What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 166 added, 120 removed, 160 unchanged (64% of the section changed)

17 unchanged sentences

underwriting practices that result in higher mortality costs.

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.

Currently, approximately 75% of insurance operations office staff work 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 month periods ended March 31, 2023, and 2022.

following table shows the condensed financial results of the insurance operations for three and six month periods ended June 30, 2023,

See Note 7 to the condensed consolidated financial statements.

Three months ended March 31

Three months ended June 30,

(in thousands of dollars)

Six months ended June 30,

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

7 unchanged sentences

(“SecurityNational Mortgage”).

Profitability for the three month period ended March 31, 2023 increased due to (a) a $2,175,000

Profitability for the six month period ended June 30, 2023 increased due to (a) a $5,468,000

increase in net investment income, (b) a $4,527,000 increase in insurance premiums and other considerations, (c) a $1,494,000 decrease

in selling, general and administrative expenses, (d) a $397,000 decrease in death, surrenders and other policy benefits, (e) a $119,000

increase in other revenues, and (f) a $44,000 increase in mortgage fee income, which were partially offset by (i) a $1,283,000 increase

in future policy benefits, (ii) a $523,000 increase in amortization of deferred policy acquisition costs, (iii) a $186,000 decrease in

intersegment revenue, (iv) a $128,000 increase in interest expense, (v) a $61,000 increase in intersegment interest expense and other

expenses, and (vi) a $51,000 decrease in gains on investments and other assets.

in selling, general and administrative expenses, (d) a $674,000 increase in gains on investments and other assets, (e) a $256,000 increase

in intersegment revenue, (f) a $83,000 increase in other revenues, and (g) a $66,000 increase in mortgage fee income, which were partially

offset by (i) a $3,183,000 increase in future policy benefits, (ii) a $732,000 increase in amortization of deferred policy acquisition

costs, (iii) a $417,000 increase in interest expense, (iv) a 125,000 increase in intersegment interest expense and other expenses, and

(v) a $16,000 increase in death, surrenders and other policy benefits.

and Mortuary Operations

8 unchanged sentences

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.

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 month periods ended March

31, 2023, and 2022.

following table shows the condensed financial results of the cemetery and mortuary operations for the three and six month periods ended

June 30, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

Three months ended March 31

Three months ended June 30,

(in thousands of dollars)

Six months ended June 30,

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

5 unchanged sentences

Profitability

in the three month period ended March 31, 2023 decreased due to (a) a $491,000 decrease in mortuary at-need sales, (b) a $222,000 decrease

in cemetery pre-need sales, (c) a $99,000 decrease in intersegment revenues, and (d) a $21,000 decrease in cemetery at-need sales, which

were partially offset by (i) a $308,000 increase in gains on investments and other assets primarily attributable to an increase in the

fair value of equity securities classified as restricted assets and cemetery perpetual care trust investments, (ii) a $105,000 increase

in net investment income, (iii) an $80,000 decrease in selling, general and administrative expenses, (iv) a $56,000 increase in other

revenues, (v) a $36,000 decrease in amortization of deferred policy acquisition costs, and (vi) a $13,000 decrease in intersegment interest

expense and other expenses.

in the six month period ended June 30, 2023 increased due to (a) a $1,227,000 increase in gains on investments and other assets, (b)

a $709,000 increase in net investment income, (c) a $495,000 increase in cemetery pre-need sales, and (d) a $138,000 increase in other

revenues, (e) a $46,000 decrease in amortization of deferred policy acquisition costs, and (f) a $28,000 decrease in intersegment interest

expense and other expenses, which were partially offset by (i) an $839,000 decrease in mortuary at-need sales, (ii) a $473,000 decrease

in cemetery at-need sales, (iii) a $116,000 increase in selling, general and administrative expenses, (iv) a $99,000 decrease in intersegment

revenues, and a (v) 9,000 increase in cost of goods and services sold.

Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of

23 unchanged sentences

As expected, the rapid increase in mortgage rates has resulted in a decrease in

loan originations classified as ‘refinance’.

