Preneed Activities Level 1 (Notes)

3 Months Ended

Mar. 31, 2022

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, 2022		December 31, 2021
	(In thousands)
Preneed receivables, net	$	1,292,600	$	1,243,781

Trust investments, at market	6,243,312		6,536,851

Insurance-backed fixed income securities and other	228,612		231,589
Trust investments	6,471,924		6,768,440
Less: Cemetery perpetual care trust investments	(1,894,068)		(1,996,898)
Preneed trust investments	4,577,856		4,771,542

Preneed receivables, net and trust investments	$	5,870,456	$	6,015,323

Preneed receivables, net comprised the following:


	March 31, 2022
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	169,607	$	1,165,693	$	1,335,300
Unearned finance charges	(11,709)		(9,708)		(21,417)
Preneed receivables, at amortized cost	157,898		1,155,985		1,313,883
Reserve for credit losses	(13,177)		(8,106)		(21,283)
Preneed receivables, net	$	144,721	$	1,147,879	$	1,292,600

	December 31, 2021
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	162,183	$	1,125,539	$	1,287,722
Unearned finance charges	(12,038)		(11,176)		(23,214)
Preneed receivables, at amortized cost	150,145		1,114,363		1,264,508
Reserve for credit losses	(12,722)		(8,005)		(20,727)
Preneed receivables, net	$	137,423	$	1,106,358	$	1,243,781

At March 31, 2022, the amortized cost basis of our preneed receivables by year of origination was as follows:



	2022		2021		2020		2019		2018		Prior		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	24,522	$	61,712	$	32,845	$	18,626	$	6,279	$	13,914	$	157,898
Cemetery	145,212		478,291		278,100		131,397		71,731		51,254		1,155,985
Total preneed receivables, at amortized cost	$	169,734	$	540,003	$	310,945	$	150,023	$	78,010	$	65,168	$	1,313,883

At March 31, 2022, 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	$	4,007	$	2,668	$	1,827	$	19,264	$	27,766	$	130,132	$	157,898
Cemetery	32,849		22,251		2,221		9,069		66,390		1,089,595		1,155,985
Total preneed receivables, at amortized cost	$	36,856	$	24,919	$	4,048	$	28,333	$	94,156	$	1,219,727	$	1,313,883

The following table summarizes the activity for the reserve for credit losses on preneed receivables for the three months ended March 31, 2022:



	December 31, 2021		Provision for Expected Credit Losses		Write Offs		Effect of Foreign Currency		March 31, 2022
	(In thousands)
Funeral	$	(12,722)	$	(1,323)	$	869	$	(1)	$	(13,177)
Cemetery	(8,005)		(256)		158		(3)		(8,106)
Total reserve for credit losses on preneed receivables	$	(20,727)	$	(1,579)	$	1,027	$	(4)	$	(21,283)

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


	Three months ended March 31,
			2022		2021
		(In thousands)
Deposits			$	127,972	$	120,283
Withdrawals			$	122,364	$	112,580
Purchases of securities			$	469,312	$	431,801
Sales of securities			$	394,424	$	427,503
Realized gains from sales of securities(1)			$	103,555	$	130,187
Realized losses from sales of securities(1)			$	(27,932)	$	(16,168)

(1)All realized gains and losses are recognized in Other income, net for our trust investments and are offset by a corresponding reclassification in Other income, 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, 2022
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	51,565	$	299	$	(1,043)	$	50,821
Canadian government	2	30,012		22		(1)		30,033
Corporate	2	175		2		(4)		173
Residential mortgage-backed	2	1,402		12		(41)		1,373
Asset-backed	2	218		1		(23)		196
Equity securities:
Preferred stock	2	4,670		7		(656)		4,021
Common stock:
United States	1	1,704,750		466,482		(99,739)		2,071,493
Canada	1	46,313		21,123		(5,844)		61,592
Other international	1	141,765		23,727		(16,564)		148,928
Mutual funds:
Equity	1	890,185		122,597		(45,197)		967,585
Fixed income	1	1,094,784		17,540		(64,350)		1,047,974
Other	3	187		1		—		188
Trust investments, at fair value		3,966,026		651,813		(233,462)		4,384,377
Commingled funds
Fixed income		677,856		84,337		(22,753)		739,440
Equity		231,312		129,968		(1,155)		360,125
Money market funds		322,089		—		—		322,089
Alternative investments		292,485		146,733		(1,937)		437,281
Trust investments, at net asset value		1,523,742		361,038		(25,845)		1,858,935
Trust investments, at market		$	5,489,768	$	1,012,851	$	(259,307)	$	6,243,312


		December 31, 2021
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	51,002	$	795	$	(283)	$	51,514
Canadian government	2	29,881		28		—		29,909
Corporate	2	170		6		(2)		174
Residential mortgage-backed	2	1,407		58		(15)		1,450
Asset-backed	2	274		2		(10)		266
Equity securities:
Preferred stock	2	4,843		4		(1,024)		3,823
Common stock:
United States	1	1,648,785		624,349		(56,092)		2,217,042
Canada	1	34,787		19,617		(898)		53,506
Other international	1	129,486		42,171		(9,819)		161,838
Mutual funds:
Equity	1	875,828		140,893		(10,116)		1,006,605
Fixed income	1	1,025,327		12,560		(18,675)		1,019,212
Other	3	187		1		—		188
Trust investments, at fair value		3,801,977		840,484		(96,934)		4,545,527
Commingled funds
Fixed income		662,125		115,939		(3,171)		774,893
Equity		230,926		161,125		(114)		391,937
Money market funds		408,762		—		—		408,762
Alternative investments		292,888		128,197		(5,353)		415,732
Trust investments, at net asset value		1,594,701		405,261		(8,638)		1,991,324
Trust investments, at market		$	5,396,678	$	1,245,745	$	(105,572)	$	6,536,851

Our alternative investments include funds invested in limited partnerships with interests in private equity, private market real estate, energy and natural resources, infrastructure, transportation, and private debt including both distressed debt 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,
			2022		2021
		(In thousands)
Fair value, beginning balance			$	188	$	190
Net realized and unrealized (losses) included in Other income, net(1)			—		(1)






Fair value, ending balance			$	188	$	189

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

Maturity dates of our fixed income securities range from 2022 to 2040. Maturities of fixed income securities (excluding mutual funds) at March 31, 2022 are estimated as follows:


	Fair Value
	(In thousands)
Due in one year or less	$	52,873
Due in one to five years	24,526
Due in five to ten years	4,996
Thereafter	201
Total estimated maturities of fixed income securities	$	82,596

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $45.9 million and $45.0 million, for the three months ended March 31, 2022 and 2021, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $24.4 million and $20.8 million for the three months ended March 31, 2022 and 2021, respectively.

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, 2022		December 31, 2021
	(In thousands)
Deferred revenue	$	2,330,418	$	2,259,364
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts	(763,201)		(726,615)
Deferred revenue, net	$	1,567,217	$	1,532,749

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,
	2022		2021
	(In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust	$	6,299,240	$	5,761,291
Net preneed contract sales	391,243		313,483
(Dispositions) acquisitions of businesses, net	269		(441)
Net investment (losses) gains(1)	(201,580)		146,160
Recognized revenue from backlog(2)	(176,913)		(156,461)
Recognized revenue from current period sales	(138,905)		(133,633)
Change in amounts due on unfulfilled performance obligations	(36,201)		(10,387)
Change in cancellation reserve	(146)		113
Effect of foreign currency and other	4,972		3,780
Ending balance — Deferred revenue, net and Deferred receipts held in trust	$	6,141,979	$	5,923,905

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

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