Preneed Activities Level 1 (Notes)

3 Months Ended

Mar. 31, 2023

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, 2023		December 31, 2022
	(In thousands)
Preneed receivables, net	$	1,416,722	$	1,402,209

Trust investments, at market	5,924,847		5,663,163

Insurance-backed fixed income securities and other	210,517		214,440
Trust investments	6,135,364		5,877,603
Less: Cemetery perpetual care trust investments	(1,774,489)		(1,702,313)
Preneed trust investments	4,360,875		4,175,290

Preneed receivables, net and trust investments	$	5,777,597	$	5,577,499

Preneed receivables, net comprised the following:


	March 31, 2023
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	188,504	$	1,274,375	$	1,462,879
Unearned finance charges	(10,837)		(6,967)		(17,804)
Preneed receivables, at amortized cost	177,667		1,267,408		1,445,075
Reserve for credit losses	(15,148)		(13,205)		(28,353)
Preneed receivables, net	$	162,519	$	1,254,203	$	1,416,722

	December 31, 2022
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	180,108	$	1,267,304	$	1,447,412
Unearned finance charges	(11,129)		(6,760)		(17,889)
Preneed receivables, at amortized cost	168,979		1,260,544		1,429,523
Reserve for credit losses	(14,438)		(12,876)		(27,314)
Preneed receivables, net	$	154,541	$	1,247,668	$	1,402,209

At March 31, 2023, the amortized cost basis of our preneed receivables by year of origination was as follows:



	2023		2022		2021		2019		2018		Prior		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	28,445	$	67,155	$	38,001	$	18,284	$	10,092	$	15,690	$	177,667
Cemetery	124,775		505,146		332,591		179,554		74,933		50,409		1,267,408
Total preneed receivables, at amortized cost	$	153,220	$	572,301	$	370,592	$	197,838	$	85,025	$	66,099	$	1,445,075

At March 31, 2023, 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	$	3,244	$	2,845	$	2,249	$	23,166	$	31,504	$	146,163	$	177,667
Cemetery	38,257		27,650		5,871		2,775		74,553		1,192,855		1,267,408
Total preneed receivables, at amortized cost	$	41,501	$	30,495	$	8,120	$	25,941	$	106,057	$	1,339,018	$	1,445,075

The following table summarizes the activity for the reserve for credit losses on preneed receivables for the three months ended March 31, 2023:



	December 31, 2022		Provision for Expected Credit Losses		Write-Offs		Effect of Foreign Currency		March 31, 2023
	(In thousands)
Funeral	$	(14,438)	$	(1,300)	$	590	$	—	$	(15,148)
Cemetery	(12,876)		(541)		209		3		(13,205)
Total reserve for credit losses on preneed receivables	$	(27,314)	$	(1,841)	$	799	$	3	$	(28,353)

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


	Three months ended March 31,
			2023		2022
		(In thousands)
Deposits			$	137,245	$	127,972
Withdrawals			$	124,245	$	122,364
Purchases of securities			$	607,476	$	469,312
Sales of securities			$	630,740	$	394,424
Realized gains from sales of securities(1)			$	82,330	$	103,555
Realized losses from sales of securities(1)			$	(49,910)	$	(27,932)

(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, 2023
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	45,239	$	37	$	(1,749)	$	43,527
Canadian government	2	33,130		—		—		33,130
Corporate	2	175		—		(18)		157
Residential mortgage-backed	2	5,485		23		(111)		5,397
Asset-backed	2	293		—		(51)		242
Equity securities:
Preferred stock	2	4,196		—		(2,062)		2,134
Common stock:
United States	1	1,765,274		293,953		(155,781)		1,903,446
Canada	1	50,325		14,876		(6,962)		58,239
Other international	1	97,626		12,049		(10,055)		99,620
Mutual funds:
Equity	1	916,174		82,279		(77,552)		920,901
Fixed income	1	1,098,174		1,776		(140,387)		959,563

Trust investments, at fair value		4,016,091		404,993		(394,728)		4,026,356
Commingled funds
Fixed income		733,119		—		(76,465)		656,654
Equity		306,512		67,597		(1,130)		372,979
Money market funds		345,577		—		—		345,577
Alternative investments		372,793		154,721		(4,233)		523,281
Trust investments, at net asset value		1,758,001		222,318		(81,828)		1,898,491
Trust investments, at market		$	5,774,092	$	627,311	$	(476,556)	$	5,924,847


		December 31, 2022
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	45,084	$	22	$	(2,033)	$	43,073
Canadian government	2	30,200		—		—		30,200
Corporate	2	175		—		(18)		157
Residential mortgage-backed	2	1,420		—		(101)		1,319
Asset-backed	2	294		—		(52)		242
Equity securities:
Preferred stock	2	4,144		—		(2,340)		1,804
Common stock:
United States	1	1,707,240		283,423		(208,523)		1,782,140
Canada	1	47,821		11,765		(11,117)		48,469
Other international	1	123,440		10,561		(19,009)		114,992
Mutual funds:
Equity	1	917,686		64,895		(112,374)		870,207
Fixed income	1	1,135,815		1,231		(166,286)		970,760

Trust investments, at fair value		4,013,319		371,897		(521,853)		3,863,363
Commingled funds
Fixed income		730,940		2		(89,246)		641,696
Equity		309,893		40,820		(3,846)		346,867
Money market funds		325,562		—		—		325,562
Alternative investments		307,275		179,491		(1,091)		485,675
Trust investments, at net asset value		1,673,670		220,313		(94,183)		1,799,800
Trust investments, at market		$	5,686,989	$	592,210	$	(616,036)	$	5,663,163

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.

Maturity dates of our fixed income securities range from 2023 to 2040. Maturities of fixed income securities (excluding mutual and commingled funds) at March 31, 2023 are estimated as follows:


	Fair Value
	(In thousands)
Due in one year or less	$	55,274
Due in one to five years	19,780
Due in five to ten years	7,289
Thereafter	110
Total estimated maturities of fixed income securities	$	82,453

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $36.0 million and $45.9 million for the three months ended March 31, 2023 and 2022, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $22.0 million and $24.4 million for the three months ended March 31, 2023 and 2022, 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, 2023		December 31, 2022
	(In thousands)
Deferred revenue	$	2,515,817	$	2,472,693
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts	(871,103)		(848,665)
Deferred revenue, net	$	1,644,714	$	1,624,028

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,
	2023		2022
	(In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust	$	5,787,548	$	6,299,240
Net preneed contract sales	364,463		391,243
Acquisitions (dispositions) of businesses, net	2,904		269
Net investment gains (losses)(1)	178,220		(201,580)
Recognized revenue from backlog(2)	(180,172)		(176,913)
Recognized revenue from current period sales	(137,324)		(138,905)
Change in amounts due on unfulfilled performance obligations	(22,519)		(36,201)
Change in cancellation reserve	26		(146)
Effect of foreign currency and other	(832)		4,972
Ending balance — Deferred revenue, net and Deferred receipts held in trust	$	5,992,314	$	6,141,979

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

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