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Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets
 3 Months Ended
Mar. 31, 2023
Cemetery Perpetual Care Trust Investments And Obligation And Restricted Assets  
Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

 

Cemetery Perpetual Care Trust Investments and Obligation

 

State law requires the Company to pay into endowment care trusts a portion of the proceeds from the sale of certain cemetery property interment rights for cemeteries that have established an endowment care trust. These endowment care trusts are defined as variable interest entities pursuant to GAAP. Also, management has determined that the Company is the primary beneficiary of these trusts, as it absorbs both a majority of the losses and returns associated with the trusts. The Company has consolidated cemetery endowment care trust investments with a corresponding amount recorded as Cemetery Perpetual Care Obligation in the accompanying consolidated balance sheets.

 

The components of the cemetery perpetual care investments and obligation as of March 31, 2023, are as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
March 31, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
U.S. Treasury securities and obligations of U.S. Government agencies  $89,004   $381   $-   $-   $89,384 
Obligations of states and political subdivisions   172,966    -    (5,928)   -    167,038 
Total fixed maturity securities available for sale  $261,969   $381   $(5,928)  $-   $256,422 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $3,251,768   $602,286   $(162,096)       $3,691,958 
Total equity securities at estimated fair value  $3,251,768   $602,286   $(162,096)       $3,691,958 
                          
Mortgage loans held for investment at amortized cost:                         
Residential construction  $2,709,339                     
Less: Allowance for credit losses  $(2,196)                    
Total mortgage loans held for investment  $2,707,143                     
                          
Real estate held for investment: Residential  $55,531                     
                          
Cash and cash equivalents  $749,358                     
                          
Total cemetery perpetual care trust investments  $7,460,412                     
                          
Cemetery perpetual care obligation  $(5,143,233)                    
                          
Trust investments in excess of trust obligations  $2,317,179                     

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

 

The components of the cemetery perpetual care investments and obligation as of December 31, 2022, are as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
U.S. Treasury securities and obligations of U.S. Government agencies  $89,004   $42   $(38)  $89,008 
Obligations of states and political subdivisions   174,201    -    (8,478)   165,723 
Total fixed maturity securities available for sale  $263,205   $42   $(8,516)  $254,731 
                     
Equity securities at estimated fair value:                    
Common stock:                    
Industrial, miscellaneous and all other  $3,195,942   $584,383   $(175,163)  $3,605,162 
Total equity securities at estimated fair value  $3,195,942   $584,383   $(175,163)  $3,605,162 
                     
Mortgage loans held for investment at amortized cost:                    
Residential construction  $1,506,517                
                     
Real estate held for investment: Residential  $(16,178)               
                     
Cash and cash equivalents  $1,925,978                
                     
Total cemetery perpetual care trust investments  $7,276,210                
                     
Cemetery perpetual care obligation  $(5,099,542)               
                     
Trust investments in excess of trust obligations  $2,176,668                

 

Fixed Maturity Securities

 

The following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at March 31, 2023 and at December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations and inflation. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

 

   Unrealized Losses for Less than Twelve Months   Fair Value   Unrealized Losses for More than Twelve Months   Fair Value   Total Unrealized Loss   Fair Value 
At March 31, 2023                              
Obligations of states and political subdivisions  $435   $54,401   $5,493   $112,637   $5,928   $167,038 
Total unrealized losses  $435   $54,401   $5,493   $112,637   $5,928   $167,038 
                               
At December 31, 2022                              
U.S. Treasury securities and obligations of U.S. Government agencies  $38   $59,392   $-   $-   $38   $59,392 
Obligations of states and political subdivisions   1,845    94,612    6,633    71,112    8,478    165,724 
Total unrealized losses  $1,883   $154,004   $6,633   $71,112   $8,516   $225,116 

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

 

There were 3 securities with fair value of 96.6% of aggregate amortized cost at March 31, 2023. There were 5 securities with fair value of 96.4% of aggregate amortized cost at December 31, 2022. No credit losses have been recognized for the three month periods ended March 31, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent rise in interest rates and inflation.

 

The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2023, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   Amortized   Estimated Fair 
   Cost   Value 
Due in 1 year  $89,004   $89,384 
Due in 2-5 years   76,509    71,788 
Due in 5-10 years   41,621    40,849 
Due in more than 10 years   54,835    54,401 
Total  $261,969   $256,422 

 

Restricted Assets

 

The Company has also established certain restricted assets to provide for future merchandise and service obligations incurred in connection with its pre-need sales for its cemetery and mortuary segment.

