixed income securities	$	93,134

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $27.0 million and $29.6 million, for the three months ended June 30, 2020 and 2019, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $17.3 million and $17.5 million for the three months ended June 30, 2020 and 2019, respectively.

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $59.2 million and $57.2 million, for the six months ended June 30, 2020 and 2019, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $36.8 million and $37.9 million for the six months ended June 30, 2020 and 2019, respectively.

Our fixed income investment unrealized losses, their associated fair values, and the duration of unrealized losses are shown in the following tables:

	June 30, 2020
	In Loss Position Less Than 12 Months				In Loss Position Greater Than 12 Months				Total
	Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses
					(In thousands)
U.S. Treasury	$	1,201	$	(3)	$	1,243	$	(246)	$	2,444	$	(249)
Canadian government	—		—		11,973		(727)		11,973		(727)
Corporate	54		(2)		2,235		(79)		2,289		(81)
Asset-backed	—		—		25		(5)		25		(5)
Total fixed income securities with an unrealized loss	$	1,255	$	(5)	$	15,476	$	(1,057)	$	16,731	$	(1,062)

	December 31, 2019
	In Loss Position Less Than 12 Months				In Loss Position Greater Than 12 Months				Total
	Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses
					(In thousands)
U.S. Treasury	$	3,023	$	(36)	$	1,947	$	(94)	$	4,970	$	(130)
Canadian government	—		—		13,804		(850)		13,804		(850)
Corporate	30		—		4,826		(172)		4,856		(172)
Residential mortgage-backed	—		—		51		(1)		51		(1)
Asset-backed	—		—		28		(4)		28		(4)
Total fixed income securities with an unrealized loss	$	3,053	$	(36)	$	20,656	$	(1,121)	$	23,709	$	(1,157)

Deferred revenue, net

Deferred revenue, net represents future revenue, including distributed trust investment earnings associated with unperformed trust-funded preneed contracts that are not held in trust accounts. Future revenue and net trust investment earnings that are held in trust accounts are included in Deferred receipts held in trust.

The components of Deferred revenue, net in our unaudited Condensed Consolidated Balance Sheet were as follows:

	June 30, 2020		December 31, 2019
	(In thousands)
Deferred revenue	$	2,090,129	$	2,046,000
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts	(596,023)		(578,897)
Deferred revenue, net	$	1,494,106	$	1,467,103

The following table summarizes the activity for our contract liabilities, which are reflected in Deferred revenue, net and Deferred receipts held in trust:

	Six Months Ended June 30,
	2020		2019
	(In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust	$	5,306,479	$	4,790,552
Net preneed contract sales	496,467		496,842
Acquisitions (dispositions) of businesses, net	12,777		(29,665)
Net investment (losses) gains(1)	(189,474)		327,819
Recognized revenue from backlog(2)	(226,663)		(212,912)
Recognized revenue from current period sales	(237,296)		(241,589)
Change in amounts due on unfulfilled performance obligations	(18,151)		(3,770)
Change in cancellation reserve	1,070		(206)
Effect of foreign currency and other	(6,891)		10,848
Ending balance — Deferred revenue, net and Deferred receipts held in trust	$	5,138,318	$	5,137,919

⁽¹⁾Includes both realized and unrealized investment (losses) gains.

⁽²⁾Includes current year trust fund income through the date of performance.