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Trust Investments

12 Months Ended

Dec. 31, 2020

Preneed Trust Investments [Abstract]

PRENEED TRUST INVESTMENTS

TRUST INVESTMENTS

Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on the Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned. Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. We do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.

Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights which we are required by various state laws to deposit into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized in Other revenue.

Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. treasury debt, common stock and equity mutual funds. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. See Note 10 to the Consolidated Financial Statements included herein for further information of the fair value measurement.

Changes in the fair value of our trust fund assets (Preneed funeral, cemetery and perpetual care trust investments) are offset by changes in the fair value of our trust fund liabilities (Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus) and reflected in Other, net. There is no impact on earnings until such time the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations and the gain or loss is allocated to the contract.

For fixed income securities in an unrealized loss position, we first assess whether we intend to sell or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For fixed income securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If our assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.

Preneed Cemetery Trust Investments

The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands):

			December 31, 2019						December 31, 2020
Preneed cemetery trust investments, at market value			$	74,572					$	89,081
Less: allowance for contract cancellation			(2,190)						(2,477)
Preneed cemetery trust investments			$	72,382					$	86,604

The cost and fair market values associated with preneed cemetery trust investments at December 31, 2020 are detailed below (in thousands):

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	1,859					$	—					$	—					$	1,859
Fixed income securities:
Foreign debt			2						15,953						2,083						(702)						17,334
Corporate debt			2						14,856						1,820						(358)						16,318
Preferred stock			2						11,886						980						(336)						12,530
Mortgage-backed securities			2						272						—						(159)						113
Common stock			1						30,253						7,642						(6,601)						31,294
Mutual funds:
Fixed Income			2						7,494						1,331						(185)						8,640
Trust securities									$	82,573					$	13,856					$	(8,341)					$	88,088
Accrued investment income									$	993																	$	993
Preneed cemetery trust investments																											$	89,081
Market value as a percentage of cost																											106.7%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): 

Due in one year or less			$	—
Due in one to five years			11,727
Due in five to ten years			9,810
Thereafter			24,758
Total fixed income securities			$	46,295

The cost and market values associated with preneed cemetery trust investments at December 31, 2019 are detailed below (in thousands):

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	5,729					$	—					$	—					$	5,729
Fixed income securities:
Foreign debt			2						5,609						312						(243)						5,678
Corporate debt			2						16,916						1,044						(649)						17,311
Preferred stock			2						14,206						904						(164)						14,946
Mortgage-backed securities			2						517						—						(114)						403
Common stock			1						28,569						2,766						(3,017)						28,318
Mutual funds:
Fixed Income			2						1,463						72						(85)						1,450
Trust Securities									$	73,009					$	5,098					$	(4,272)					$	73,835
Accrued investment income									$	737																	$	737
Preneed cemetery trust investments																											$	74,572
Market value as a percentage of cost																											101.1%

The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2020
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	2,517					$	(57)					$	371					$	(645)					$	2,888					$	(702)
Corporate debt			784						(99)						542						(259)						1,326						(358)
Preferred stock			709						(118)						4,049						(218)						4,758						(336)
Mortgage-backed securities			—						—						112						(159)						112						(159)
Total fixed income securities with an unrealized loss			$	4,010					$	(274)					$	5,074					$	(1,281)					$	9,084					$	(1,555)

The following table summarized our fixed income securities within our preneed cemetery trust investments in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2019
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	268					$	(42)					$	758					$	(201)					$	1,026					$	(243)
Corporate debt			1,368						(168)						4,520						(481)						5,888						(649)
Preferred stock			4,135						(164)						—						—						4,135						(164)
Mortgage-backed securities			—						—						402						(114)						402						(114)
Total fixed income securities with an unrealized loss			$	5,771					$	(374)					$	5,680					$	(796)					$	11,451					$	(1,170)

Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Investment income			$	1,596					$	1,743					$	2,175
Realized gains			4,546						6,353						8,922
Realized losses			(5,817)						(4,677)						(5,090)
Unrealized gains (losses), net			(6,610)						826						5,515
Expenses and taxes			(907)						(1,313)						(1,354)
Net change in deferred preneed cemetery receipts held in trust			7,192						(2,932)						(10,168)
			$	—					$	—					$	—

Purchases and sales of investments in the preneed cemetery trusts are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Purchases			$	(27,006)					$	(40,984)					$	(48,824)
Sales			39,180						29,635						41,178

Preneed Funeral Trust Investments

Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust.

