SECURITY NATIONAL FINANCIAL CORP

Previous wording

The following table shows the condensed financial results of the insurance operations for the three and nine month periods ended September 30, 2024 and 2023. See Note 7 to the condensed consolidated financial statements.

Current wording

The following table shows the condensed financial results of the insurance operations for the three month periods ended March 31, 2025 and 2024. See Note 7 to the condensed consolidated financial statements.

Previous wording

The Company sells mortuary services and products through its nine mortuaries in Utah and three mortuaries in New Mexico. The Company also sells cemetery products and services through its five cemeteries in Utah, one cemetery in San Diego County, California, and one cemetery in Santa Fe, New Mexico. At-need product sales and services are recognized as revenue when the services are performed or when the products are delivered. Pre-need cemetery product sales are deferred until the merchandise is delivered and services performed. Recognition of revenue for cemetery land sales occurs when 10% of the purchase price is received.

Current wording

The Company sells mortuary services and products through its eleven mortuaries in Utah and four mortuaries in New Mexico. The Company also sells cemetery products and services through its five cemeteries in Utah, one cemetery in San Diego County, California, and one cemetery in Santa Fe, New Mexico. At-need product sales and services are recognized as revenue when the services are performed or when the products are delivered. Pre-need cemetery product sales are deferred until the merchandise is delivered and services performed. Recognition of revenue for cemetery land sales occurs when 10% of the purchase price is received.

Previous wording

The following table shows the condensed financial results of the cemetery and mortuary operations for the three and nine month periods ended September 30, 2024 and 2023. See Note 7 to the condensed consolidated financial statements.

Current wording

The following table shows the condensed financial results of the cemetery and mortuary operations for the three month periods ended March 31, 2025 and 2024. See Note 7 to the condensed consolidated financial statements.

Previous wording

Profitability in the nine month period ended September 30, 2024 increased due to (a) a $1,704,000 increase in gains on investments and other assets, (b) a $445,000 increase in mortuary at-need sales, (c) a $344,000 increase in cemetery pre-need sales, (d) a $143,000 increase in other revenues, (e) a $19,000 decrease in intersegment interest expense and other expenses, and (f) a $1,000 increase in intersegment revenues, which were partially offset by (i) a $324,000 decrease in net investment income, (ii) a $224,000 increase in amortization of deferred policy acquisition costs, (iii) a $132,000 decrease in cemetery at-need sales, (iv) a $62,000 increase in selling, general and administrative expenses, and (v) a $12,000 increase in cost of goods and services sold.

Current wording

Profitability in the three month period ended March 31, 2025 decreased due to (a) a $663,000 decrease in net investment income, (b) a $372,000 decrease in gains on investments and other assets, (c) a $234,000 increase in selling, general and administrative expenses, and (d) a $1,000 decrease in intersegment revenues, which were partially offset by (i) a $252,000 decrease in income tax expense, (ii) a $176,000 increase in mortuary at-need sales, (iii) a $146,000 increase in cemetery pre-need sales, (iv) a $60,000 decrease in amortization of deferred policy acquisition costs, (v) a $30,000 increase in cemetery at-need sales, (vi) a $21,000 decrease in cost of goods and services sold, (vii) a $15,000 increase in other revenues, and (viii) a $6,000 decrease in intersegment expenses.

Previous wording

The Company’s wholly owned subsidiary, SecurityNational Mortgage Company (“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 mortgages 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 the 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 Company (“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 the SecurityNational Mortgage are funded through loan purchase agreements with 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 mortgage servicing rights on approximately 0.32% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.

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 mortgage servicing rights on approximately 0.10% 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 increased 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

Mortgage rates have followed the US Treasury yields up in response to increased inflation. 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.

Previous wording

For the nine month periods ended September 30, 2024 and 2023, SecurityNational Mortgage originated 5,505 loans ($1,723,036,000 total volume) and 5,680 loans ($1,708,831,000 total volume), respectively.

Current wording

For the three month periods ended March 31, 2025 and 2024, SecurityNational Mortgage originated 1,508 loans ($517,886,000 total volume) and 1,486 loans ($465,605,000 total volume), respectively.

Previous wording

The following table shows the condensed financial results of the mortgage operations for the three and nine month periods ended September 30, 2024 and 2023. See Note 7 to the condensed consolidated financial statements.

