SECURITY NATIONAL FINANCIAL CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Overview The Company’s operations over the last several years generally reflect three trends or events which the Company expects to continue to focus on: (i) increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii) emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating mortgage loans. The Company has adjusted its strategy to respond to the changing economic circumstances resulting from the COVID-19 pandemic. Insurance Operations The Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life, accident and health insurance products. The Company places specific marketing emphasis on funeral plans through pre-need planning. A funeral plan is a small face value life insurance policy that generally has face coverage of up to $30,000. The Company believes that funeral plans represent a marketing niche that is less competitive because most insurance companies do not offer similar coverage. The purpose of the funeral plan policy is to pay the costs and expenses incurred at the time of a person’s death. On a per thousand-dollar cost of insurance basis, these policies can be more expensive to the policyholder than many types of non-burial insurance due to their low face amount, requiring the fixed cost of the policy administration to be distributed over a smaller policy size, and the simplified underwriting practices that result in higher mortality costs. In response to the COVID-19 pandemic, the life insurance sales force began using virtual and tele sales processes to market its products. This past quarter, the life insurance sales force returned to in person sales, however, it continues to use virtual and tele sales where needed. Currently, the insurance operations has approximately 75% of its office staff working in the office with the flexibility for hybrid-remote or completely remote working arrangements as needed. The following table shows the condensed financial results of the insurance operations for three and nine months ended September 30, 2021 and 2020. See Note 7 to the condensed consolidated financial statements. Three months ended September 30 (in thousands of dollars) Nine months ended September 30 (in thousands of dollars) 2021 2020 % Increase (Decrease) 2021 2020 % Increase (Decrease) Revenues from external customers Insurance premiums $ 26,446 $ 23,767 11 % $ 74,755 $ 68,983 8 % Net investment income 14,116 14,240 (1 %) 41,860 40,074 4 % Gains (losses) on investments and other assets 931 860 8 % 3,303 71 4552 % Other 546 394 39 % 1,724 1,127 53 % Total $ 42,039 $ 39,261 7 % $ 121,642 $ 110,255 10 % Intersegment revenue $ 1,757 $ 2,953 (41 %) $ 5,410 $ 5,677 (5 %) Earnings before income taxes $ 3,721 $ 4,807 (23 %) $ 11,110 $ 5,408 105 % Intersegment revenues are primarily interest income from the warehouse line for loans held for sale provided to SecurityNational Mortgage. Profitability for the nine months ended September 30, 2021 has increased due to a $5,772,000 increase in insurance premiums and other considerations, a $3,232,000 increase in gains on investments and other assets primarily due to an increase in the fair value of equity securities and a decrease in impairment losses on real estate held for sale, a $1,785,000 increase in net investment income, a $1,459,000 decrease in selling, general and administrative expenses, a $596,000 increase in other revenues, a $164,000 decrease in interest expense, a $96,000 decrease in intersegment selling, general and administrative expenses, and an $18,000 decrease in intersegment interest expense and other expenses. This increase was partially offset by a $5,370,000 increase in death, surrenders and other policy benefits, a $1,177,000 increase in amortization of deferred policy acquisition costs and value of business acquired primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs, a $606,000 increase in future policy benefits, and a $267,000 decrease in intersegment revenue. 51 Cemetery and Mortuary Operations The Company sells mortuary services and products through its eight mortuaries in Utah. The Company also sells cemetery products and services through its five cemeteries in Utah and one cemetery in San Diego County, California. 