The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands):

			December 31, 2019						December 31, 2020
Preneed funeral trust investments, at market value			$	99,246					$	104,166
Less: allowance for contract cancellation			(2,911)						(2,931)
Preneed funeral trust investments			$	96,335					$	101,235

The cost and fair market values associated with preneed funeral trust investments at December 31, 2020 are detailed below (in thousands):

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	18,478					$	—					$	—					$	18,478
Fixed income securities:
U. S. treasury debt			1						819						6						—						825
Foreign debt			2						15,144						2,018						(634)						16,528
Corporate debt			2						13,292						1,638						(310)						14,620
Preferred stock			2						10,944						900						(298)						11,546
Mortgage-backed securities			2						293						1						(155)						139
Common stock			1						28,327						7,364						(6,052)						29,639
Mutual funds:
Fixed income			2						6,475						1,198						(121)						7,552
Other investments			2						3,928						—						—						3,928
Trust securities									$	97,700					$	13,125					$	(7,570)					$	103,255
Accrued investment income									$	911																	$	911
Preneed funeral trust investments																											$	104,166
Market value as a percentage of cost																											105.7%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):

Due in one year or less			$	825
Due in one to five years			11,103
Due in five to ten years			8,615
Thereafter			23,115
Total fixed income securities			$	43,658

The cost and market values associated with preneed funeral trust investments at December 31, 2019 are detailed below (in thousands):

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	24,160					$	—					$	—					$	24,160
Fixed income securities:
U.S. treasury debt			1						822						—						—						822
Foreign debt			2						5,587						309						(232)						5,664
Corporate debt			2						16,109						992						(646)						16,455
Preferred stock			2						14,094						874						(198)						14,770
Mortgage-backed securities			2						585						—						(117)						468
Common stock			1						27,652						2,773						(2,869)						27,556
Mutual funds:
Equity			1						772						617						(4)						1,385
Fixed income			2						4,364						107						(107)						4,364
Other investments			2						2,902						—						—						2,902
Trust securities									$	97,047					$	5,672					$	(4,173)					$	98,546
Accrued investment income									$	700																	$	700
Preneed funeral trust investments																											$	99,246
Market value as a percentage of cost																											101.5%

The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2020
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	2,225					$	(55)					$	337					$	(579)					$	2,562					$	(634)
Corporate debt			763						(96)						528						(214)						1,291						(310)
Preferred stock			506						(87)						3,942						(211)						4,448						(298)
Mortgage-backed securities			—						—						111						(155)						111						(155)
Total fixed income securities with an unrealized loss			$	3,494					$	(238)					$	4,918					$	(1,159)					$	8,412					$	(1,397)

The following table summarized our fixed income securities within our preneed funeral trust investment in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2019
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	274					$	(43)					$	723					$	(189)					$	997					$	(232)
Corporate debt			1,403						(172)						4,433						(474)						5,836						(646)
Preferred stock			4,412						(198)						—						—						4,412						(198)
Mortgage-backed securities			—						—						439						(117)						439						(117)
Total fixed income securities with an unrealized loss			$	6,089					$	(413)					$	5,595					$	(780)					$	11,684					$	(1,193)

Preneed funeral trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Investment income			$	1,623					$	1,753					$	1,907
Realized gains			6,662						6,214						9,441
Realized losses			(5,882)						(4,612)						(4,677)
Unrealized gains (losses), net			(6,727)						1,499						5,555
Expenses and taxes			(885)						(1,129)						(878)
Net change in deferred preneed funeral receipts held in trust			5,209						(3,725)						(11,348)
			$	—					$	—					$	—

Purchases and sales of investments in the preneed funeral trusts are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Purchases			$	(28,264)					$	(38,984)					$	(47,315)
Sales			39,955						29,983						43,270

Cemetery Perpetual Care Trust Investments

Care trusts’ corpus on our Consolidated Balance Sheet represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as follows (in thousands): 

