SECURITY NATIONAL FINANCIAL CORP
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
SNFCA$9.48+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-29.
0001493152-24-011903
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001641172-25-001508
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 85 current paragraphs.
43 unchanged; 35 reworded; 6 added; 44 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report
The Company’s significant accounting policies are fundamental to understanding its results of operations and financial condition as they require that the Company use estimates and assumptions that may affect the value of its assets or liabilities and financial results. See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.
Current report
Five of these policies, discussed below, relate to critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Actual results could differ from those estimates.
Current report
The Company’s Management and the Audit Committee of the Board of Directors have reviewed and approved the accounting policies associated with these critical estimates.
Current report
Loan Loss Reserve
Current report
Other revenues increased by $958,000, or 26.3%, to $4,604,000 for 2024 from $3,646,000 for 2023. This increase was primarily attributable to a $1,350,000 legal settlement, which was partially offset by a decrease of $392,000 in other miscellaneous revenues.
Removed paragraphs (44)
Previous report
The following is a summary of the Company’s significant accounting policies and a review of the Company’s most critical accounting estimates. See Note 1 of the Notes to Consolidated Financial Statements.
Previous report
Insurance Operations
Previous report
In accordance with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations received for interest sensitive products are reflected as increases in liabilities for policyholder account balances and not as revenues. Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products are reflected as decreases in liabilities for policyholder account balances and not as expenses.
Previous report
The Company receives investment income earned from the funds deposited into account balances, a portion of which is passed through to the policyholders in the form of interest credited. Interest credited to policyholder account balances and benefit claims more than policyholder account balances are reported as expenses in the consolidated financial statements.
Previous report
Premiums and other considerations received for traditional life insurance products are recognized as revenues when due. Future policy benefits are recognized as expenses over the life of the policy by means of the provision for future policy benefits.
Previous report
The costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally commissions), defined as deferred policy acquisition costs, are capitalized, and amortized into expenses. For nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued. For interest sensitive products, these costs are amortized generally in proportion to expected gross profits from surrender charges and investment, mortality, and expense margins. This amortization is adjusted when the Company revises the estimate of current or future gross profits or margins. For example, deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated maturity.
Previous report
Death and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under insurance retention limits. The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits, expense levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders) and persistency. The Company can mitigate adverse experiences through sound underwriting, asset and liability duration matching, sound actuarial practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.
Previous report
Cemetery and Mortuary Operations
Previous report
Pre-need sales of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets, are deferred until the services are performed or the caskets are delivered.
Previous report
Pre-need sales of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery interment rights, are recognized in accordance with the retail land sales provisions of GAAP. Under GAAP, recognition of revenue and associated costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected. Revenues related to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets the criteria of GAAP, described above.
Previous report
Pre-need sales of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery merchandise, are deferred until the merchandise is delivered, fulfilling the performance obligation.
Previous report
Pre-need sales of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue and costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.
Previous report
Prearranged funeral and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged funeral business are accounted for under the guidance of the provisions of GAAP. Obtaining costs, which include only costs that vary with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise is delivered or services are performed.
Previous report
Revenues and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured, and there are no significant company obligations remaining.
Previous report
Mortgage Operations
Previous report
Mortgage fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale of mortgage loans. The Company has elected to use fair value accounting for all mortgage loans that are held for sale. Accordingly, all revenues and costs are now recognized when the mortgage loan is funded and any changes in fair value are shown as a component of mortgage fee income.
Previous report
The Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse, unless defects are identified in the representations and warranties made at loan sale. It may be required, however, to repurchase a loan or pay a fee instead of repurchasing under certain events, which include the following:
Previous report
Loan purchase commitments generally specify a date 30 to 45 days after delivery upon which the underlying loans should be settled. Depending on market conditions, these commitment settlement dates can be extended at a cost to the Company.