 

Restricted cash also represents escrows held for borrowers and investors under servicing and appraisal agreements relating to mortgage loans, funds held by warehouse banks in accordance with loan purchase agreements and funds held in escrow for certain real estate construction development projects. Additionally, the Company elected to maintain its medical benefit fund without change from the prior year and has included this amount as a component of restricted cash. These restricted cash items are for the Company’s life insurance and mortgage segments.

 

Restricted assets as of March 31, 2023, are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Allowance for Credit Losses   Estimated Fair Value 
March 31, 2023:                         
Fixed maturity securities, available for sale, at estimated fair value:                         
Obligations of states and political subdivisions  $1,030,141   $679   $(12,436)  $-   $1,018,384 
Corporate securities including public utilities   200,543    -    (1,620)   -    198,923 
Total fixed maturity securities available for sale  $1,230,685   $679   $(14,056)  $-   $1,217,307 
                          
Equity securities at estimated fair value:                         
Common stock:                         
Industrial, miscellaneous and all other  $5,241,033   $692,339   $(272,945)       $5,660,427 
Total equity securities at estimated fair value  $5,241,033   $692,339   $(272,945)       $5,660,427 
                          
Mortgage loans held for investment at amortized cost:                        
Residential construction  $2,936,896                     
Less: Allowance for credit losses  $(5,874)                    
Total mortgage loans held for investment  $2,931,023                     
                          
Cash and cash equivalents (1)  $9,228,113                     
                          
Total restricted assets  $19,036,870                     

 

 

(1) Including cash and cash equivalents of $8,232,615 for the life insurance and mortgage segments.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

 

Restricted assets as of December 31, 2022, are summarized as follows:

 

   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Estimated Fair Value 
December 31, 2022:                    
Fixed maturity securities, available for sale, at estimated fair value:                    
Obligations of states and political subdivisions  $1,033,047   $866   $(15,360)  $1,018,553 
Corporate securities including public utilities   201,771    -    (3,016)   198,755 
Total fixed maturity securities available for sale  $1,234,818   $866   $(18,376)  $1,217,308 
                     
Equity securities at estimated fair value:                    
Common stock:                    
Industrial, miscellaneous and all other  $4,955,360   $703,049   $(310,165)  $5,348,244 
Total equity securities at estimated fair value  $4,955,360   $703,049   $(310,165)  $5,348,244 
                     
Mortgage loans held for investment at amortized cost:                     
Residential construction  $1,731,469                
                     
Cash and cash equivalents (1)  $10,638,034                
                     
Total restricted assets  $18,935,055                

 

 

(1) Including cash and cash equivalents of $8,527,620 for the life insurance and mortgage segments.

 

Fixed Maturity Securities

 

The following tables summarize unrealized losses on fixed maturities securities that were carried at estimated fair value at March 31, 2023 and at December 31, 2022. The unrealized losses were primarily related to interest rate fluctuations and inflation. The tables set forth unrealized losses by duration with the fair value of the related fixed maturity securities:

 

   Unrealized Losses for Less than Twelve Months   Fair Value   Unrealized Losses for More than Twelve Months   Fair Value   Total Unrealized Loss   Fair Value 
At March 31, 2023                              
Obligations of states and political subdivisions  $2,670   $338,301   $9,767   $500,955   $12,436   $839,256 
Corporate securities including public utilities   1,620    198,923    -    -    1,620    198,923 
Total unrealized losses  $4,290   $537,225   $9,767   $500,955   $14,056   $1,038,179 
                               
At December 31, 2022                              
Obligations of states and political subdivisions  $11,891   $760,255   $3,469   $58,072   $15,360   $818,327 
Corporate securities including public utilities   3,016    198,755    -    -    3,016    198,755 
Total unrealized losses  $14,907   $959,010   $3,469   $58,072   $18,376   $1,017,082 

 

There were 17 securities with fair value of 98.7% of aggregate amortized cost at March 31, 2023. There were 17 securities with fair value of 98.2% of aggregate amortized cost at December 31, 2022. No credit losses have been recognized for the three month periods ended March 31, 2023 and 2022, since the increase in unrealized losses is primarily a result of the recent rise in interest rates and inflation.

 

 

SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2023 (Unaudited)

 

15) Cemetery Perpetual Care Trust Investments and Obligation and Restricted Assets (Continued)

 

The following table presents the amortized cost and estimated fair value of fixed maturity securities available for sale at March 31, 2023, by contractual maturity. Expected maturities may differ from contractual maturities because certain borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

   Amortized   Estimated Fair 
   Cost   Value 
Due in 1 year  $-   $- 
Due in 2-5 years   318,067    311,893 
Due in 5-10 years   153,284    151,610 
Due in more than 10 years   759,334    753,804 
Total  $1,230,685   $1,217,307 

 

See Notes 3 and 8 for additional information regarding restricted assets and cemetery perpetual care trust investments.