Preneed Activities Level 1 (Notes)

3 Months Ended

Mar. 31, 2021

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:



	March 31, 2021		December 31, 2020
	(In thousands)
Preneed receivables, net	$	1,124,838	$	1,069,965

Trust investments, at market	6,062,704		5,851,188

Insurance-backed fixed income securities and other	243,307		245,056
Trust investments	6,306,011		6,096,244
Less: Cemetery perpetual care trust investments	(1,881,728)		(1,820,489)
Preneed trust investments	4,424,283		4,275,755

Preneed receivables, net and trust investments	$	5,549,121	$	5,345,720

Preneed receivables, net comprised the following:


	March 31, 2021
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	151,293	$	1,024,209	$	1,175,502
Unearned finance charges	(13,339)		(17,288)		(30,627)
Preneed receivables, at amortized cost	137,954		1,006,921		1,144,875
Reserve for credit losses	(11,450)		(8,587)		(20,037)
Preneed receivables, net	$	126,504	$	998,334	$	1,124,838

	December 31, 2020
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	143,896	$	979,259	$	1,123,155
Unearned finance charges	(14,018)		(19,968)		(33,986)
Preneed receivables, at amortized cost	129,878		959,291		1,089,169
Reserve for credit losses	(10,940)		(8,264)		(19,204)
Preneed receivables, net	$	118,938	$	951,027	$	1,069,965

At March 31, 2021, the amortized cost basis of our preneed receivables by year of origination was as follows:



	2021		2020		2019		2018		2017		Prior		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	24,115	$	52,370	$	32,855	$	11,182	$	5,300	$	12,132	$	137,954
Cemetery	142,146		399,260		209,141		132,126		75,248		49,000		1,006,921
Total preneed receivables, at amortized cost	$	166,261	$	451,630	$	241,996	$	143,308	$	80,548	$	61,132	$	1,144,875

At March 31, 2021, 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	$	3,608	$	2,047	$	1,623	$	16,453	$	23,731	$	114,223	$	137,954
Cemetery	25,626		17,921		4,322		888		48,757		958,164		1,006,921
Total preneed receivables, at amortized cost	$	29,234	$	19,968	$	5,945	$	17,341	$	72,488	$	1,072,387	$	1,144,875

The following table summarizes the activity for the reserve for credit losses on preneed receivables for the three months ended March 31, 2021:



	January 1, 2021		Provision for Expected Credit Losses		Write Offs		Effect of Foreign Currency		March 31, 2021
	(In thousands)
Funeral	$	(10,940)	$	(1,366)	$	857	$	(1)	$	(11,450)
Cemetery	(8,264)		(408)		89		(4)		(8,587)
Total reserve for credit losses on preneed receivables	$	(19,204)	$	(1,774)	$	946	$	(5)	$	(20,037)

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


	Three months ended March 31,
	2021		2020
	(In thousands)
Deposits	$	120,283	$	105,553
Withdrawals	$	112,580	$	114,592
Purchases of securities	$	431,801	$	434,367
Sales of securities	$	427,503	$	334,140
Realized gains from sales of securities(1)	$	130,187	$	52,157
Realized losses from sales of securities(1)	$	(16,168)	$	(85,402)

(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.


		March 31, 2021
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	46,312	$	1,197	$	(374)	$	47,135
Canadian government	2	29,396		45		(4)		29,437
Corporate	2	1,445		10		(15)		1,440
Residential mortgage-backed	2	1,072		77		(5)		1,144
Asset-backed	2	283		2		(17)		268
Equity securities:
Preferred stock	2	1,378		54		(5)		1,427
Common stock:
United States	1	1,538,711		590,244		(35,351)		2,093,604
Canada	1	41,103		14,098		(2,165)		53,036
Other international	1	102,439		40,452		(2,430)		140,461
Mutual funds:
Equity	1	800,930		125,413		(5,679)		920,664
Fixed income	1	1,048,187		18,413		(13,254)		1,053,346
Other	3	187		2		—		189
Trust investments, at fair value		3,611,443		790,007		(59,299)		4,342,151
Commingled funds
Fixed income		660,474		26,441		(2,329)		684,586
Equity		278,866		100,757		(93)		379,530
Money market funds		326,518		—		—		326,518
Private equity		270,786		67,134		(8,001)		329,919
Trust investments, at net asset value		1,536,644		194,332		(10,423)		1,720,553
Trust investments, at market		$	5,148,087	$	984,339	$	(69,722)	$	6,062,704


		December 31, 2020
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	44,907	$	1,566	$	(272)	$	46,201
Canadian government	2	30,210		51		(157)		30,104
Corporate	2	1,669		14		(8)		1,675
Residential mortgage-backed	2	2,438		131		—		2,569
Asset-backed	2	174		3		(5)		172
Equity securities:
Preferred stock	2	358		—		(24)		334
Common stock:
United States	1	1,500,125		503,757		(54,748)		1,949,134
Canada	1	35,016		10,915		(1,823)		44,108
Other international	1	110,775		39,837		(1,831)		148,781
Mutual funds:
Equity	1	821,406		95,155		(10,437)		906,124
Fixed income	1	1,022,409		35,872		(19,298)		1,038,983
Other	3	188		2		—		190
Trust investments, at fair value		3,569,675		687,303		(88,603)		4,168,375
Commingled funds
Fixed income		657,219		37,474		(173)		694,520
Equity		283,329		97,704		—		381,033
Money market funds		330,745		—		—		330,745
Private equity		217,953		68,846		(10,284)		276,515
Trust investments, at net asset value		1,489,246		204,024		(10,457)		1,682,813
Trust investments, at market		$	5,058,921	$	891,327	$	(99,060)	$	5,851,188

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 March 31,
		2021		2020
	(in thousands)
Fair value, beginning balance		$	190	$	8,218
Net realized and unrealized gains (losses) included in Other income (expense), net(1)		(1)		(974)
Purchases		—		10
Sales		—		(25)


Transfers		—		(6,811)

Fair value, ending balance		$	189	$	418

(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 2021 to 2040. Maturities of fixed income securities (excluding mutual funds) at March 31, 2021 are estimated as follows:


	Fair Value
	(In thousands)
Due in one year or less	$	47,498
Due in one to five years	24,382
Due in five to ten years	7,313
Thereafter	231
Total estimated maturities of fixed income securities	$	79,424

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $45.0 million and $32.2 million, for the three months ended March 31, 2021 and 2020, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $20.8 million and $19.5 million for the three months ended March 31, 2021 and 2020, respectively. Trust fund income is up significantly compared to the prior year due to higher investment returns and from the increase in services performed.

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:


	March 31, 2021		December 31, 2020
	(In thousands)
Deferred revenue	$	2,151,333	$	2,127,878
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts	(649,759)		(638,969)
Deferred revenue, net	$	1,501,574	$	1,488,909

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


	Three months ended March 31,
	2021		2020
	(In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust	$	5,761,291	$	5,306,479
Net preneed contract sales	313,483		238,471
(Dispositions) acquisitions of businesses, net	(441)		12,743
Net investment (losses) gains(1)	146,160		(665,127)
Recognized revenue from backlog(2)	(156,461)		(121,611)
Recognized revenue from current period sales	(133,633)		(107,821)
Change in amounts due on unfulfilled performance obligations	(10,387)		(2,555)
Change in cancellation reserve	113		1,095
Effect of foreign currency and other	3,780		(17,468)
Ending balance — Deferred revenue, net and Deferred receipts held in trust	$	5,923,905	$	4,644,206

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

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