Previous report
It is the Company’s policy to cure any documentation problems regarding such loans at a minimal cost for up to a six-month period and to pursue efforts to enforce loan purchase commitments from third-party investors concerning the loans. The Company believes that six months allows adequate time to remedy any documentation issues, to enforce purchase commitments, and to exhaust other alternatives. Remedial methods include the following:
Previous report
Once purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month period, the loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and the previously recorded sales revenue that was to be received from a third-party investor is written off against the loan loss reserve. Any loan that later becomes delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.
Previous report
Determining fair value. The cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value, while often difficult to determine and may contain significant unobservable inputs, is based on the following guidelines:
Previous report
The appraised value of the real estate underlying the original mortgage loan adds significance to the Company’s determination of fair value because, if the loan becomes delinquent, the Company has sufficient value to collect the unpaid principal balance or the carrying value of the loan, thus minimizing credit risk. Most loans originated are sold to third-party investors. The amounts expected to be sold to investors are shown on the consolidated balance sheets as loans held for sale.
Previous report
Use of Significant Accounting Estimates
Previous report
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which could have a material impact on the financial statements. The following is a summary of our significant accounting estimates, and critical issues that impact them:
Previous report
Deferred Acquisition Costs
Previous report
Value of Business Acquired
Previous report
Mortgage Loans Foreclosed to Real Estate Held for Investment or Sale
Previous report
These properties are recorded at the lower of cost or fair value upon foreclosure. The Company believes that in an orderly market, fair value approximates the replacement cost of a home, and the rental income provides a cash flow stream for investment analysis. The Company believes the highest and best use of the properties are as income producing assets since it is the Company’s intent to hold the properties as rental properties, matching the income from the investment in rental properties with the funds required for estimated future policy benefits. Accordingly, the fair value determination is generally weighted more heavily toward the rental analysis. The fair value is also estimated by obtaining an independent appraisal, which typically considers area comparable properties and property condition.
Previous report
Unearned Premium Reserve
Previous report
The universal life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into revenues over the estimated expected gross profits from surrender charges and investment, mortality, and expense margins. The same issues that impact deferred acquisition costs apply to unearned revenue.
Previous report
Deferred Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future Cost of Pre-need Sales
Previous report
The revenue and cost associated with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is delivered or the service is performed.
Previous report
The Company, through its cemetery and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder or potential mortuary customer utilizes one of the Company’s facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance policy.
Previous report
Mortgage Servicing Rights
Previous report
Mortgage Service Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents) when mortgage loans are sold. Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans sold, in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities, collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound) funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real estate owned and property dispositions. The Company initially accounts for MSRs at fair value and subsequently accounts for them using the amortization method. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated future net servicing income of the underlying financial assets. The Company periodically assesses MSRs accounted for using the amortization method for impairment.
Previous report
Mortgage Allowance for Credit Losses and Loan Loss Reserve
Previous report
The mortgage allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage loans held for investment to present the net amount expected to be collected. When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment. The Company will rent the properties until it is deemed desirable to sell them.
Previous report
Deferred Tax Assets and Liabilities
Previous report
Deferred tax assets and liabilities require various estimates and judgments and may be affected favorably or unfavorably by various internal and external factors. These estimates and judgments occur in the calculation of certain deferred tax assets and liabilities that arise from temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes and in estimating the ultimate amount of deferred tax assets recoverable in future periods. Factors affecting the deferred tax assets and liabilities include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes to overall levels of pre-tax earnings. Changes in these estimates, judgments or factors may result in an increase or decrease to the Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes.
Previous report
Other revenues decreased by $15,171,000, or 80.6%, to $3,646,000 for 2023 from $18,817,000 for 2022. This decrease was primarily attributable to a decrease in servicing fee revenue because of the sale of certain mortgage servicing rights in October 2022.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Reworded paragraphs (35)
Previous wording
The Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating mortgage loans.
Current wording
The Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on the housing market by originating mortgage loans.
Previous wording
Profitability for 2023 increased due to (a) a $9,656,000 increase in insurance premiums and other considerations, (b) a $5,247,000 increase in net investment income, (c) a $1,602,000 increase in intersegment revenue, (d) a $1,422,000 increase in gains on investments and other assets primarily due to an increase in the fair value of equity securities, and (e) a $987,000 decrease in selling, general and administrative expenses, which were partially offset by (i) a $5,150,000 increase in future policy benefits, (ii) a $1,936,000 increase in death, surrenders and other policy benefits, (iii) a $266,000 decrease in other revenues, (iv) a $176,000 increase in intersegment interest expense and other expenses, (v) a $133,000 increase in amortization of deferred policy acquisition costs primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs, (vi) a $111,000 increase in interest expense, and (vii) a $66,000 decrease in mortgage fee income.
Current wording
Profitability for 2024 increased due to (a) a $4,998,000 increase in insurance premiums and other considerations, (b) a $3,301,000 decrease in death, surrenders and other policy benefits, (c) a $2,323,000 decrease in amortization of deferred policy acquisition costs, (d) a $1,092,000 increase in gains on investments and other assets, (e) a $443,000 increase in net investment income, and (f) a $354,000 decrease in interest expense, which were partially offset by (i) a $2,949,000 increase in income tax expense, (ii) a $2,929,000 increase in selling, general and administrative expenses, (iii) a $2,245,000 increase in future policy benefits, (iv) a $931,000 decrease in intersegment revenue, (v) a $102,000 decrease in other revenues, (vi) a $77,000 decrease in mortgage fee income, and (vii) a $42,000 increase in intersegment interest expense and other expenses.
Previous wording
Profitability in 2023 increased due to (a) a $2,196,000 increase in cemetery pre-need sales, (b) a $1,513,000 increase in gains on investments and other assets (primarily attributable to an increase in the fair value of equity securities classified as restricted assets and cemetery perpetual care trust investments), (c) a $507,000 increase in net investment income, (d) a $99,000 increase in other revenues, (e) a $59,000 decrease in amortization of deferred policy acquisition costs, and (f) a $44,000 decrease in intersegment interest expense and other expenses, which were partially offset by (i) a $878,000 decrease in cemetery at-need sales, (ii) a $546,000 increase in selling, general and administrative expenses, (iii) a $447,000 decrease in mortuary at-need sales, (iv) a $111,000 decrease in intersegment revenues, and (v) a $85,000 increase in costs of goods sold.
Current wording
Profitability in 2024 increased due to (a) a $1,140,000 increase in cemetery pre-need sales, (b) a $260,000 increase in mortuary at-need sales, (c) a $156,000 increase in gains on investments and other assets, (d) a $139,000 increase in other revenues, and (e) a $26,000 decrease in intersegment interest expense and other expenses, which were partially offset by (i) a $458,000 increase in selling, general and administrative expenses, (ii) a $383,000 decrease in net investment income, (iii) a $239,000 increase in amortization of deferred policy acquisition costs, (iv) a $228,000 decrease in cemetery at-need sales, and (v) a $96,000 increase in income tax expense.
Previous wording
The Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with Security National Life, Kilpatrick Life and unaffiliated financial institutions.
Current wording
The Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with the Company, Security National Life, Kilpatrick Life, and unaffiliated financial institutions.
Previous wording
SecurityNational Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”) released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately 4% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer. On October 31, 2022, the Company sold certain of its MSRs. The MSRs related to mortgage loans previously originated by the Company in aggregate unpaid principal amount of approximately $7.02 billion. As a result of the sale, the book value of the Company’s MSRs decreased $51,185,906.
Current wording
SecurityNational Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”) released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately 0.44% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.
Previous wording
Mortgage rates have followed the US Treasury yields up in response to the higher-than-expected inflation and the expectation that the Federal Reserve will continue to raise rates in the near term. As expected, the rapid increase in mortgage rates has resulted in a decrease in loan originations classified as ‘refinance’. Higher mortgage rates have also had a negative effect on loan originations classified as ‘purchases’, although not as significant as those in the refinance classification.