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. In response to the COVID-19 pandemic, the cemetery and mortuary’s pre-need sales force began using virtual selling processes to market its products and services including some in home sales as local regulations permitted. This past quarter, the sales force returned mostly to in home sales, however, it continues to use virtual selling where needed. Currently, the cemetery and mortuary operations office staff works in the office with the flexibility for hybrid-remote or completely remote working arrangements as needed. The following table shows the condensed financial results of the cemetery and mortuary operations for the three and nine months ended September 30, 2021 and 2020. See Note 7 to the condensed consolidated financial statements. Three months ended September 30 (in thousands of dollars) Nine months ended September 30 (in thousands of dollars) 2021 2020 % Increase (Decrease) 2021 2020 % Increase (Decrease) Revenues from external customers Mortuary revenues $ 2,191 $ 2,112 4 % $ 6,124 $ 5,560 10 % Cemetery revenues 3,776 3,260 16 % 12,104 8,970 35 % Net investment income 826 168 392 % 1,297 445 191 % Gains (losses) on investments and other assets (113 ) (67 ) 69 % 913 (244 ) 474 % Other 24 23 4 % 74 85 (13 %) Total $ 6,704 $ 5,496 22 % $ 20,512 $ 14,816 38 % Earnings before income taxes $ 1,747 $ 1,322 32 % $ 6,718 $ 2,976 126 % Profitability in the nine months ended September 30, 2021 has increased due to a $2,441,000 increase in cemetery pre-need sales, a $1,157,000 increase in gains on investments and other assets primarily attributable to a $955,000 increase in gains on real estate sales and a $203,000 increase in the fair value of equity securities classified as restricted assets and cemetery perpetual care trust investments, a $851,000 increase in net investment income, a $693,000 increase in cemetery at-need sales, a $564,000 increase in mortuary at-need sales, a $113,000 decrease in interest expense, a $69,000 decrease in intersegment interest expense and other expenses, and an $18,000 decrease in amortization of deferred policy acquisition costs. This increase was partially offset by a $1,637,000 increase in selling, general and administrative expenses, a $479,000 increase in costs of goods sold, a $38,000 decrease in intersegment revenues, and a $10,000 decrease in other revenues. Mortgage Operations The Company’s wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company, are mortgage lenders 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 originate 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 and EverLEND Mortgage originate and refinance mortgage loans on a retail basis. Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan purchase agreements with Security National Life, Kilpatrick Life and unaffiliated financial institutions. The Company’s mortgage subsidiaries receive 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 originated by the mortgage subsidiaries. Mortgage loans originated by the mortgage subsidiaries are generally sold with mortgage servicing rights released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 58% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer. For the nine months ended September 30, 2021 and 2020, SecurityNational Mortgage originated 14,898 loans ($4,157,704,000 total volume) and 14,462 loans ($3,708,810,000 total volume), respectively. For the nine months ended September 30, 2021 and 2020, EverLEND Mortgage originated 260 loans ($85,368,000 total volume) and 400 loans ($115,519,000 total volume), respectively. Record low mortgage interest rates that prevailed during the third quarter of 2020 and into the first quarter of 2021 trended higher through the second and third quarters of 2021. Production volumes remained strong in the second and third quarters of 2021, particularly for purchase mortgage transactions but were below those experienced during the earlier low interest rate period. The work from home accommodations made by necessity in 2020 as a result of COVID-19 have been integrated into 2021 standard operating procedures. A larger percentage of fulfillment employees are in office in 2021 compared to 2020, however the flexibility remains to accommodate in office or work from home functionality. 52 The following table shows the condensed financial results of the mortgage operations for the three and nine months ended September 30, 2021 and 2020. See Note 7 to the condensed consolidated financial statements. Three months ended September 30 (in thousands of dollars) Nine months ended September 30 (in thousands of dollars) 2021 2020 % Increase (Decrease) 2021 2020 % Increase (Decrease) Revenues from external customers Secondary gains from investors $ 55,441 $ 70,628 (22 %) $ 179,901 $ 151,216 19 % Income from loan originations 11,457 22,627 (49 %) 33,382 44,309 (25 %) Change in fair value of loans held for sale (259 ) 1,404 (118 %) (8,320 ) 4,231 (297 %) Change in fair value of loan commitments (381 ) 3,901 (110 %) (549 ) 12,454 (104 %) Net investment income 151 300 (50 %) 408 553 (26 %) Gains on investments and other assets 159 7 2171 % 199 — 100 % Other 4,197 2,581 63 % 11,744 6,641 77 % Total $ 70,765 $ 101,448 (30 %) $ 216,765 $ 219,404 (1 %) Earnings before income taxes $ 8,675 $ 32,454 (73 %) $ 27,348 $ 58,868 (54 %) Included in other revenues is service fee income. Profitability for the nine months ended September 30, 2021 has decreased due to a $13,304,000 increase in personnel expenses, a $13,003,000 decrease in the fair value of loan commitments, a $12,551,000 decrease in the fair value of loans held for sale, a $10,926,000 decrease in income from loan originations, a $9,741,000 increase in commissions, a $4,434,000 increase in other expenses, a $826,000 increase in advertising expenses, a $663,000 increase in costs related to funding mortgage loans, a $563,000 increase in rent and rent related expenses, a $145,000 decrease in net investment income, and a $89,000 decrease in intersegment revenues. This decrease was partially offset by a $28,685,000 increase in secondary gains from investors, a $5,103,000 increase in other revenues, a $459,000 decrease in interest expense, a $213,000 decrease in intersegment interest expense, a $199,000 increase in gains on investments and other assets, and a $70,000 decrease in depreciation on property and equipment. Mortgage Loan Loss Settlements Future mortgage loan losses can be extremely difficult to estimate. However, management believes that the Company’s reserve methodology and its current practice of property preservation allow it to estimate its potential losses on mortgage loans sold. The estimated liability for indemnification losses was included in other liabilities and accrued expenses and, as of September 30, 2021 and December 31, 2020, the balances were $2,408,233 and $20,583,618, respectively. Consolidation Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020 Total revenues decreased by $26,696,000, or 18.3%, to $119,509,000 for the three months ended September 30, 2021, from $146,205,000 for the comparable period in 2020. Contributing to this decrease in total revenues was a $32,302,000 decrease in mortgage fee income. This decrease was partially offset by a $2,679,000 increase in insurance premiums and other considerations, a $1,771,000 increase in other revenues, a $596,000 increase in net mortuary and cemetery sales, a $384,000 increase in net investment income, and a $176,000 increase in gains on investments and other assets. Mortgage fee income decreased by $32,302,000, or 32.8%, to $66,258,000 for the three months ended September 30, 2021, from $98,560,000 for the comparable period in 2020. This decrease was primarily due to a $15,187,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, a $11,170,000 decrease in loan fees and interest income net of a decrease in the provision for loan loss reserve, a $4,282,000 decrease in the fair value of loan commitments, and a $1,663,000 decrease in the fair value of loans held for sale. Insurance premiums and other considerations increased by $2,679,000, or 11.3%, to $26,446,000 for the three months ended September 30, 2021, from $23,767,000 for the comparable period in 2020. This increase was due to a $1,676,000 increase in first year premiums as a result of increased insurance sales and a $1,003,000 increase in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying business in force. Net investment income increased by $384,000, or 2.6%, to $15,093,000 for the three months ended September 30, 2021, from $14,709,000 for the comparable period in 2020. This increase was primarily attributable to a $309,000 increase in rental income from real estate held for investment, a $254,000 decrease in investment expenses, a $220,000 increase in insurance assignment income, a $123,000 increase in mortgage loan interest, a $35,000 increase in income on other investments, and a $16,000 increase in interest on cash and cash equivalents. This increase was partially offset by a $523,000 decrease in fixed maturity securities income, a $35,000 decrease in policy loan income, and a $15,000 decrease in equity securities income. Net mortuary and cemetery sales increased by $596,000, or 11.1%, to $5,968,000 for the three months ended September 30, 2021, from $5,372,000 for the comparable period in 2020. This increase was primarily due to a $740,000 increase in cemetery pre-need sales and a $79,000 increase in mortuary at-need sales. This increase was partially offset by a $223,000 decrease in cemetery at-need sales. 