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Trust Investments

3 Months Ended

Mar. 31, 2021

Preneed Trust Investments [Abstract]

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 our 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 8 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.

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, 2020		March 31, 2021
Preneed cemetery trust investments, at market value	$	89,081	$	94,882
Less: allowance for contract cancellation	(2,477)		(2,519)
Preneed cemetery trust investments	$	86,604	$	92,363

The cost and market values associated with preneed cemetery trust investments at March 31, 2021 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	1,464	$	—	$	—	$	1,464
Fixed income securities:

Foreign debt	2	15,996		2,244		(620)		17,620
Corporate debt	2	14,509		1,849		(91)		16,267
Preferred stock	2	11,922		689		(360)		12,251
Mortgage-backed securities	2	—		—		—		—
Common stock	1	31,925		7,912		(3,508)		36,329
Mutual funds:
Equity	1	27		1		—		28
Fixed Income	2	8,110		1,729		(137)		9,702
Trust securities		$	83,953	$	14,424	$	(4,716)	$	93,661
Accrued investment income		$	1,221					$	1,221
Preneed cemetery trust investments								$	94,882
Market value as a percentage of cost								111.6		%

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	13,602
Due in five to ten years	8,505
Thereafter	24,031
Total fixed income securities	$	46,138

The cost and 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 following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at March 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	March 31, 2021
	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	$	2,590	$	(114)	$	509	$	(506)	$	3,099	$	(620)
Corporate debt	735		(9)		682		(82)		1,417		(91)
Preferred stock	3,912		(324)		837		(36)		4,749		(360)

Total fixed income securities with an unrealized loss	$	7,237	$	(447)	$	2,028	$	(624)	$	9,265	$	(1,071)

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)

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


	Three months ended March 31,
	2020		2021
Investment income	$	319	$	467
Realized gains	1,916		4,092
Realized losses	(1,372)		(2,518)
Unrealized gains (losses), net	(16,305)		9,708
Expenses and taxes	(187)		(327)
Net change in deferred preneed cemetery receipts held in trust	15,629		(11,422)
	$	—	$	—

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


	Three months ended March 31,
	2020		2021
Purchases	$	(18,857)	$	(8,411)
Sales	13,231		8,049

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, 2020		March 31, 2021
Preneed funeral trust investments, at market value	$	104,166	$	108,131
Less: allowance for contract cancellation	(2,931)		(2,930)
Preneed funeral trust investments	$	101,235	$	105,201

The cost and market values associated with preneed funeral trust investments at March 31, 2021 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	18,119	$	—	$	—	$	18,119
Fixed income securities:
U.S treasury debt	1	816		5		—		821

Foreign debt	2	14,959		2,142		(551)		16,550
Corporate debt	2	12,826		1,639		(87)		14,378
Preferred stock	2	10,816		637		(340)		11,113

Common stock	1	29,618		7,546		(3,120)		34,044
Mutual funds:
Equity	1	26		1		—		27
Fixed income	2	6,600		1,534		(87)		8,047
Other investments	2	3,901		—		—		3,901
Trust securities		$	97,681	$	13,504	$	(4,185)	$	107,000
Accrued investment income		$	1,131					$	1,131
Preneed funeral trust investments								$	108,131
Market value as a percentage of cost								109.5		%

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


Due in one year or less	$	821
Due in one to five years	12,143
Due in five to ten years	7,855
Thereafter	22,043
Total fixed income securities	$	42,862

The cost and 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 following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at March 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	March 31, 2021
	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	$	2,270	$	(100)	$	456	$	(451)	$	2,726	$	(551)
Corporate debt	705		(9)		654		(78)		1,359		(87)
Preferred stock	3,750		(311)		599		(29)		4,349		(340)

Total fixed income securities with an unrealized loss	$	6,725	$	(420)	$	1,709	$	(558)	$	8,434	$	(978)

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)

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


	Three months ended March 31,
	2020		2021
Investment income	$	258	$	369
Realized gains	2,551		3,871
Realized losses	(1,129)		(2,368)
Unrealized gains (losses), net	(15,274)		9,319
Expenses and taxes	(97)		(196)
Net change in deferred preneed funeral receipts held in trust	13,691		(10,995)
	$	—	$	—

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


	Three months ended March 31,
	2020		2021
Purchases	$	(18,538)	$	(7,628)
Sales	15,968		7,524

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, 2020		March 31, 2021
Cemetery perpetual care trust investments, at market value	$	70,828	$	75,815
Obligations due from trust	(1,121)		(455)
Care trusts’ corpus	$	69,707	$	75,360

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at March 31, 2021 (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	528	$	—	$	—	$	528
Fixed income securities:

Foreign debt	2	12,642		1,775		(508)		13,909
Corporate debt	2	11,525		1,540		(69)		12,996
Preferred stock	2	10,518		558		(299)		10,777

Common stock	1	25,151		6,436		(2,945)		28,642
Mutual funds:
Equity	1	20		1				21
Fixed Income	2	6,739		1,374		(164)		7,949
Trust securities		$	67,123	$	11,684	$	(3,985)	$	74,822
Accrued investment income		$	993					$	993
Cemetery perpetual care investments								$	75,815
Market value as a percentage of cost								111.5		%

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	10,149
Due in five to ten years	7,216
Thereafter	20,317
Total fixed income securities	$	37,682

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 following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at March 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	March 31, 2021
	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	$	1,800	$	(79)	$	430	$	(429)	$	2,230	$	(508)
Corporate debt	559		(7)		519		(62)		1,078		(69)
Preferred stock	2,973		(246)		1,318		(53)		4,291		(299)

Total fixed income securities with an unrealized loss	$	5,332	$	(332)	$	2,267	$	(544)	$	7,599	$	(876)

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)

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


	Three months ended March 31,
	2020		2021
Realized gains	$	709	$	691
Realized losses	(679)		(420)
Unrealized gains (losses), net	(13,525)		7,699
Net change in Care trusts’ corpus	13,495		(7,970)
Total	$	—	$	—

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


	Three months ended March 31,
	2020		2021
Investment income	$	1,405	$	2,513
Realized losses, net	(36)		(138)
Total	$	1,369	$	2,375

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


	Three months ended March 31,
	2020		2021
Purchases	$	(14,612)	$	(6,137)
Sales	12,694		5,956