What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 185 added, 265 removed, 104 unchanged (81% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

Company’s operations over the last several years generally reflect three trends or events which the Company expects to continue

(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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Company’s operations over the last several years generally reflect three strategies which the Company expects to continue:

increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole

life products;

(ii) increased emphasis on cemetery and mortuary business;

and (iii) capitalizing on an improving housing market by originating

mortgage loans.

The Company has adjusted its strategies to respond to the changing economic circumstances resulting from the COVID-19

Company’s life insurance business includes funeral plans and interest-sensitive life insurance, as well as other traditional life,

9 unchanged sentences

underwriting practices that result in higher mortality costs.

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

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.

following table shows the condensed financial results of the insurance operations for three and nine months ended September 30, 2021

See Note 7 to the condensed consolidated financial statements.

Three months ended

(in thousands of dollars)

Nine months ended

response to the COVID-19 pandemic, the Company’s life insurance sales force began using virtual and tele sales processes to market

During the third quarter 2021, the life insurance sales force returned to in person sales, however, it continues to use virtual

and tele sales where needed.

As of March 31, 2022, approximately 75% of insurance operations office staff were working in the office

with the flexibility for hybrid-remote or completely remote working arrangements as needed.

following table shows the condensed financial results of the insurance operations for three months ended March 31, 2022 and 2021.

Note 7 to the condensed consolidated financial statements.

Three months ended March 31

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

1 unchanged sentence

Net investment income

Gains (losses) on investments and other assets

Gains on investments and other assets

Intersegment revenue

Earnings before income taxes

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

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.

revenues are primarily interest income from the warehouse line for loans held for sale provided to SecurityNational Mortgage Company

(“SecurityNational Mortgage”).

Profitability for the three months ended March 31, 2022 has decreased due to a $2,516,000

increase in future policy benefits, a $1,733,000 increase in selling, general and administrative expenses, a $1,054,000 decrease in gains

on investments and other assets primarily due to a decrease in the fair value of equity securities, a $783,000 increase in amortization

of deferred policy acquisition costs primarily due to an increase in the average outstanding balance of deferred policy and pre-need

acquisition costs, a $466,000 increase in interest expense, a $206,000 decrease in intersegment revenue, and a $21,000 decrease in other

This increase was partially offset by a $2,992,000 increase in insurance premiums and other considerations, a $1,182,000 decrease

in death, surrenders and other policy benefits, a $642,000 increase in net investment income, and an $86,000 decrease in intersegment

interest expense and other expenses.

and Mortuary Operations

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

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.

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.

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.

During the third quarter 2021, 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.

following table shows the condensed financial results of the cemetery and mortuary operations for the three months ended March 31, 2022

See Note 7 to the condensed consolidated financial statements.

Three months ended September 30

(in thousands of dollars)

Nine months ended

Three months ended March 31

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

5 unchanged sentences

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.

in the three months ended March 31, 2022 has decreased due to a $1,092,000 increase in selling, general and administrative expenses,

a $1,053,000 decrease in gains on investments and other assets primarily attributable to a $579,000 decrease in gains on real estate

sales and a $495,000 decrease in the fair value of equity securities classified as restricted assets and cemetery perpetual care trust

investments, a $561,000 decrease in cemetery pre-need sales, an $85,000 increase in costs of goods sold, a $54,000 increase in intersegment

interest expense and other expenses, a $37,000 increase in amortization of deferred policy acquisition costs, and a $13,000 decrease

in other revenues.

This increase was partially offset by a $1,746,000 increase in mortuary at-need sales, a $266,000 increase in net

investment income, a $105,000 increase in intersegment revenues, a $79,000 increase in cemetery at-need sales, and an $18,000 decrease

in interest expense.

Company’s wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company, are mortgage lenders incorporated

14 unchanged sentences

These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.

the nine months ended September 30, 2021 and 2020, SecurityNational Mortgage originated 14,898 loans ($4,157,704,000 total volume) and

December 2021, the Company ceased operations in EverLEND Mortgage and merged its operations into SecurityNational Mortgage.

the three months ended March 31, 2022 and 2021, SecurityNational Mortgage originated 3,356 loans ($1,039,217,000 total volume) and 5,361

loans ($1,415,821,000 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.

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.

following table shows the condensed financial results of the mortgage operations for the three and nine months ended September 30, 2021

For the three months ended March 31, 2021, EverLEND Mortgage originated 110 loans

($34,020,000 total volume).

response to the COVID-19 pandemic, the mortgage operations has integrated employee work from home accommodations into its standard operating

A large percentage of fulfillment employees are in office however the flexibility remains to accommodate in office or work

from home functionality.

following table shows the condensed financial results of the mortgage operations for the three months ended March 31, 2022 and 2021.

See Note 7 to the condensed consolidated financial statements.

Three months ended

(in thousands of dollars)

Nine months ended

Three months ended March 31

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

7 unchanged sentences

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.