53 Gains on investments and other assets increased by $176,000, or 22.0%, to $977,000 for the three months ended September 30, 2021, from $801,000 for the comparable period in 2020. This increase in gains on investments and other assets was primarily due to a $569,000 increase in gains on other assets and a $216,000 increase in gains on fixed maturity securities. This increase in gains on investments and other assets was partially offset by a $609,000 decrease in gains on equity securities mostly attributable to decreases in the fair value of these equity securities. Other revenues increased by $1,771,000, or 59.1%, to $4,768,000 for the three months ended September 30, 2021, from $2,997,000 for the comparable period in 2020. This increase was primarily attributable to an increase in servicing fee revenue. Total benefits and expenses were $105,366,000, or 88.2% of total revenues, for the three months ended September 30, 2021, as compared to $107,621,000, or 73.6% of total revenues, for the comparable period in 2020. Death benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $1,961,000 or 8.9%, to $23,937,000 for the three months ended September 30, 2021, from $21,976,000 for the comparable period in 2020. This increase was primarily the result of and a $2,592,000 increase in future policy benefits. This increase was partially offset by a $552,000 decrease in death benefits (including, approximately, a $501,000 decrease in COVID-19 related deaths) and a $79,000 decrease in surrender and other policy benefits. Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $470,000, or 11.1%, to $4,710,000 for the three months ended September 30, 2021, from $4,240,000 for the comparable period in 2020. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs. Selling, general and administrative expenses decreased by $4,139,000, or 5.3%, to $74,003,000 for the three months ended September 30,2021, from $78,142,000 for the comparable period in 2020. This decrease was primarily the result of a $8,993,000 decrease in commissions, a $678,000 decrease in costs related to funding mortgage loans, and a $104,000 decrease in depreciation on property and equipment. This decrease was partially offset by a $3,422,000 increase in personnel expenses, a $2,073,000 increase in other expenses, an $84,000 increase in advertising expenses, and a $57,000 increase in rent and rent related expenses. Interest expense decreased by $556,000 or 23.5%, to $1,807,000 for the three months ended September 30, 2021, from $2,363,000 for the comparable period in 2020. This decrease was primarily due to a decrease of $543,000 in interest expense on mortgage warehouse lines for loans held for sale and a $13,000 decrease in interest expense on bank loans. Cost of goods and services sold-mortuaries and cemeteries increased by $9,000, or 1.0%, to $908,000 for the three months ended September 30, 2021, from $899,000 for the comparable period in 2020. This increase was primarily due to a $33,000 increase in cemetery at-need sales and a $27,000 increase in mortuary at-need sales. This increase was partially offset by a $51,000 decrease in cemetery pre-need sales. Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020 Total revenues increased by $14,443,000, or 4.2%, to $358,918,000 for the nine months ended September 30, 2021, from $344,475,000 for the comparable period in 2020. Contributing to this increase in total revenues was a $5,772,000 increase in insurance premiums and other considerations, a $5,689,000 increase in other revenues, a $4,588,000 increase in gains on investments and other assets, a $3,698,000 increase in net mortuary and cemetery sales, and a $2,492,000 increase in net investment income. This increase was partially offset by a $7,796,000 decrease in mortgage fee income. Mortgage fee income decreased by $7,796,000, or 3.7%, to $204,414,000, for the nine months ended September 30, 2021, from $212,210,000 for the comparable period in 2020. This decrease was primarily due to a $12,551,000 decrease in the fair value of loans held for sale, a $13,003,000 decrease in the fair value of loan commitments, and a $10,927,000 decrease in loan fees and interest income net of a decrease in the provision for loan loss reserve. This decrease in mortgage fee income was partially offset by a $28,685,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market. Insurance premiums and other considerations increased by $5,772,000, or 8.4%, to $74,755,000 for the nine months ended September 30, 2021, from $68,983,000 for the comparable period in 2020. This increase was due to a $4,243,000 increase in first year premiums as a result of increased insurance sales and a $1,529,000 increase in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium paying business in force. Net investment income increased by $2,492,000, or 6.1%, to $43,564,000 for the nine months ended September 30, 2021, from $41,072,000 for the comparable period in 2020. This increase was primarily attributable to a $1,874,000 increase in mortgage loan interest, a $1,054,000 increase in insurance assignment income, a $434,000 decrease in investment expenses, a $413,000 increase in rental income from real estate held for investment, a $63,000 increase in income on other investments, and a $16,000 increase in equity securities income. This increase was partially offset by a $1,069,000 decrease in fixed maturity securities income, a $231,000 decrease in interest on cash and cash equivalents, and a $62,000 decrease in policy loan income. Net mortuary and cemetery sales increased by $3,698,000, or 25.4%, to $18,228,000 for the nine months ended September 30, 2021, from $14,530,000 for the comparable period in 2020. This increase was primarily due to an $2,441,000 increase in cemetery pre-need sales, a $693,000 increase in cemetery at-need sales, and a $564,000 increase in mortuary at-need sales. Gains on investments and other assets increased by $4,588,000, or 2644.8%, to gains of $4,414,000 for the nine months ended September 30, 2021, from losses of $174,000 for the comparable period in 2020. This increase in gains on investments and other assets was primarily due a $2,217,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities. This increase in gains on investments and other assets was also due to a $2,035,000 increase in gains on other assets mostly attributable gains on real estate and mortgage loans. This increase in gains on investments and other assets was also due to a $336,000 increase in gains on fixed maturity securities. 54 Other revenues increased by $5,689,000, or 72.4%, to $13,542,000 for the nine months ended September 30, 2021, from $7,853,000 for the comparable period in 2020. This increase was primarily attributable to an increase in servicing fee revenue. Total benefits and expenses were $313,742,000, or 87.4% of total revenues, for the nine months ended September 30, 2021, as compared to $277,223,000, or 80.5% of total revenues, for the comparable period in 2020. Death benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $5,976,000 or 9.3%, to $70,497,000 for the nine months ended September 30, 2021, from $64,521,000 for the comparable period in 2020. This increase was primarily the result of a $5,609,000 increase in death benefits (including, approximately, $2,922,000 for COVID-19 related deaths) and a $606,000 increase in future policy benefits. This increase was partially offset by a $239,000 decrease in surrender and other policy benefits. Amortization of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,159,000, or 10.8%, to $11,941,000 for the nine months ended September 30, 2021, from $10,781,000 for the comparable period in 2020. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs Selling, general and administrative expenses increased by $29,640,000, or 15.3%, to $223,096,000 for the nine months ended September 30, 2021, from $193,456,000 for the comparable period in 2020. This increase was primarily the result of a $12,863,000 increase in personnel expenses, a $9,837,000 increase in commissions, a $4,674,000 increase in other expenses, a $1,247,000 increase in advertising expenses, a $663,000 increase in costs related to funding mortgage loans, and a $519,000 increase in rent and rent related expenses. This increase was partially offset by a $163,000 decrease in depreciation on property and equipment. Interest expense decreased by $736,000, or 12.1%, to $5,327,000 for the nine months ended September 30, 2021, from $6,063,000 for the comparable period in 2020. This decrease was primarily due to a $459,000 decrease in interest expense on mortgage warehouse lines for loans held for sale and a $277,000 decrease in interest expense on bank loans. Cost of goods and services sold-mortuaries and cemeteries increased by $479,000, or 20.0%, to $2,881,000 for the nine months ended September 30, 2021, from $2,402,000 for the comparable period in 2020. This increase was primarily due to a $189,000 increase in cemetery pre-need sales, a $183,000 increase in cemetery at-need sales, and a $107,000 increase in mortuary at-need sales. Liquidity and Capital Resources The Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from the proceeds from the maturity or sale of investments. The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans, and fees earned from mortgage loans held for sale that are sold to investors into the secondary market. The Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally are long-term and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the maintenance of existing policies, and debt service, and to meet current operating expenses. It should be noted that current conditions in the financial markets and economy caused by the COVID-19 pandemic may affect the cash flows of the Company. During the nine months ended September 30, 2021 and 2020, the Company’s operations provided cash of $128,891,000 and used cash of $ 164,589,000, respectively. This increase was due