Current wording

The following table shows the condensed financial results of the mortgage operations for the three month periods ended March 31, 2025 and 2024. See Note 7 to the condensed consolidated financial statements.

Previous wording

Total revenues increased by $8,032,000, or 10.0%, to $88,274,000 for the three month period ended September 30, 2024, from $80,242,000 for the comparable period in 2023. Contributing to this increase in total revenues was a $5,288,000 increase in mortgage fee income, a $2,280,000 increase in gains on investments and other assets, a $1,229,000 increase in other revenues, and a $1,104,000 increase in insurance premiums and other considerations, which were partially offset by a $1,449,000 decrease in net investment income and a $420,000 decrease in net mortuary and cemetery sales.

Current wording

Total revenues increased by $1,552,000, or 1.9%, to $82,740,000 for the three month period ended March 31, 2025, from $81,188,000 for the comparable period in 2024. Contributing to this increase in total revenues was a $2,977,000 increase in mortgage fee income, a $352,000 increase in net mortuary and cemetery sales, and a $122,000 increase in other revenues, which were partially offset by a $1,083,000 decrease in gains on investments and other assets, a $744,000 decrease in net investment income, and a $72,000 decrease in insurance premiums and other considerations.

Previous wording

Mortgage fee income increased by $5,288,000, or 21.2%, to $30,224,000, for the three month period ended September 30, 2024, from $24,936,000 for the comparable period in 2023. This increase was primarily due to a $3,068,000 increase in the fair value of loans held for sale, a $1,324,000 increase in the fair value of loan commitments, a $539,000 increase in loan fees and interest income net of an increase in the provision for loan loss reserve, and a $357,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market.

Current wording

Mortgage fee income increased by $2,977,000, or 13.6%, to $24,809,000, for the three month period ended March 31, 2025, from $21,832,000 for the comparable period in 2024. This increase was primarily due to a $2,224,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market and a $942,000 increase in the fair value of loans held for sale, which were partially offset by a $102,000 decrease in loan fees and interest income net of an increase in the provision for loan loss reserve and an $87,000 decrease in the fair value of loan commitments.

Previous wording

Insurance premiums and other considerations increased by $1,104,000, or 3.8%, to $30,011,000 for the three month period ended September 30, 2024, from $28,907,000 for the comparable period in 2023. This increase was primarily due to an increase of $1,199,000 in renewal premiums, which was partially offset by a decrease of $95,000 in first year premiums.

Current wording

Insurance premiums and other considerations decreased by $72,000, or 0.2%, to $29,780,000 for the three month period ended March 31, 2025, from $29,852,000 for the comparable period in 2024. This decrease was primarily due to a decrease of $350,000 in first year premiums, which was partially offset by an increase of $278,000 in renewal premiums.

Previous wording

Net investment income decreased by $1,449,000, or 7.5%, to $17,799,000 for the three month period ended September 30, 2024, from $19,248,000 for the comparable period in 2023. This decrease was primarily attributable to a $2,811,000 decrease in mortgage loan interest and a $198,000 decrease in real estate income, which were partially offset by a $668,000 increase in insurance assignment income, a $618,000 increase in interest on cash and cash equivalents, a $117,000 decrease in investment expenses, a $59,000 increase in fixed maturity securities income, a $59,000 increase in other investment income, a $34,000 increase in policy loan interest, and a $5,000 increase in equity securities income.

Current wording

Net investment income decreased by $744,000, or 3.7%, to $19,203,000 for the three month period ended March 31, 2025, from $19,947,000 for the comparable period in 2024. This decrease was primarily attributable to a $850,000 decrease in mortgage loan interest, a $555,000 decrease in real estate income, a $288,000 decrease in interest on cash and cash equivalents, a $57,000 decrease in policy loan interest, and a $37,000 decrease in other investment income, which were partially offset by a $656,000 increase in insurance assignment income, a $261,000 increase in fixed maturity securities income, a $102,000 decrease in investment expenses, and a $24,000 increase in equity securities income.

Previous wording

Gains (losses) on investments and other assets increased by $2,280,000 to $1,348,000 in net gains for the three month period ended September 30, 2024, from $932,000 in net losses for the comparable period in 2023. This increase in gains on investments and other assets was primarily due to a $3,414,000 increase in gains on equity securities, primarily attributable to increases in the fair value of these equity securities, a $76,000 increase in gains on other assets, and a $35,000 increase in gains on real estate, which were partially offset by a $1,161,000 decrease in gains on mortgage loans held for investment and an $84,000 decrease in gains on fixed maturity securities.