Current wording
US Treasury rates continue to remain elevated despite the downward trend in inflation data and the Federal Reserve’s action to reduce rates. This has resulted in higher-than-expected mortgage rates, which in turn has further decreased the demand for loan originations classified as refinance. The higher-than-expected mortgage rates have also continued to have a negative effect on loan originations classified as purchases.
Previous wording
For 2023 and 2022, SecurityNational Mortgage originated 7,185 loans ($2,173,081,000 total volume) and 10,663 loans ($3,373,554,000 total volume), respectively.
Current wording
For 2024 and 2023, SecurityNational Mortgage originated 7,269 loans ($2,295,830,000 total volume) and 7,185 loans ($2,173,081,000 total volume), respectively.
Previous wording
Included in other revenues is service fee income. Profitability in 2023 decreased due to (a) an $85,300,000 decrease in secondary gains from investors, (b) a $15,004,000 decrease in other revenues due to the sale of certain MSRs in October 2022, (c) a $1,535,000 increase in intersegment interest expense and other expenses, (d) a $1,527,000 decrease in income from loan originations, and (e) a $241,000 decrease in gains on investments and other assets, which were partially offset by (i) a $23,662,000 decrease in commissions, (ii) a $17,871,000 decrease in personnel expenses, (iii) a $13,180,000 decrease in other expenses, (iv) an $8,356,000 increase in the fair value of loans held for sale, (v) a $3,185,000 increase in the fair value of loan commitments, (vi) a $3,077,000 decrease in interest expense, (vii) a $1,100,000 decrease in costs related to funding mortgage loans, (viii) a $1,011,000 decrease in advertising expenses, (ix) a $392,000 increase in net investment income, (x) a $175,000 increase in intersegment revenues, (xi) a $42,000 decrease in depreciation on property and equipment, and (xii) a $52,000 decrease in rent and rent related expenses.
Current wording
Losses in 2024 compared to 2023 decreased due to (a) a $4,251,000 decrease in other expenses, (b) a $3,348,000 increase in the fair value of loans held for sale, (c) a $2,359,000 increase in income from loan originations, (d) a $2,177,000 decrease in personnel expenses, (e) a $1,927,000 increase in secondary gains from investors, (f) a $1,854,000 increase in the fair value of loan commitments, (g) a $1,729,000 decrease in rent and rent related expenses, (h) a $921,000 increase in other revenues, (i) a $904,000 decrease in intersegment interest expense and other expenses, (j) a $330,000 decrease in advertising expenses, (k) a $306,000 decrease in costs related to funding mortgage loans, (l) a $257,000 decrease in interest expense, (m) a $42,000 increase in intersegment revenues, and (n) a $29,000 decrease in depreciation on property and equipment, which were partially offset by (i) a $7,410,000 increase in commissions, (ii) a $2,717,000 increase in income tax expense, (iii) a $1,143,000 decrease in gains on investments and other assets, and (iv) a $678,000 decrease in net investment income.
Previous wording
The Company provides for losses on its mortgage loans held for investment through an allowance for credit losses (a contra-asset account) and through the mortgage loan loss reserve (a liability account).
Current wording
The Company provides for losses on its mortgage loans held for sale through the mortgage loan loss reserve (a liability account).
Previous wording
Total revenues decreased by $71,155,000, or 18.3%, to $318,497,000 for 2023 from $389,652,000 for 2022. Contributing to this decrease in total revenues was primarily a $75,352,000 decrease in mortgage fee income and a $15,171,000 decrease in other revenues. This decrease in total revenues was offset by a $9,657,000 increase in insurance premiums and other considerations, a $6,145,000 increase in net investment income, a $2,695,000 increase in gains on investments and other assets, and an $871,000 increase in net cemetery and mortuary sales.
Current wording
Total revenues increased by $16,025,000, or 5.0%, to $334,522,000 for 2024 from $318,497,000 for 2023. Contributing to this increase in total revenues was primarily a $9,411,000 increase in mortgage fee income, a $4,997,000 increase in insurance premiums and other considerations, a $1,172,000 increase in net cemetery and mortuary sales, a $958,000 increase in other revenues, and a $105,000 increase in gains on investments and other assets. This increase in total revenues was offset by a $618,000 decrease in net investment income.
Previous wording
Mortgage fee income decreased by $75,352,000, or 43.4%, to $98,148,000 for 2023, from $173,500,000 for 2022. This decrease was primarily due to an $85,366,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, and a $2,579,000 decrease in loan fees and interest income. This decrease in mortgage fee income was partially offset by a $11,541,000 increase in the fair value of loans held for sale and loan commitments and a $1,052,000 decrease in the provision for loan loss reserve.
Current wording
Mortgage fee income increased by $9,411,000, or 9.6%, to $107,559,000 for 2024, from $98,148,000 for 2023. This increase was primarily due to a $5,202,000 increase in the fair value of loans held for sale and loan commitments, a $3,264,000 increase in loan fees and interest income, a $1,850,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market. This increase in mortgage fee income was partially offset by a $905,000 increase in the provision for loan loss reserve.
Previous wording
Insurance premiums and other considerations increased by $9,657,000, or 9.2%, to $114,658,000 for 2023, from $105,002,000 for 2022. This increase was due to an increase of $9,238,000 in first year premiums because of increased preneed insurance sales and an increase of $419,000 in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying policies in force.
Current wording
Insurance premiums and other considerations increased by $4,997,000, or 4.4%, to $119,656,000 for 2024, from $114,659,000 for 2023. This increase was due to an increase of $2,555,000 in first year premiums because of increased preneed insurance sales and an increase of $2,442,000 in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying policies in force.
Previous wording
Net investment income increased by $6,145,000, or 9.3%, to $72,343,000 for 2023, from $66,198,000 for 2022. This increase was primarily attributable to a $4,476,000 increase in fixed maturity securities income, a $2,583,000 increase in interest on cash and cash equivalents, a $477,000 decrease in investment expenses, a $223,000 increase in rental income from real estate held for investment, a $106,000 increase in equity securities income, a $99,000 increase in income in other investments, and a $5,000 increase in insurance assignment income. This increase was partially offset by a $1,708,000 decrease in mortgage loan interest and a $116,000 decrease in policy loan income.
Current wording
Net investment income decreased by $618,000, or 0.9%, to $71,725,000 for 2024, from $72,343,000 for 2023. This decrease was primarily attributable to a $3,416,000 decrease in rental income from real estate held for investment and a $3,290,000 decrease in mortgage loan interest. This decrease was partially offset by a $2,427,000 increase in interest on cash and cash equivalents, a $1,853,000 increase in insurance assignment income, a $941,000 decrease in investment expenses, a $461,000 increase in fixed maturity securities income, a $189,000 increase in income in other investments, a $137,000 increase in policy loan income, and an $82,000 increase in equity securities income.
Previous wording
Net mortuary and cemetery sales increased by $871,000, or 3.2%, to $27,865,000 for 2023, from $26,994,000 for 2022. This increase was primarily due to a $2,196,000 increase in cemetery pre-need sales. This increase was partially offset by a $878,000 decrease in cemetery at-need sales and a $447,000 decrease in mortuary at-need sales.
Current wording
Net mortuary and cemetery sales increased by $1,172,000, or 4.2%, to $29,037,000 for 2024, from $27,865,000 for 2023. This increase was primarily due to a $1,140,000 increase in cemetery pre-need sales and a $260,000 increase in mortuary at-need sales. This increase was partially offset by a $228,000 decrease in cemetery at-need sales.
Previous wording
Gains on investments and other assets increased by $2,695,000, or 314.3%, to $1,837,000 in gains for 2023, from $858,000 in losses for 2022. This increase in gains on investments and other assets was primarily due to a $4,157,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities. This increase was partially offset by a $527,000 decrease in gains on fixed maturity securities, a $485,000 decrease in gains on other assets, and a $450,000 decrease in gains on real estate held for investment.
Current wording
Gains on investments and other assets increased by $105,000, or 5.7%, to $1,942,000 for 2024, from $1,837,000 for 2023. This increase in gains on investments and other assets was primarily due to a $614,000 increase in gains on real estate held for investment, a $234,000 increase in gains on other assets, a $210,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities, and a $208,000 increase in gains on fixed maturity securities. This increase was partially offset by a $1,161,000 decrease in gains on mortgage loans held for investment.
Previous wording
Total benefits and expenses were $302,197,000, or 94.9% of total revenues for 2023, as compared to $355,275,000, or 91.2% of total revenues for 2022.
Current wording
Total benefits and expenses were $300,419,000, or 89.8% of total revenues for 2024, as compared to $302,197,000, or 94.9% of total revenues for 2023.
Previous wording
Death benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $7,086,000, or 7.6%, to $100,012,000 for 2023, from $92,926,000 for 2022. This increase was primarily the result of a $5,150,000 increase in future policy benefits and a $2,012,000 increase in death benefits. This increase was partially offset by a $76,000 decrease in surrender and other policy benefits.
Current wording
Death benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $1,056,000, or 1.1%, to $98,956,000 for 2024, from $100,012,000 for 2023. This decrease was primarily the result of a $3,274,000 decrease in death benefits and a $27,000 decrease in surrender and other policy benefits. This decrease was partially offset by a $2,245,000 increase in future policy benefits.
Previous wording
Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $74,000, or 0.4%, to $18,024,000 for 2023, from $17,950,000 for 2022. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.
Current wording
Amortization of deferred policy and pre-need acquisition costs and value of business acquired decreased by $2,084,000, or 11.6%, to $15,940,000 for 2024, from $18,024,000 for 2023. This decrease was primarily due to increased payment consistency from premium-paying products along with a decrease in new business.
Previous wording
Selling, general and administrative expenses decreased by an aggregate of $57,358,000, or 24.7%, to $174,490,000 for 2023, from $231,848,000 for 2022. This decrease was primarily the result of a $23,391,000 decrease in commissions, a $16,970,000 decrease in personnel expenses, a $13,739,000 decrease in other expenses, a $1,987,000 decrease in advertising expenses, a $1,100,000 decrease in costs related to funding mortgage loans, a $145,000 decrease in depreciation on property and equipment, and a $26,000 decrease in rent and rent related expenses.
Current wording
Selling, general and administrative expenses increased by an aggregate of $1,975,000, or 1.1%, to $176,465,000 for 2024, from $174,490,000 for 2023. This increase was primarily the result of a $7,043,000 increase in commissions, a $1,943,000 increase in personnel expenses, and a $32,000 increase in depreciation on property and equipment. This increase was partially offset by a $4,432,000 decrease in other expenses, a $1,710,000 decrease in rent and rent related expenses, a $595,000 decrease in advertising expenses, and a $306,000 decrease in costs related to funding mortgage loans.
Previous wording
Interest expense decreased by $2,965,000, or 37.9%, to $4,865,000 for 2023, from $7,830,000 for 2022. This decrease was primarily due to a decrease of $3,077,000 in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a $112,000 increase in interest expense on bank loans.
Current wording
Interest expense decreased by $611,000, or 12.6%, to $4,254,000 for 2024, from $4,865,000 for 2023. This decrease was primarily due to a decrease of $354,000 in interest expense on bank loans and a decrease of $257,000 in interest expense on mortgage warehouse lines of credit for loans held for sale.
Previous wording
Income tax expense decreased by $6,881,000, or 79.2%, to $1,805,000 for 2023, from $8,687,000 for 2022. This decrease was primarily due to a decrease in earnings before income taxes for 2023 compared to 2022. The Company’s overall effective tax rate decreased from 25.3% for 2022 to 11.1% in 2023, a 14.2% decrease in the effective tax rate or a 56.1% change.
Current wording
Income tax expense increased by $5,763,000, or 319.2%, to $7,568,000 for 2024, from $1,805,000 for 2023. This increase was primarily due to an increase in earnings before income taxes for 2024 compared to 2023. The Company’s overall effective tax rate increased from 11.1% for 2023 to 22.2% in 2024, a 11.1% increase in the effective tax rate or a 100.6% change. This increase was partially due to the prior period reducing the valuation allowance to zero and no valuation allowance adjustment in the current period.
Previous wording
Legal and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying its operations, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices that identify and minimize the adverse impact of such risks.
Current wording
Legal and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying its operations, thus reducing its exposure to any single product or jurisdiction, and by employing underwriting practices that identify and minimize the adverse impact of such risks.
Previous wording
During 2023 and 2022 the Company decreased its loan loss reserve by $1,178,000 and increased its loan loss reserve by $1,079,000, respectively, for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of December 31, 2023 and 2022, the balances were $547,000 and $1,726,000, respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2023. There is a risk, however, that future loan losses may exceed the loan loss reserve.
Current wording
During 2024 and 2023 the Company increased its loan loss reserve by $150,000 and decreased its loan loss reserve by $1,178,000, respectively, for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses is included in other liabilities and accrued expenses and, as of December 31, 2024 and 2023, the balances were $697,000 and $547,000, respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2024. There is a risk, however, that future loan losses may exceed the loan loss reserve.
Previous wording
As of December 31, 2023, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal amount of $6,149,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $2,263,000 were in foreclosure proceedings. The Company has not received or recognized any interest income on the $6,149,000 in mortgage loans with delinquencies exceeding 90 days. During 2023 and 2022, the Company increased its allowance for credit losses by $1,184,000 and by $270,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses for the period. The Company also increased its allowance for credit losses by $665,000 at the beginning of 2023 due to the adoption of the new accounting standard (Refer to Note 1 of the Notes to the Consolidated Financial Statements). The allowances for credit losses on the Company’s mortgage loans held for investment portfolio as of December 31, 2023 and 2022 were $3,819,000 and $1,970,000, respectively.
Current wording
As of December 31, 2024, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal amount of $11,400,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $4,134,000 were in foreclosure proceedings. The Company has not received or recognized any interest income on the $11,400,000 in mortgage loans with delinquencies exceeding 90 days. During 2024 and 2023, the Company decreased its allowance for credit losses by $1,934,000 and increased it by $1,184,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses for the period. The main reasons for the decrease in 2024 when compared to 2023 were due to a decrease in the commercial loan held for investment portfolio, further refinement of the Company’s quantitative loss analysis and general market improvements related to the residential mortgage loan held for investment single family portfolio. The allowances for credit losses on the Company’s mortgage loans held for investment portfolio as of December 31, 2024 and 2023 were $1,885,000 and $3,819,000, respectively.
Previous wording
Mortality and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or other claims earlier than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting practices, asset and liability duration matching, and sound actuarial practices.
Current wording
Mortality and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or make other claims earlier than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting practices, asset and liability duration matching, and sound actuarial practices.
Previous wording
Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the value of mortgage loans foreclosed to real estate held for investment or sale; those used in determining the liability for future policy benefits and unearned revenue; those used in determining the estimated future costs for pre-need sales; those used in determining the value of mortgage servicing rights; those used in determining the value of loans held for sale; those used in determining allowances for credit losses; those used in determining loan loss reserve; and those used in determining deferred tax assets and liabilities. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.
Current wording
Material estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the liability for future policy benefits; those used in determining the value of loans held for sale; and those used in determining loan loss reserve. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.
Previous wording
As of December 31, 2023, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage is required to repay the outstanding advances of approximately $7,732,000 on the warehouse line of credit that has not provided a covenant waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate other warehouse lines of credit with other lenders.
Current wording
As of December 31, 2024, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage is required to repay the outstanding advances of approximately $10,587,449 on the warehouse line of credit that has not provided a covenant waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate other warehouse lines of credit with other lenders.
Previous wording
During 2023 and 2022, the Company’s operations provided cash of $54,008,000 and of $130,450,000, respectively. The decrease in cash provided by operations was due primarily to decreased proceeds from the sale of loans held for sale.
Current wording
During 2024 and 2023, the Company’s operations provided cash of $57,320,000 and of $53,875,000, respectively. The increase in cash provided by operations was due primarily to the increase in net earnings.
Previous wording
The Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans held for sale. The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $362,663,000 (at estimated fair value) and $345,598,000 (at estimated fair value) as of December 31, 2023 and 2022, respectively. This represented 38.7% and 36.4% of the total investments of the Company as of December 31, 2023, and 2022, respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. As of December 31, 2023, 1.8% (or $6,954,000) and as of December 31, 2022, 2.2% (or $7,833,000) of the insurance subsidiaries’ total bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.
Current wording
The Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans held for sale. The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $348,774,000 (at estimated fair value) and $362,663,000 (at estimated fair value) as of December 31, 2024 and 2023, respectively. This represented 38.0% and 38.7% of the total investments of the Company as of December 31, 2024, and 2023, respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. As of December 31, 2024, 2.4% (or $8,431,000) and as of December 31, 2023, 1.8% (or $6,954,000) of the insurance subsidiaries’ total bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.
Previous wording
If market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately $657,153,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based on the respective basis point swing (the change in the fair values were calculated using a modeling technique):
Current wording
If market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately $668,293,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based on the respective basis point swing (the change in the fair values were calculated using a modeling technique):
Previous wording
The Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $418,450,000 as of December 31, 2023, as compared to $454,499,000 as of December 31, 2022. This decrease was primarily due to a decrease of $56,158,000 in bank loans and other loans payable which was partially offset by a $20,108,000 increase in stockholders’ equity. Stockholders’ equity as a percent of total capitalization was 74.8% and 64.4% as of December 31, 2023 and 2022, respectively.
Current wording
The Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $445,758,000 as of December 31, 2024, as compared to $418,450,000 as of December 31, 2023. This increase was primarily due to a $26,122,000 increase in stockholders’ equity and an increase of $1,185,000 in bank loans and other loans payable. Stockholders’ equity as a percentage of total capitalization was 76.1% and 74.8% as of December 31, 2024 and 2023, respectively.
Previous wording
Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 4.4% for 2023 as compared to a rate of 4.3% for 2022.
Current wording
Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 7.0% for 2024 as compared to a rate of 4.4% for 2023.
Previous wording
The combined statutory capital and surplus of the Company’s life insurance subsidiaries was $107,385,000 and $94,254,000 as of December 31, 2023 and 2022, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of state insurance regulatory authorities.
Current wording
The combined statutory capital and surplus of the Company’s life insurance subsidiaries was $120,216,000 and $107,385,000 as of December 31, 2024 and 2023, respectively. The life insurance subsidiaries cannot pay dividends to their parent company without the approval of state insurance regulatory authorities.
Previous wording
The Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December 31, 2023, the Company’s commitments were approximately $146,953,000 for these loans, of which $104,977,000 had been funded. The Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.
Current wording
The Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December 31, 2024, the Company’s commitments were approximately $216,368,000 for these loans, of which $152,361,000 had been funded. The Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made. The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.
Previous wording
In the ordinary course of the Company’s operations, the Company enters into certain contractual obligations. Such obligations include operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes to Consolidated Financial Statements for more information about these obligations.
Current wording
In the ordinary course of the Company’s operations, the Company enters certain contractual obligations. Such obligations include operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes to Consolidated Financial Statements for more information about these obligations.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Deferred Acquisition Costs and Value of Business Acquired