Higher mortgage rates have also had a negative effect on loan originations classified

loan originations classified as ‘refinance.’ Higher mortgage rates have also had a negative effect on loan originations classified

as ‘purchases,’ although not as significant as those in the refinance classification.

the three month periods ended March 31, 2023 and 2022, SecurityNational Mortgage originated 1,702 loans ($531,868,000 total volume) and

the six month periods ended June 30, 2023 and 2022, SecurityNational Mortgage originated 3,738 loans ($1,139,735,000 total volume) and

6,419 loans ($2,049,959,000 total volume), respectively.

response to the COVID-19 pandemic, the Company’s mortgage operations integrated employee work from home accommodations into its

standard operating procedures.

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 month periods ended March 31, 2023, and

following table shows the condensed financial results of the mortgage operations for the three and six month periods ended June 30, 2023,

See Note 7 to the condensed consolidated financial statements.

Three months ended September 30

Three months ended June 30,

(in thousands of dollars)

Six months ended June 30,

(in thousands of dollars)

% Increase (Decrease)

Revenues from external customers

7 unchanged sentences

in other revenues is service fee income.

Profitability for the three month period ended March 31, 2023 decreased due to (a) a $21,686,000

Profitability for the six month period ended June 30, 2023 decreased due to (a) a $39,571,000

decrease in secondary gains from investors, (b) a $8,721,000 decrease in other revenues, (c) a $4,504,000 decrease in income from loan

originations, (d) a $1,997,000 decrease in the fair value of loan commitments, (e) a $319,000 decrease in gains on investments and other

assets, (f) a $137,000 increase in rent and rent related expenses, and (g) a $6,000 increase in depreciation on property and equipment,

which were partially offset by (i) a $10,262,000 decrease in commissions, (ii) a $4,875,000 decrease in personnel expenses, (iii) a $4,019,000

decrease in other expenses, (iv) a $3,542,000 increase in the fair value of loans held for sale, (v) a $997,000 decrease in costs related

to funding mortgage loans, (v) a $401,000 decrease in interest expense, (vi) a $338,000 decrease in advertising expenses, (vii) a $300,000

increase in net investment income, (viii) a $284,000 decrease in intersegment interest expense and other expenses, and (ix) a $47,000

increase in intersegment revenues.

originations, (d) a $274,000 increase in rent and rent related expenses, (e) a $230,000 decrease in gains on investments and other assets,

and (f) a $167,000 increase in intersegment interest expense and other expenses, which were partially offset by (i) a $18,025,000 decrease

in commissions, (ii) a $9,849,000 decrease in personnel expenses, (iii) a $7,503,000 decrease in other expenses, (iv) a $5,603,000 increase

in the fair value of loans held for sale, (v) a $1,200,000 decrease in costs related to funding mortgage loans, (v) a $1,177,000 decrease

in interest expense, (vi) a $661,000 decrease in advertising expenses, (vii) a $604,000 increase in net investment income, (viii) a $107,000

increase in intersegment revenues, and (ix) a $99,000 increase in the fair value of loan commitments.

Results of Operations

month period ended March 31, 2023, Compared to Three month period ended March 31, 2022

revenues decreased by $22,925,000, or 22.4%, to $79,501,000 for the three month period ended March 31, 2023, from $102,426,000 for the

month period ended June 30, 2023, Compared to Three month period ended June 30, 2022

revenues decreased by $11,721,000, or 12.3%, to $83,846,000 for the three month period ended June 30, 2023, from $95,567,000 for the

comparable period in 2022.

Contributing to this decrease in total revenues was a $15,952,000 decrease in mortgage fee income, a $4,520,000

decrease in other revenues, a $734,000 decrease in net mortuary and cemetery sales, and a $61,000 decrease in gains on investments and

other assets, which were partially offset by a $2,581,000 increase in net investment income and a $1,625,000 increase in insurance premiums

decrease in other revenues, and an $82,000 decrease in net mortuary and cemetery sales, which were partially offset by a $4,201,000 increase

in net investment income, a $1,731,000 increase in gains on investments and other assets, and a $2,901,000 increase in insurance premiums

and other considerations.

fee income decreased by $22,355,000, or 46.2%, to $25,989,000, for the three month period ended March 31, 2023, from $48,345,000 for

the comparable period in 2022.