Current wording

Gains (losses) on investments and other assets decreased by $1,083,000 to $586,000 for the three month period ended March 31, 2025, from $1,669,000 for the comparable period in 2024. This decrease in gains on investments and other assets was primarily due to a $1,094,000 decrease in gains on equity securities, primarily attributable to decreases in the fair value of these equity securities, a $103,000 decrease in gains on other assets, and a $31,000 decrease in gains on fixed maturity securities, which were partially offset by a $145,000 increase in gains on real estate.

Previous wording

Other revenues increased by $1,228,000, or 144.7%, to $2,077,000 for the nine month period ended September 30, 2024, from $849,000 for the comparable period in 2023. This increase was primarily attributable to a $1,350,000 legal settlement, which was partially offset by a decrease of $107,000 in other miscellaneous revenues and a decrease of $15,000 in servicing fee revenue due to a decrease in the retention of mortgage servicing rights.

Current wording

Other revenues increased by $122,000, or 13.0%, to $1,062,000 for the three month period ended March 31, 2025, from $940,000 for the comparable period in 2024. This increase was primarily due to an increase of $147,000 in other miscellaneous revenues and a decrease of $25,000 in servicing fee revenue due to a decrease in the retention of mortgage servicing rights.

Previous wording

Death benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $2,438,000 or 3.2%, to $73,956,000 for the nine month period ended September 30, 2024, from $76,394,000 for the comparable period in 2023. This decrease was primarily the result of a $3,458,000 decrease in death benefits and a $97,000 increase in surrender and other policy benefits, which were partially offset by a $1,117,000 increase in future policy benefits.

Current wording

Death benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $40,000 or 0.2%, to $26,235,000 for the three month period ended March 31, 2025, from $26,275,000 for the comparable period in 2024. This decrease was primarily the result of a $358,000 decrease in future policy benefits and a $14,000 decrease in surrender and other policy benefits which were partially offset by a $332,000 increase in death benefits.

Previous wording

Amortization of deferred policy and pre-need acquisition costs and value of business acquired decreased by $2,193,000, or 49.0%, to $2,287,000 for the three month period ended September 30, 2024, from $4,480,000 for the comparable period in 2023. This decrease was primarily due to increased payment consistency from premium-paying products.

Current wording

Amortization of deferred policy and pre-need acquisition costs and value of business acquired decreased by $47,000, or 1.0%, to $4,697,000 for the three month period ended March 31, 2025, from $4,744,000 for the comparable period in 2024. This decrease was primarily due to increased payment consistency from premium-paying products.

Previous wording

Selling, general and administrative expenses increased by $2,587,000, or 6.1%, to $45,239,000 for the three month period ended September 30, 2024, from $42,652,000 for the comparable period in 2023. This increase was primarily the result of a $2,737,000 increase in commissions, a $1,015,000 increase in personnel expenses, a $132,000 increase in costs related to funding mortgage loans, and a $21,000 increase in depreciation on property and equipment, which were partially offset by a $933,000 decrease in other expenses, a $298,000 decrease in rent and rent related expenses, and a $87,000 decrease in advertising expense.

Current wording

Selling, general and administrative expenses increased by $5,616,000, or 14.7%, to $43,864,000 for the three month period ended March 31, 2025, from $38,248,000 for the comparable period in 2024. This increase was primarily the result of a $2,457,000 increase in commissions, a $2,327,000 increase in personnel expenses, a $1,115,000 increase in other expenses, a $136,000 increase in advertising expense, and a $28,000 increase in depreciation on property and equipment, which were partially offset by a $413,000 decrease in rent and rent related expenses and a $34,000 decrease in costs related to funding mortgage loans.

Previous wording

Interest expense decreased by $91,000, or 7.9%, to $1,061,000 for the three month period ended September 30, 2024, from $1,152,000 for the comparable period in 2023. This decrease was primarily due to a decrease of $23,000 in interest expense on mortgage warehouse lines of credit for loans held for sale and a decrease of $68,000 in interest expense on bank loans.