Profitability for the three months ended March 31, 2022 has decreased due to a $28,836,000 decrease

in secondary gains from investors, a $2,733,000 decrease in income from loan originations, a $1,224,000 increase in personnel expenses,

an $86,000 decrease in intersegment revenues, and a $7,000 decrease in net investment income.

This increase was partially offset by a

$12,811,000 decrease in commissions, a $4,199,000 increase in the fair value of loans held for sale, a $2,361,000 increase in the fair

value of loan commitments, a $1,088,000 increase in other revenues, a $943,000 decrease in other expenses, a $546,000 decrease in interest

expense, a $505,000 decrease in advertising expenses, a $355,000 decrease in the provision for loan loss reserve, a $319,000 increase

in gains on investments and other assets, a $155,000 decrease in intersegment interest expense and other expenses, a $132,000 decrease

in rent and rent related expenses, a $98,000 decrease in costs related to funding mortgage loans, and a $22,000 decrease in depreciation

on property and equipment.

Loan Loss Settlements

3 unchanged sentences

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

Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

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.

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.

for indemnification losses was included in other liabilities and accrued expenses and, as of March 31, 2022 and December 31, 2021, the

balances were $2,143,390 and $2,447,139, respectively.

Consolidated Results of Operations

Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

revenues decreased by $20,233,000, or 16.5%, to $102,426,000 for the three months ended March 31, 2022, from $122,659,000 for the comparable

period in 2021.

Contributing to this decrease in total revenues was a $24,654,000 decrease in mortgage fee income and a $1,788,000 decrease

in gains on investments and other assets.

This decrease was partially offset by a $2,992,000 increase in insurance premiums and other

considerations, a $1,264,000 increase in net mortuary and cemetery sales, a $1,054,000 increase in other revenues, and a $900,000 increase

in net investment income.

fee income decreased by $24,654,000, or 33.8%, to $48,345,000, for the three months ended March 31, 2022, from $72,999,000 for the comparable

period in 2021.

This decrease was primarily due to a $28,836,000 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

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

investors into the secondary market and a $2,378,000 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 $4,199,000 increase in the fair value of loans held

for sale and a $2,361,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $2,992,000, or 12.8%, to $26,342,000 for the three months ended March 31, 2022, from $23,350,000

for the comparable period in 2021.

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

This increase was due to an increase of $1,691,000 in first year premiums as a result of increased

insurance sales and an increase of $1,300,366 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.

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.

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

investment income increased by $900,000, or 6.3%, to $15,194,000 for the three months ended March 31, 2022, from $14,294,000 for the

comparable period in 2021.

This increase was primarily attributable to a $1,876,000 increase in mortgage loan interest, a $74,000 increase

in policy loan income, a $57,000 increase in income on other investments, a $51,000 increase in insurance assignment income, and a $36,000

increase in interest on cash and cash equivalents.

This increase was partially offset by a $997,000 increase in investment expenses,

and a $188,000 decrease in fixed maturity securities income.

mortuary and cemetery sales increased by $1,264,000, or 21.3%, to $7,206,000 for the three months ended March 31, 2022, from $5,942,000

for the comparable period in 2021.

This increase was primarily due to a $740,000 increase in cemetery pre-need sales and a $79,000 increase

This increase was primarily due to a $1,746,000 increase in cemetery at-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.

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

This increase was partially offset by a $561,000 decrease in cemetery pre-need sales.

on investments and other assets decreased by $1,788,000, or 91.2%, to $172,000 for the three months ended March 31, 2022, from $1,960,000

for the comparable period in 2021.

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.

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

This decrease in gains on investments and other assets was primarily due to a $1,676,000 decrease

in gains on equity securities mostly attributable to decreases in the fair value of these equity securities, an $85,000 decrease in gains

on other assets, and a $27,000 decrease in gains on fixed maturity securities.

revenues increased by $1,054,000, or 25.6%, to $5,168,000 for the three months ended March 31, 2022, from $4,114,000 for the comparable

period in 2021.

This increase was primarily attributable to an increase in servicing fee revenue.

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,

benefits and expenses were $97,982,000, or 95.7% of total revenues, for the three months ended March 31, 2022, as compared to $106,304,000,

or 86.7% of total revenues, for the comparable period in 2021.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $1,335,000 or 5.6%, to $24,979,000

for the three months ended September 30, 2021, from $21,976,000 for the comparable period in 2020.

for the three months ended March 31, 2022, from $23,644,000 for the comparable period in 2021.

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.

of a $2,516,000 increase in future policy benefits and a $246,000 increase in surrender and other policy benefits.

This increase was

partially offset by a $1,427,000 decrease in death benefits ($1,646,698 for COVID-19 related deaths).

of deferred policy and pre-need acquisition costs and value of business acquired increased by $819,000, or 22.9%, to $4,396,000 for the

three months ended September 30, 2021, from $4,240,000 for the comparable period in 2020.

three months ended March 31, 2022, from $3,577,000 for the comparable period in 2021.

This increase was primarily due to an increase

in the average outstanding balance of deferred policy and pre-need acquisition costs.

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.

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.

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.

Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

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.