primarily to sales of mortgage loans held for sale. The Company’s liability for future policy benefits is expected to be paid out over the long-term due to the Company’s market niche of selling funeral plans. Funeral plans are small face value life insurance that will pay the costs and expenses incurred at the time of a person’s death. A person generally will keep these policies in force and will not surrender them prior to a person’s death. Because of the long-term nature of these liabilities, the Company is able to hold to maturity its bonds, real estate, and mortgage loans, thus reducing the risk of having to liquidate these long-term investments as a result of any sudden changes in their fair values. The Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may sell investments other than those held to maturity in the portfolio to help in this timing. The Company purchases short-term investments on a temporary basis to meet the expectations of short-term requirements of the Company’s products. The Company’s investment philosophy is intended to provide a rate of return that will persist during the expected duration of policyholder and cemetery and mortuary liabilities regardless of future interest rate movements. The Company’s investment policy is to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage loans on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing the life insurance subsidiaries. Bonds owned by the insurance subsidiaries and classified as fixed maturity securities available for sale carried at estimated fair value amounted to $264,562,000 (at estimated fair value) and $294,384,000 (at estimated fair value) as of September 30, 2021 and December 31, 2020, respectively. This represents 30.9% and 38.0% of the total investments as of September 30, 2021 and December 31, 2020, 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. At September 30, 2021, 4.5% (or $11,780,000) and at December 31, 2020, 4.2% (or $12,418,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which were considered non-investment grade. The Company is subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. At September 30, 2021 and December 31, 2020, the life insurance subsidiaries were in compliance with the regulatory criteria. 55 The Company’s total capitalization of stockholders’ equity, bank and other loans payable was $559,903,000 as of September 30, 2021, as compared to $561,811,000 as of December 31, 2020. Stockholders’ equity as a percent of total capitalization was 53.0% and 47.0% as of September 30, 2021 and December 31, 2020, respectively. Lapse rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance in 2020 was 5.9% as compared to a rate of 9.8% for 2019. The 2021 lapse rate to date has been approximately the same as 2020. At September 30, 2021, the combined statutory capital and surplus of the Company’s life insurance subsidiaries was $74,042,000. The life insurance subsidiaries cannot pay a dividend to its parent company without approval of state insurance regulatory authorities. COVID-19 Pandemic During 2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March 11, 2020. COVID-19, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers, and vendors. The Company is closely monitoring developments relating to the ongoing COVID-19 pandemic and assessing its impact on the Company’s business. The continued uncertainty surrounding the COVID-19 pandemic has had and continues to have a major impact on the global economy and financial markets. Governments and businesses have taken numerous measures to try to contain the virus and its variants, which include the implementation of travel bans, self-imposed quarantine periods, social distancing, and various mask and vaccine mandates. These measures have disrupted and will continue to disrupt businesses globally. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize the economic conditions. Like most businesses, COVID-19 has impacted the Company. However, the Company cannot, with any certainty predict the severity or duration with which COVID-19 will impact the Company’s business, financial condition, results of operations, and cash flows. To the extent the COVID-19 pandemic adversely affects the Company’s business, financial condition, and results of operations, it may also have the effect of heightening many of the other Company risks. These uncertainties have the potential to negatively affect the risk of credit default for the issuers of the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company. The Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, including some remote work arrangements. Such measures and precautions have enabled the Company to continue to conduct business. Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.