Current wording

Interest expense increased by $92,000, or 9.0%, to $1,119,000 for the three month period ended March 31, 2025, from $1,027,000 for the comparable period in 2024. This increase was primarily due to an increase of $117,000 in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a decrease of $25,000 in interest expense on bank loans.

Previous wording

Cost of goods and services sold-mortuaries and cemeteries decreased by $60,000, or 5.1%, to $1,117,000 for the three month period ended September 30, 2024, from $1,177,000 for the comparable period in 2023. This decrease was primarily due to a decrease of $39,000 in cemetery at-need sales and a decrease of $27,000 in mortuary at-need sales, which were partially offset by an increase of $6,000 in cemetery pre-need sales.

Current wording

Cost of goods and services sold-mortuaries and cemeteries decreased by $21,000, or 1.6%, to $1,253,000 for the three month period ended March 31, 2025, from $1,274,000 for the comparable period in 2024. This decrease was primarily due to a decrease of $40,000 in at-need sales, which was partially offset by an increase of $19,000 in pre-need sales.

Previous wording

In summary total benefits and expenses were $73,059,000, or 82.8% of total revenues, for the three month period ended September 30, 2024, as compared to $75,083,000, or 93.6% of total revenues, for the comparable period in 2023.

Current wording

In summary total benefits and expenses were $77,169,000, or 93.3% of total revenues, for the three month period ended March 31, 2025, as compared to $71,569,000, or 88.2% of total revenues, for the comparable period in 2024.

Previous wording

During the nine month periods ended September 30, 2024 and 2023, the Company’s operations provided cash of approximately $34,894,000 and of approximately $18,384,000, respectively. The increase in cash provided by operations was due primarily to the increase in net earnings.

Current wording

During the three month periods ended March 31, 2025 and 2024, the Company’s operations provided cash of approximately $9,586,000 and of approximately $25,077,000, respectively. The decrease in cash provided by operations was due primarily to the decrease in net earnings and in loans held for sale.

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. 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 $326,914,000 (at estimated fair value) and $362,663,000 (at estimated fair value) as of September 30, 2024 and December 31, 2023, respectively. This represented 35.4% and 38.7% of the total investments of the Company as of September 30, 2024 and December 31, 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 September 30, 2024, 2.1% (or $7,232,000) and as of December 31, 2023, 1.8% (or $6,954,000) of the Company’s 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. 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 $353,780,000 (at estimated fair value) and $348,774,000 (at estimated fair value) as of March 31, 2025 and December 31, 2024, respectively. This represented 35.5% and 38.0% of the total investments of the Company as of March 31, 2025 and December 31, 2024, 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 the rating of bonds. As of March 31, 2025, 1.8% (or $6,473,000) and as of December 31, 2024, 2.4% (or $8,431,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.

Previous wording

The Company’s total capitalization of stockholders’ equity, bank and other loans payable was $453,312,000 as of September 30, 2024, as compared to $418,450,000 as of December 31, 2023. This increase was primarily due to an increase of $33,427,000 in stockholders’ equity and an increase of $1,435,000 in bank loans and other loans payable. Stockholders’ equity as a percent of total capitalization was 76.4% and 74.8% as of September 30, 2024 and December 31, 2023, respectively.

Current wording

The Company’s total capitalization of stockholders’ equity, bank and other loans payable was $469,317,000 as of March 31, 2025, as compared to $445,758,000 as of December 31, 2024. This increase was primarily due to an increase of $7,711,000 in stockholders’ equity and an increase of $16,083,000 in bank loans and other loans payable. Stockholders’ equity as a percent of total capitalization was 73.8% and 76.1% as of March 31, 2025 and December 31, 2024, respectively.

Previous wording

Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance in 2023 was 4.4% as compared to a lapse rate of 4.3% for 2022. The 2024 lapse rate to date has been approximately the same as 2023.

Current wording

Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance in 2024 was 7.0% as compared to a lapse rate of 4.4% for 2023. The 2025 lapse rate to date has been approximately the same as 2024.

Previous wording

The combined statutory capital and surplus of the Company’s life insurance subsidiaries was approximately $121,504,000 and $107,385,000 as of September 30, 2024, and December 31, 2023, 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 approximately $121,485,000 and $120,216,000 as of March 31, 2025, and December 31, 2024, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of state insurance regulatory authorities.