Preneed Activities Level 1 (Notes)

9 Months Ended

Sep. 30, 2023

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:

	September 30, 2023		December 31, 2022
	(In thousands)
Preneed receivables, net	$	1,470,713	$	1,402,209
Trust investments, at market	5,916,668		5,663,163
Insurance-backed fixed income securities and other	219,351		214,440
Trust investments	6,136,019		5,877,603
Less: Cemetery perpetual care trust investments	(1,778,882)		(1,702,313)
Preneed trust investments	4,357,137		4,175,290
Preneed receivables, net and trust investments	$	5,827,850	$	5,577,499

Preneed receivables, net comprised the following:

	September 30, 2023
	Funeral		Cemetery		Total
	(In thousands)
Preneed receivables	$	192,677	$	1,325,085	$	1,517,762
Unearned finance charges	(10,530)		(6,304)		(16,834)
Preneed receivables, at amortized cost	182,147		1,318,781		1,500,928
Reserve for credit losses	(16,087)		(14,128)		(30,215)
Preneed receivables, net	$	166,060	$	1,304,653	$	1,470,713
	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 September 30, 2023, the amortized cost basis of our preneed receivables by year of origination was as follows:

	2023		2022		2021		2020		2019		Prior		Total
	(In thousands)
Preneed receivables, at amortized cost:
Funeral	$	65,181	$	53,310	$	28,785	$	13,072	$	7,642	$	14,157	$	182,147
Cemetery	393,000		435,554		267,642		138,828		52,746		31,011		1,318,781
Total preneed receivables, at amortized cost	$	458,181	$	488,864	$	296,427	$	151,900	$	60,388	$	45,168	$	1,500,928

At September 30, 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	$	5,951	$	3,655	$	2,492	$	25,297	$	37,395	$	144,752	$	182,147
Cemetery	50,989		37,235		11,208		4,109		103,541		1,215,240		1,318,781
Total preneed receivables, at amortized cost	$	56,940	$	40,890	$	13,700	$	29,406	$	140,936	$	1,359,992	$	1,500,928

The following table summarizes the activity for the reserve for credit losses on preneed receivables for the nine months ended September 30, 2023:

	December 31, 2022		Provision for Expected Credit Losses		Write Offs		Effect of Foreign Currency and Other		September 30, 2023
	(In thousands)
Funeral	$	(14,438)	$	(3,379)	$	1,730	$	—	$	(16,087)
Cemetery	(12,876)		(1,728)		459		17		(14,128)
Total reserve for credit losses on preneed receivables	$	(27,314)	$	(5,107)	$	2,189	$	17	$	(30,215)

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

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
	(In thousands)
Deposits	$	143,148	$	134,918	$	434,210	$	403,340
Withdrawals	$	135,995	$	120,314	$	404,790	$	366,465
Purchases of securities	$	420,796	$	389,487	$	1,566,090	$	1,293,426
Sales of securities	$	375,021	$	378,798	$	1,540,936	$	1,202,445
Realized gains from sales of securities(1)	$	51,612	$	53,134	$	205,493	$	274,373
Realized losses from sales of securities(1)	$	(42,316)	$	(69,442)	$	(144,562)	$	(150,085)

(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.

		September 30, 2023
	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Value
				(In thousands)
Fixed income securities:
U.S. Treasury	2	$	45,888	$	29	$	(1,900)	$	44,017
Canadian government	2	32,663		—		—		32,663
Corporate	2	164		—		(18)		146
Residential mortgage-backed	2	5,437		—		(241)		5,196
Asset-backed	2	291		—		(56)		235
Equity securities:
Preferred stock	2	409		—		(119)		290
Common stock:
United States	1	1,761,457		320,413		(158,404)		1,923,466
Canada	1	41,604		13,673		(2,522)		52,755
Other international	1	98,592		11,225		(12,775)		97,042
Mutual funds:
Equity	1	903,221		85,740		(83,033)		905,928
Fixed income	1	1,025,338		251		(158,717)		866,872
Trust investments, at fair value		3,915,064		431,331		(417,785)		3,928,610
Commingled funds
Fixed income		827,398		—		(99,689)		727,709
Equity		336,627		39,959		(6,135)		370,451
Money market funds		336,387		—		—		336,387
Alternative investments		385,833		173,479		(5,801)		553,511
Trust investments, at net asset value		1,886,245		213,438		(111,625)		1,988,058
Trust investments, at market		$	5,801,309	$	644,769	$	(529,410)	$	5,916,668

		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 September 30, 2023 are estimated as follows:

	Fair Value
	(In thousands)
Due in one year or less	$	52,560
Due in one to five years	21,882
Due in five to ten years	7,722
Thereafter	93
Total estimated maturities of fixed income securities	$	82,257

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $44.0 million and $31.6 million for the three months ended September 30, 2023 and 2022, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $20.1 million and $19.3 million for the three months ended September 30, 2023 and 2022, respectively.

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $121.3 million and $113.1 million for the nine months ended September 30, 2023 and 2022, respectively. Recognized trust fund income (realized

and unrealized) related to our cemetery perpetual care trust investments was $63.5 million and $64.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The increase in trust fund income (realized and unrealized) related to our preneed trust investments in the three and nine months ended September 30, 2023 is due in part to earnings retained related to the unclaimed property audit. Information regarding the unclaimed property audit is set forth in Note 9 of this Form 10-Q.

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:

	September 30, 2023		December 31, 2022
	(In thousands)
Deferred revenue	$	2,582,448	$	2,472,693
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts	(930,735)		(848,665)
Deferred revenue, net	$	1,651,713	$	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:

	Nine months ended September 30,
	2023		2022
	(In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust	$	5,787,548	$	6,299,241
Net preneed contract sales	1,098,816		1,104,812
(Dispositions) acquisitions of businesses, net	(386)		616
Net investment gains (losses)(1)	167,596		(851,904)
Recognized revenue from backlog(2)	(449,098)		(406,358)
Recognized revenue from current period sales	(504,649)		(498,086)
Change in amounts due on unfulfilled performance obligations	(78,974)		(108,360)
Change in cancellation reserve	30		(366)
Effect of foreign currency and other	(17,533)		(17,371)
Ending balance — Deferred revenue, net and Deferred receipts held in trust	$	6,003,350	$	5,522,224

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

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