			December 31, 2019						December 31, 2020
Cemetery perpetual care trust investments, at market value			$	64,047					$	70,828
Obligations due from trust			(631)						(1,121)
Care trusts’ corpus			$	63,416					$	69,707

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2020 (in thousands):

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	686					$	—					$	—					$	686
Fixed income securities:
Foreign debt			2						12,539						1,641						(582)						13,598
Corporate debt			2						11,684						1,506						(240)						12,950
Preferred stock			2						10,444						819						(355)						10,908
Mortgage-backed securities			2						206						—						(121)						85
Common stock			1						23,662						6,108						(5,255)						24,515
Mutual funds:
Fixed income			2						6,444						1,054						(220)						7,278
Trust securities									$	65,665					$	11,128					$	(6,773)					$	70,020
Accrued investment income									$	808																	$	808
Cemetery perpetual care investments																											$	70,828
Market value as a percentage of cost																											106.6%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):

Due in one year or less			$	—
Due in one to five years			8,819
Due in five to ten years			7,789
Thereafter			20,933
Total fixed income securities			$	37,541

The following table reflects the cost and market values associated with the trust investments held in perpetual care trust funds at December 31, 2019 (in thousands): 

			Fair Value Hierarchy Level						Cost						Unrealized Gains						Unrealized Losses						Fair Market Value
Cash and money market accounts			1						$	4,624					$	—					$	—					$	4,624
Fixed income securities:
Foreign debt			2						4,200						238						(175)						4,263
Corporate debt			2						11,658						802						(534)						11,926
Preferred stock			2						10,782						666						(106)						11,342
Mortgage-backed securities			2						324						—						(71)						253
Common stock			1						21,594						3,399						(1,911)						23,082
Mutual funds:
Equity			1						233						146						(1)						378
Fixed income			2						7,156						618						(107)						7,667
Trust securities									$	60,571					$	5,869					$	(2,905)					$	63,535
Accrued investment income									$	512																	$	512
Cemetery perpetual care investments																											$	64,047
Market value as a percentage of cost																											104.9		%

The following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2020
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	1,728					$	(43)					$	312					$	(539)					$	2,040					$	(582)
Corporate debt			592						(74)						410						(166)						1,002						(240)
Preferred stock			1,142						(191)						3,060						(164)						4,202						(355)
Mortgage-backed securities			—						—						85						(121)						85						(121)
Total fixed income securities with an unrealized loss			$	3,462					$	(308)					$	3,867					$	(990)					$	7,329					$	(1,298)

The following table summarized our fixed income securities within our perpetual care trust investment in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

			December 31, 2019
			In Loss Position Less than 12 months												In Loss Position Greater than 12 months												Total
			Fair market value						Unrealized Losses						Fair market value						Unrealized Losses						Fair market value						Unrealized Losses
Fixed income securities:
Foreign debt			$	168					$	(26)					$	549					$	(149)					$	717					$	(175)
Corporate debt			1,057						(196)						3,253						(338)						4,310						(534)
Preferred stock			2,989						(106)						—						—						2,989						(106)
Mortgage-backed securities			—						—						252						(71)						252						(71)
Total fixed income securities with an unrealized loss			$	4,214					$	(328)					$	4,054					$	(558)					$	8,268					$	(886)

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Realized gains			$	1,364					$	1,663					$	2,602
Realized losses			(1,896)						(1,258)						(1,695)
Unrealized gains (losses), net			(4,405)						2,964						4,355
Net change in Care trusts’ corpus			4,937						(3,369)						(5,262)
Total			$	—					$	—					$	—

Perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Investment income			$	5,934					$	4,500					$	8,461
Realized losses			(1,355)						(377)						(387)
Total			$	4,579					$	4,123					$	8,074

Purchases and sales of investments in the perpetual care trusts are as follows (in thousands):

			Years ended December 31,
			2018						2019						2020
Purchases			$	(17,313)					$	(26,573)					$	(38,168)
Sales			25,786						17,588						34,316

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- Definition

PRENEED TRUST INVESTMENTS

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- Definition

This note represents disclosures relating to preneed funeral and cemetery activity and major accounts which also include: (1) fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments; (2) variable interest entities; and (3)all other required (as defined) and desired information.

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