This decrease was primarily due to a $21,641,000 decrease in secondary gains from mortgage loans sold

to third-party investors into the secondary market, a $1,997,000 decrease in the fair value of loan commitments, and a $2,258,000 decrease

in loan fees and interest income net of a decrease in the provision for loan loss reserve, which were partially offset by a $3,541,000

increase in the fair value of loans held for sale.

premiums and other considerations increased by $1,625,000, or 6.2%, to $27,967,000 for the three month period ended March 31, 2023, from

fee income decreased by $15,952,000, or 38.0%, to $26,079,000, for the three month period ended June 30, 2023, from $42,031,000 for the

comparable period in 2022.

This decrease was primarily due to a $17,863,000 decrease in secondary gains from mortgage loans sold to third-party

investors into the secondary market due to the decline in origination activity because of increasing interest rates, and a $2,247,000

decrease in loan fees and interest income net of a decrease in the provision for loan loss reserve, which were partially offset by a

$2,096,000 increase in the fair value of loan commitments and a $2,062,000 increase in the fair value of loans held for sale.

premiums and other considerations increased by $2,901,000, or 11.2%, to $28,813,000 for the three month period ended June 30, 2023, from

$25,912,000 for the comparable period in 2022.

1 unchanged sentence

an increase of $72,000 in renewal premiums.

investment income increased by $2,581,000, or 17.0%, to $17,775,000 for the three month period ended March 31, 2023, from $15,194,000

investment income increased by $4,201,000, or 26.3%, to $20,172,000 for the three month period ended June 30, 2023, from $15,971,000

for the comparable period in 2022.

This increase was primarily attributable to a $1,332,000 increase in fixed maturity securities income,

a $713,000 increase in interest on cash and cash equivalents, a $528,000 increase in mortgage loan interest, a $325,000 increase in real

estate income, and a $298,000 decrease in investment expenses, which were partially offset by a $629,000 decrease in insurance assignment

income and a $106,000 decrease in policy loan income.

mortuary and cemetery sales decreased by $734,000, or 10.2%, to $6,471,000 for the three month period ended March 31, 2023, from $7,205,000

for the comparable period in 2022.

This decrease was primarily due to a $491,000 decrease in mortuary at-need sales and a $222,000 decrease

in cemetery at-need sales.

on investments and other assets decreased by $61,000, or 35.4%, to $111,000 for the three month period ended March 31, 2023, from $172,000

an $885,000 increase in real estate income, a $672,000 increase in interest on cash and cash equivalents, a $585,000 decrease in investment

expenses, a $368,000 increase in insurance assignment income, a $223,000 increase in mortgage loan interest, a $115,000 increase in other

investment income, and a $21,000 increase in equity securities income.

mortuary and cemetery sales decreased by $82,000, or 1.1%, to $7,169,000 for the three month period ended June 30, 2023, from $7,250,000

for the comparable period in 2022.

This decrease in gains on investments and other assets was primarily due to a $402,000 decrease in

gains on other assets, a $291,000 decrease in gains on real estate, and a $264,000 decrease in gains on fixed maturity securities, which

were partially offset by a $896,000 increase in gains on equity securities mostly attributable to increases in the fair value of these

equity securities.

revenues decreased by $3,981,000, or 77.0%, to $1,187,000 for the three month period ended March 31, 2023, from $5,168,000 for the comparable

This decrease was primarily due to a $617,000 decrease in cemetery at-need sales, which were partially

offset by a $517,000 increase in cemetery pre-need sales and an $18,000 increase in mortuary at-need sales.

on investments and other assets increased by $1,731,000, or 189.3%, to $817,000 in net gains for the three month period ended June 30,

2023, from $914,000 in net losses for the comparable period in 2022.

This increase in gains on investments and other assets was primarily

due to a $2,597,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity, which

were partially offset by securities a $558,000 decrease in gains on other assets, a $199,000 decrease in gains on fixed maturity securities,

and a $109,000 decrease in gains on real estate.

revenues decreased by $4,520,000, or 85.0%, to $797,000 for the three month period ended June 30, 2023, from $5,316,000 for the comparable

period in 2022.

1 unchanged sentence

servicing rights in October 2022.

benefits and expenses were $77,916,000, or 98.0% of total revenues, for the three month period ended March 31, 2023, as compared to $97,982,000,

benefits and expenses were $75,697,000, or 90.3% of total revenues, for the three month period ended June 30, 2023, as compared to $90,837,000,

or 95.1% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $2,313,000 or 10.2%, to $24,906,000

for the three month period ended March 31, 2023, from $24,979,000 for the comparable period in 2022.

This increase was primarily the

result of a $1,283,000 increase in future policy benefits, which was partially offset by a $206,000 decrease in death benefits and a

for the three month period ended June 30, 2023, from $22,593,000 for the comparable period in 2022.

This increase was primarily the result

of a $1,899,000 increase in future policy benefits and a $616,000 increase in death benefits, which were partially offset by a $203,000

decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $198,000, or 4.9%, to $4,251,000 for the

three month period ended March 31, 2023, from $4,396,000 for the comparable period in 2022.

three month period ended June 30, 2023, from $4,053,000 for the comparable period in 2022.

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 $21,168,000, or 32.2%, to $44,527,000 for the three month period ended March 31, 2023,

general and administrative expenses decreased by $17,174,000, or 28.1%, to $43,873,000 for the three month period ended June 30, 2023,

from $61,047,000 for the comparable period in 2022.

This decrease was primarily the result of a $10,229,000 decrease in commissions,

a $4,912,000 decrease in personnel expenses, a $4,311,000 decrease in other expenses, a $997,000 decrease in costs related to funding

mortgage loans, a $809,000 decrease in advertising expense, and a $27,000 decrease in depreciation on property and equipment, which were

partially offset by a $117,000 increase in rent and rent related expenses.

expense decreased by $274,000, or 15.9%, to $1,453,000 for the three month period ended March 31, 2023, from $1,727,000 for the comparable

This decrease was primarily the result of a $7,661,000 decrease in commissions, a

$4,997,000 decrease in personnel expenses, a $3,771,000 decrease in other expenses, a $630,000 decrease in advertising expense, a $203,000

decrease in costs related to funding mortgage loans, and a $41,000 decrease in depreciation on property and equipment, which were partially

offset by a $129,000 increase in rent and rent related expenses.

expense decreased by $485,000, or 25.5%, to $1,415,000 for the three month period ended June 30, 2023, from $1,900,000 for the comparable

period in 2022.

1 unchanged sentence

for sale, which was partially offset by an increase of $291,000 in interest expense on bank loans.

month period ended June 30, 2023, Compared to Six month period ended June 30, 2022

revenues decreased by $34,646,000, or 17.5%, to $163,347,000 for the six month period ended June 30, 2023, from $197,993,000 for the

comparable period in 2022.

Contributing to this decrease in total revenues was a $38,308,000 decrease in mortgage fee income, a $8,500,000

decrease in other revenues, and an $816,000 decrease in net mortuary and cemetery sales, which were partially offset by a $6,781,000

increase in net investment income, a $4,527,000 increase in insurance premiums and other considerations, and a $1,670,000 increase in

gains on investments and other assets.

fee income decreased by $38,308,000, or 42.4%, to $52,068,000, for the six month period ended June 30, 2023, from $90,375,000 for the

comparable period in 2022.

This decrease was primarily due to a $39,504,000 decrease in secondary gains from mortgage loans sold to third-party

investors into the secondary market due to the decline in origination activity because of increasing interest rates and a $4,505,000

decrease in loan fees and interest income net of a decrease in the provision for loan loss reserve, which were partially offset by a

$5,603,000 increase in the fair value of loans held for sale and a $98,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $4,527,000, or 8.7%, to $56,781,000 for the six month period ended June 30, 2023, from

$52,254,000 for the comparable period in 2022.

This increase was primarily due to an increase of $4,018,000 in first year premiums and

an increase of $509,000 in renewal premiums.

investment income increased by $6,781,000, or 21.8%, to $37,947,000 for the six month period ended June 30, 2023, from $31,165,000 for

the comparable period in 2022.

This increase was primarily attributable to a $2,709,000 increase in fixed maturity securities income,

a $1,384,000 increase in interest on cash and cash equivalents, a $1,210,000 increase in real estate income, an $883,000 decrease in

investment expenses, a $750,000 increase in mortgage loan interest, a $173,000 increase in income from other investments, and a $39,000

increase in equity securities income, which were partially offset by a $261,000 decrease in insurance assignment income and a $106,000

decrease in policy loan income.

mortuary and cemetery sales decreased by $816,000, or 5.6%, to $13,640,000 for the six month period ended June 30, 2023, from $14,456,000

for the comparable period in 2022.

This decrease was primarily due to an $839,000 decrease in cemetery at-need sales and a $472,000 decrease

in mortuary at-need sales, which were partially offset by a $495,000 increase in cemetery pre-need sales.

on investments and other assets increased by $1,670,000, or 225.00%, to $928,000 in gains for the six month period ended June 30, 2023,

from $742,000 in losses for the comparable period in 2022.

This increase in gains on investments and other assets was primarily due to

a $3,493,000 increase in gains on equity securities mostly attributable to increases in the fair value of these equity securities, which

were partially offset by a $980,000 decrease in gains on real estate, a $464,000 decrease in gains on fixed maturity securities, and

$379,000 decrease in gains on other assets.

revenues decreased by $8,500,000, or 81.1%, to $1,984,000 for the six month period ended June 30, 2023, from $10,484,000 for the comparable

period in 2022.

This decrease was primarily attributable to a decrease in servicing fee revenue as a result of the sale of certain mortgage

servicing rights in October 2022.

benefits and expenses were $153,613,000, or 94.0% of total revenues, for the six month period ended June 30, 2023, as compared to $188,819,000,

or 95.4% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $3,200,000 or 6.7%, to $50,772,000

for the six month period ended June 30, 2023, from $47,572,000 for the comparable period in 2022.

This increase was primarily the result

of a $3,183,000 increase in future policy benefits and a $410,000 increase in death benefits, which was partially offset by a $393,000

decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $685,000, or 8.1%, to $9,135,000 for the

six month period ended June 30, 2023, from $8,450,000 for the comparable period in 2022.

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 $38,341,000, or 30.3%, to $88,401,000 for the six month period ended June 30, 2023,

from $126,742,000 for the comparable period in 2022.

This decrease was primarily the result of a $17,890,000 decrease in commissions,

a $9,909,000 decrease in personnel expenses, a $8,082,000 decrease in other expenses, a $1,438,000 decrease in advertising expense, a

$1,200,000 decrease in costs related to funding mortgage loans, and a $68,000 decrease in depreciation on property and equipment, which

were partially offset by a $246,000 increase in rent and rent related expenses.

expense decreased by $759,000, or 20.9%, to $2,868,000 for the six month period ended June 30, 2023, from $3,627,000 for the comparable

period in 2022.

This decrease was primarily due to a decrease of $1,177,000 in interest expense on mortgage warehouse lines for loans

held for sale, which was partially offset by an increase of $418,000 in interest expense on bank loans.

and Capital Resources

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 sale or maturity of investments.

The mortgage subsidiaries realize cash flow from fees generated by

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

It should be noted that current conditions in the financial markets and economy may affect the realization of these expected

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.

March 31, 2023, the Company was not in compliance with the net income covenant on its warehouse line with U.S.

Bank and has received

or is in the process of receiving waivers from the warehouse banks.

In the unlikely event the Company is required to repay the

outstanding advances of approximately $8,900,000 on the Texas Capital Bank N.A.

warehouse line that has not provided a covenant

waiver, the Company has sufficient cash and borrowing capacity on the warehouse lines that have provided covenant waivers to fund

its origination activities.

the three month periods ended March 31, 2023 and 2022, the Company’s operations used cash of $16,074,000 and provided cash of $72,509,000,

respectively.

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

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 sale or maturity of investments.

The mortgage subsidiaries realize cash flow from fees generated by originating

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 may affect the realization of these expected cash flows.

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.

As of June 30, 2023, the Company was not in compliance

with the net income covenant and has received or is in the process of receiving waivers from the warehouse banks.

In the unlikely event

the Company is required to repay the outstanding advances of approximately $7,100,000 on the warehouse line that has not provided a covenant

waiver, the Company has sufficient cash and borrowing capacity on the warehouse lines that have provided covenant waivers to fund its

origination activities.

The Company has done an internal analysis of its funding capacities of both internal and external sources and

has determined that there are sufficient funds to continue its business model.

The Company continues to negotiate other warehouse lines

with other lenders.

the six month periods ended June 30, 2023 and 2022, the Company’s operations provided cash of $2,181,000 and $97,639,000, respectively.

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

Company’s liability for future policy benefits is expected to be paid out over the long-term due to the Company’s market

17 unchanged sentences

Bonds owned by the insurance subsidiaries amounted to $340,331,000 (at estimated fair value)

and $345,598,000 (at estimated fair value) as of March 31, 2023 and December 31, 2022, respectively.

and $345,598,000 (at estimated fair value) as of June 30, 2023 and December 31, 2022, respectively.

This represented 38.0% and 36.4%

of the total investments as of March 31, 2023, and December 31, 2022, 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, 2023, 1.9% (or $6,679,000) and at December 31, 2022, 2.2% (or $7,833,000) of the Company’s total

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

of the total investments as of June 30, 2023, and December 31, 2022, 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

At June 30, 2023, 2.0% (or $6,932,000) and at December 31, 2022, 2.2% (or $7,833,000) 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 March 31, 2023 and December 31, 2022, the life insurance

At June 30, 2023 and December 31, 2022, the life insurance

subsidiaries were in compliance with the regulatory criteria.

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $435,425,000 as of March 31, 2023,

Company’s total capitalization of stockholders’ equity, bank and other loans payable was $402,064,000 as of June 30, 2023,

as compared to $454,499,000 as of December 31, 2022.

Stockholders’ equity as a percent of total capitalization was 74.3% and 64.4%

as of March 31, 2023, and December 31, 2022, respectively.

Bank loans and other loans payable decreased by $23,321,000 as of March 31,

2023, as compared to December 31, 2022, which was partially offset by an increase in stockholders’ equity of $4,247,000 as of March

as of June 30, 2023, and December 31, 2022, respectively.

Bank loans and other loans payable decreased by $58,411,000 as of June 30,

2023, as compared to December 31, 2022, which was partially offset by an increase in stockholders’ equity of $5,976,000 as of June

30, 2023 as compared to December 31, 2022, thus causing the increase in the stockholders’ equity percentage.

3 unchanged sentences

The 2023 lapse rate to date has been approximately the same as 2022.

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $94,133,000 and $94,254,000 as of March

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $99,865,000 and $94,254,000 as of June

30, 2023, and December 31, 2022, respectively.

1 unchanged sentence

the approval of state insurance regulatory authorities.

7.01 Regulation FD Disclosure.

March 10, 2023 and March 12, 2023, Silicon Valley Bank and Signature Bank were placed in receivership with the Federal Deposit Insurance

8 unchanged sentences

and community banks.

information furnished in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,

except as shall be expressly set forth by specific reference in such filing.

and Qualitative Disclosures About Market Risk.

1 unchanged sentence

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