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.

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.

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.

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

general and administrative expenses decreased by $10,462,000, or 13.7%, to $65,695,000 for the three months ended March 31, 2022, from

$76,157,000 for the comparable period in 2021.

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.

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.

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.

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.

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.

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.

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

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.

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.

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

This increase was primarily the result of a $12,827,000 decrease in commissions, a $207,000

decrease in rent and rent related expenses, a $98,000 decrease in costs related to funding mortgage loans, and an $89,000 decrease in

advertising expenses.

This decrease was partially offset by a $2,503,000 increase in personnel expenses, a $142,000 increase in other

expenses, and a $114,000 increase in depreciation on property and equipment.

expense decreased by $98,000, or 5.4%, to $1,727,000 for the three months ended March 31, 2022, from $1,825,000 for the comparable period

This decrease was primarily due to a decrease of $546,000 in interest expense on mortgage warehouse lines for loans held for

This decrease was partially offset by a $448,000 increase in interest expense on bank loans.

of goods and services sold-mortuaries and cemeteries increased by $85,000, or 7.7%, to $1,185,000 for the three months ended March 31,

2022, from $1,100,000 for the comparable period in 2021.

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.

This increase was primarily due to a $300,000 increase in mortuary at-need sales.

This increase was partially offset by a $35,000 decrease in cemetery at-need sales and a $180,000 decrease in cemetery pre-need sales.

and Capital Resources

1 unchanged sentence

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 proceeds from the sale or maturity 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.

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,

and refinancing mortgage loans and fees from mortgage loans held for sale that are sold to investors into the secondary market.

be noted that current conditions in the financial markets and economy caused by the COVID-19 pandemic may affect the realization of these

expected cash flows.

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, debt service, and to meet current operating expenses.

the three months ended March 31, 2022 and 2021, the Company’s operations provided cash of $72,509,000 and provided cash of $100,976,000,

respectively.

This increase was due primarily to sales of mortgage loans held for sale.

This decrease in cash provided by operations was due primarily to decreased proceeds from the sale of mortgage loans held

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

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.

Funeral plans are small face value life insurance policies that payout upon a person’s death to

cover funeral burial costs.

Policyholders generally keep these policies in force and do not surrender them prior to death.

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 liquidating these long-term investments as a result of any sudden changes in their fair values.

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.

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.

sell investments other than those held to maturity in the portfolio to help in this timing matching.

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, which will persist during the expected duration of policyholder and cemetery

and mortuary liabilities regardless of future interest rate movements.

Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing

of mortgage loans held for sale 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 amounted to $271,931,000 (at estimated fair value)

and $259,005,000 (at estimated fair value) as of March 31, 2022 and December 31, 2021, respectively.

This represented 32.1% and 31.5%

of the total investments as of March 31, 2022, and December 31, 2021, 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 March 31, 2022, 3.5% (or $9,597,000) and at December 31, 2021, 3.9% (or $9,991,000) of the Company’s total

bond investments were invested in bonds in rating categories three through six, which are considered non-investment grade.

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

At March 31, 2022 and December 31, 2021, the life insurance

subsidiaries were in compliance with the regulatory criteria.

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $559,903,000 as of September 30,

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $525,928,000 as of March 31, 2022,

as compared to $551,054,000 as of December 31, 2021.

Stockholders’ equity as a percent of total capitalization was 53.0%

and 47.0% as of September 30, 2021 and December 31, 2020, respectively.

Stockholders’ equity as a percent of total capitalization was 55.6% and 54.4%

as of March 31, 2022 and December 31, 2021, respectively.

rates measure the amount of insurance terminated during a particular period.

2 unchanged sentences

The 2022 lapse rate to date has been approximately the same as 2021.

September 30, 2021, the combined statutory capital and surplus of the Company’s life insurance subsidiaries was $74,042,000.

life insurance subsidiaries cannot pay a dividend to its parent company without approval of state insurance regulatory authorities.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $81,822,000 and $82,823,000 as of March

31, 2022 and December 31, 2021, respectively.

The life insurance subsidiaries cannot pay a dividend to their parent company without the

approval of state insurance regulatory authorities.

2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March 11,

COVID-19, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers, and

The Company is closely monitoring developments relating to the ongoing COVID-19 pandemic and assessing its impact on the Company’s

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.

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

The Company continues to closely monitor 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 significant

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.

most businesses, COVID-19 has impacted the Company, including the temporary adoption of work from home arrangements and a restructuring

of selling techniques for its products and services.

The Company also experienced increased expenses for cleaning services of its offices.

Throughout 2021 and the first quarter of 2022, the Company continues to adapt to the impact of COVID-19 and its related economic effects.

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.

Company has implemented risk management, business continuity plans and has taken preventive measures and other precautions, including

1 unchanged sentence

Such measures and precautions have enabled the Company to continue to conduct business.

and Qualitative Disclosures About Market Risk.

Quantitative and Qualitative Disclosures About Market Risk.

a smaller reporting company, the Company is not required to provide information typically disclosed under this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis