What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 194 added, 184 removed, 142 unchanged (73% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations.

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:

15 unchanged sentences

underwriting practices that result in higher mortality costs.

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

following table shows the condensed financial results of the insurance operations for the three and nine month periods ended September

30, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

Three months ended June 30,

Three months ended September 30,

(in thousands of dollars)

Six months ended June 30,

Nine months ended September 30,

(in thousands of dollars)

5 unchanged sentences

Net investment income

Gains on investments and other assets

Losses 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 Company

(“SecurityNational Mortgage”).

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 $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.

revenues are primarily interest income from the warehouse lines of credit for loans held for sale provided to SecurityNational Mortgage

Company (“SecurityNational Mortgage”).

Profitability for the nine month period ended September 30, 2023 increased due to

(a) a $7,081,000 increase in insurance premiums and other considerations, (b) a $6,340,000 increase in net investment income, (c) a $2,049,000

decrease in selling, general and administrative expenses, (d) a $1,696,000 increase in gains on investments and other assets, (e) a $862,000

increase in intersegment revenue, and (f) a $76,000 increase in mortgage fee income, which were partially offset by (i) a $5,270,000

increase in future policy benefits, (ii) a $827,000 increase in death, surrenders and other policy benefits, (iii) a $408,000 increase

in interest expense, (iv) a $294,000 decrease in other revenues, (v) a $158,000 increase in intersegment interest expense and other expenses,

and (vi) a $112,000 increase in amortization of deferred policy acquisition costs.

and Mortuary Operations

8 unchanged sentences

revenue for cemetery land sales occurs when 10% of the purchase price is received.

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.

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

September 30, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

Three months ended June 30,

Three months ended September 30,

(in thousands of dollars)

Six months ended June 30,

Nine months ended September 30,

(in thousands of dollars)

5 unchanged sentences

Net investment income

Gains (losses) on investments and other assets

Losses on investments and other assets

Earnings before income taxes

Profitability

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.

in the nine month period ended September 30, 2023 increased due to (a) a $1,415,000 increase in gains on investments and other assets,

(b) a $1,266,000 increase in cemetery pre-need sales, (c) a $544,000 increase in net investment income, (d) a $75,000 increase in other

revenues, (e) a $33,000 decrease in intersegment interest expense and other expenses, (f) a $14,000 decrease in cost of goods and services

sold, and (g) an $8,000 decrease in amortization of deferred policy acquisition costs, which were partially offset by (i) a $729,000

decrease in cemetery at-need sales, (ii) a $589,000 decrease in mortuary at-need sales, (iii) a $256,000 increase in selling, general

and administrative expenses, and (iv) a $105,000 decrease in intersegment revenues.

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

7 unchanged sentences

SecurityNational

Mortgage receive fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from

Mortgage receives 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.

15 unchanged sentences

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

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.

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

the nine month periods ended September 30, 2023 and 2022, SecurityNational Mortgage originated 5,680 loans ($1,708,831,000 total volume)

and 8,886 loans ($2,837,349,000 total volume), respectively.

following table shows the condensed financial results of the mortgage operations for the three and nine month periods ended September

30, 2023, and 2022.

See Note 7 to the condensed consolidated financial statements.

Three months ended June 30,

Three months ended September 30,

(in thousands of dollars)

Six months ended June 30,

Nine months ended September 30,

(in thousands of dollars)

8 unchanged sentences

Gains on investments and other assets

Earnings before income taxes

Earnings (loss) before income taxes

in other revenues is service fee income.

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

Profitability for the nine month period ended September 30, 2023 decreased due to (a) a $48,411,000

decrease in secondary gains from investors, (b) a $13,170,000 decrease in other revenues, (c) a $2,651,000 decrease in income from loan

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.

originations, (d) a $772,000 increase in intersegment interest expense and other expenses, (e) a $226,000 increase in rent and rent related

expenses, and (f) a $194,000 decrease in gains on investments and other assets, which were partially offset by (i) a $22,475,000 decrease

in commissions, (ii) a $14,426,000 decrease in personnel expenses, (iii) a $10,985,000 decrease in other expenses, (iv) a $7,257,000

increase in the fair value of loans held for sale, (v) a $2,152,000 decrease in interest expense, (vi) a $1,865,000 increase in the fair

value of loan commitments, (vii) a $1,009,000 decrease in costs related to funding mortgage loans, (viii) an $867,000 decrease in advertising

expenses, (ix) a $542,000 increase in net investment income, (x) a $140,000 increase in intersegment revenues, and (xi) an $18,000

decrease in depreciation on property and equipment.

Results of Operations

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, 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 $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

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

revenues decreased by $3,235,000, or 3.9%, to $80,242,000 for the three month period ended September 30, 2023, from $83,477,000 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.

This increase was primarily due to an increase of $2,829,000 in first year premiums and

an increase of $72,000 in renewal premiums.

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

Contributing to this decrease in total revenues was a $4,888,000 decrease in other revenues and a $3,672,000

decrease in mortgage fee income, which were partially offset by a $2,669,000 increase in insurance premiums and other considerations,

a $1,247,000 increase in gains on investments and other assets, a $764,000 increase in net mortuary and cemetery sales, and a $645,000

increase in net investment income.

fee income decreased by $3,672,000, or 12.8%, to $24,936,000, for the three month period ended September 30, 2023, from $28,608,000 for

the comparable period in 2022.

This decrease was primarily due to a $11,316,000 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, which

was partially offset by a $4,023,000 increase in the fair value of loans held for sale, a $1,854,000 increase in loan fees and interest

income net of an increase in the provision for loan loss reserve and a $1,767,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $2,669,000, or 10.2%, to $28,907,000 for the three month period ended September 30, 2023,

from $26,238,000 for the comparable period in 2022.

This increase was primarily due to an increase of $2,737,000 in first year premiums,

which was partially offset by a decrease of $68,000 in renewal premiums.

investment income increased by $645,000, or 3.5%, to $19,248,000 for the three month period ended September 30, 2023, from $18,603,000

for the comparable period in 2022.

This increase was primarily attributable to a $1,054,000 increase in fixed maturity securities income,

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

a $568,000 increase in interest on cash and cash equivalents, a $125,000 decrease in investment expenses, a $122,000 increase in insurance

assignment income, a $32,000 increase in other investment income, and a $28,000 increase in equity securities income, which were partially

offset by a $635,000 decrease in mortgage loan interest, a $627,000 decrease in real estate income, and a $22,000 decrease in policy

loan interest.

mortuary and cemetery sales increased by $764,000, or 11.8%, to $7,234,000 for the three month period ended September 30, 2023, from

$6,470,000 for the comparable period in 2022.

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.

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 $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.

This increase was primarily due to a $771,000 increase in cemetery pre-need sales and a

$110,000 increase in cemetery at-need sales, which were partially offset by a $117,000 decrease in mortuary at-need sales.

on investments and other assets decreased by $1,247,000, or 57.2%, to $932,000 for the three month period ended September 30, 2023, from

$2,179,000 for the comparable period in 2022.

This decrease in losses on investments and other assets was primarily due to a $764,000

increase in gains on real estate, a $518,000 increase in gains on equity securities mostly attributable to increases in the fair value

of these equity securities, and a $25,000 increase in gains on fixed maturity securities, which were partially offset by a $60,000 decrease

in gains on other assets mostly attributable to the Company discontinuing its use of call and put option derivatives in the first quarter

revenues decreased by $4,888,000, or 85.2%, to $849,000 for the three month period ended September 30, 2023, from $5,737,000 for the

comparable period in 2022.

This decrease was primarily attributable to a decrease in servicing fee revenue because of the sale of certain

mortgage servicing rights in October 2022.

benefits and expenses were $75,083,000, or 93.6% of total revenues, for the three month period ended September 30, 2023, as compared

to $86,780,000, or 104.0% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $2,898,000 or 12.8%, to $25,622,000

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 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 $17,174,000, or 28.1%, to $43,873,000 for the three month period ended June 30, 2023,

for the three month period ended September 30, 2023, from $22,724,000 for the comparable period in 2022.

This increase was primarily

the result of a $2,087,000 increase in future policy benefits, a $681,000 increase in death benefits, and a $130,000 increase in surrender

and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired decreased by $581,000, or 11.5%, to $4,481,000 for the

three month period ended September 30, 2023, from $5,062,000 for the comparable period in 2022.

This decrease was primarily due to increased

payment consistency from premium-paying products.

general and administrative expenses decreased by $13,005,000, or 23.4%, to $42,652,000 for the three month period ended September 30,

2023, from $55,657,000 for the comparable period in 2022.

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

This decrease was primarily the result of a $4,537,000 decrease in commissions,

a $4,158,000 decrease in personnel expenses, a $4,053,000 decrease in other expenses, a $378,000 decrease in advertising expense, a $46,000

decrease in depreciation on property and equipment, and a $23,000 decrease in rent and rent related expenses which were partially offset

by a $192,000 increase in costs related to funding mortgage loans.

expense decreased by $985,000, or 46.1%, to $1,152,000 for the three month period ended September 30, 2023, from $2,137,000 for the comparable

period in 2022.

This decrease was primarily due to a decrease of $776,000 in interest expense on mortgage warehouse lines for loans held

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.

This decrease was primarily due to a decrease of $975,000 in interest expense on mortgage warehouse lines of credit for

loans held for sale and a decrease of $10,000 in interest expense on bank loans.

month period ended September 30, 2023, Compared to Nine month period ended September 30, 2022

revenues decreased by $37,881,000, or 13.5%, to $243,589,000 for the nine month period ended September 30, 2023, from $281,470,000 for

the comparable period in 2022.

Contributing to this decrease in total revenues was a $41,979,000 decrease in mortgage fee income, a $13,389,000

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

decrease in other revenues, and a $52,000 decrease in net mortuary and cemetery sales, which were partially offset by a $7,427,000 increase

in net investment income, a $7,196,000 increase in insurance premiums and other considerations, and a $2,916,000 increase in gains on

investments and other assets.

fee income decreased by $41,979,000, or 35.3%, to $77,004,000, for the nine month period ended September 30, 2023, from $118,983,000

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 decrease was primarily due to a $48,451,000 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 $2,650,000 decrease in loan fees and interest income net of an increase in the provision for loan loss reserve, which were partially

offset by a $7,257,000 increase in the fair value of loans held for sale and a $1,865,000 increase in the fair value of loan commitments.

premiums and other considerations increased by $7,196,000, or 9.2%, to $85,687,000 for the nine month period ended September 30, 2023,

from $78,491,000 for the comparable period in 2022.

This increase was primarily due to an increase of $6,755,000 in first year premiums

and an increase of $441,000 in renewal premiums.

investment income increased by $7,427,000, or 14.9%, to $57,195,000 for the nine month period ended September 30, 2023, from $49,769,000

for the comparable period in 2022.

This increase was primarily attributable to a $3,762,000 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

a $1,953,000 increase in interest on cash and cash equivalents, a $1,008,000 decrease in investment expenses, a $583,000 increase in

real estate income, a $205,000 increase in income from other investments, a $116,000 increase in mortgage loan interest, and a $66,000

increase in equity securities income, which were partially offset by a $138,000 decrease in insurance assignment income and a $128,000

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

mortuary and cemetery sales decreased by $52,000, or 0.3%, to $20,874,000 for the nine month period ended September 30, 2023, from $20,926,000

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

This decrease was primarily due to a $729,000 decrease in cemetery at-need sales and a $589,000 decrease

in mortuary at-need sales, which were partially offset by a $1,266,000 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.

on investments and other assets decreased by $2,916,000, or 99.8%, to $5,000 for the nine month period ended September 30, 2023, from

$2,921,000 for the comparable period in 2022.

This decrease in losses on investments and other assets was primarily due to a $4,011,000

decrease in losses on equity securities mostly attributable to increases in the fair value of these equity securities, which were partially

offset by a $439,000 increase in losses on fixed maturity securities, a $292,000 decrease in gains on other invested assets, a $238,000

decrease in gains on real estate, and a $126,000 decrease in gains on call and put option derivatives due to the Company discontinuing

is use of call and put option derivatives in the first quarter of 2023.

revenues decreased by $13,389,000, or 82.5%, to $2,832,000 for the nine month period ended September 30, 2023, from $16,221,000 for the

comparable period in 2022.

This decrease was primarily attributable to a decrease in servicing fee revenue because of the sale of certain

mortgage servicing rights in October 2022.

benefits and expenses were $228,696,000, or 93.9% of total revenues, for the nine month period ended September 30, 2023, as compared

to $275,599,000, or 97.9% of total revenues, for the comparable period in 2022.

benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $6,098,000 or 8.7%, to $76,394,000

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.

for the nine month period ended September 30, 2023, from $70,296,000 for the comparable period in 2022.

This increase was primarily the

result of a $5,270,000 increase in future policy benefits and a $1,092,000 increase in death benefits, which were partially offset by

a $264,000 decrease in surrender and other policy benefits.

of deferred policy and pre-need acquisition costs and value of business acquired increased by $104,000, or 0.8%, to $13,615,000 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,

nine month period ended September 30, 2023, from $13,511,000 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 $51,346,000, or 28.2%, to $131,052,000 for the nine month period ended September 30,

2023, from $182,398,000 for the comparable period in 2022.

This decrease was primarily the result of a $22,426,000 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.

a $14,067,000 decrease in personnel expenses, a $12,136,000 decrease in other expenses, a $1,817,000 decrease in advertising expense,

a $1,009,000 decrease in costs related to funding mortgage loans, and a $114,000 decrease in depreciation on property and equipment,

which were partially offset by a $223,000 increase in rent and rent related expenses.

expense decreased by $1,744,000, or 30.3%, to $4,020,000 for the nine month period ended September 30, 2023, from $5,764,000 for the

comparable period in 2022.

This decrease was primarily due to a decrease of $2,152,000 in interest expense on mortgage warehouse lines

of credit for loans held for sale, which was partially offset by an increase of $408,000 in interest expense on bank loans.

and Capital Resources

8 unchanged sentences

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

niche of selling funeral plans.

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.

As of September 30, 2023, the Company’s

subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under its Warehouse Lines of Credit and has

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

In the unlikely event SecurityNational Mortgage is required

to repay the outstanding advances of approximately $10,200,000 on the Warehouse Line of Credit that has not provided a covenant waiver,

SecurityNational Mortgage has sufficient cash and borrowing capacity on the Warehouse Lines of Credit that have provided covenant waivers

to fund its origination activities.

The Company has done an internal analysis of the 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 of credit with other lenders.

the nine month periods ended September 30, 2023 and 2022, the Company’s operations provided cash of $18,384,000 and $109,318,000,

respectively.

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

Company expects to pay out liabilities under its funeral plans over the long term given the nature of those plans.

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 until, and do not surrender prior to, death.

Because of the long-term nature of these liabilities, the Company

can hold to maturity or for the targeted investment period its corresponding bond, real estate, and mortgage loan investments, thus reducing

the risk of liquidating these long-term investments because 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.

2 unchanged sentences

The Company purchases short-term

investments on a temporary basis to meet the expectations of short-term requirements of the Company’s products.

investments on a temporary basis to meet the expected short-term requirements of the Company’s insurance 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.

investment philosophy is intended to provide a rate of return for the expected duration of its cemetery and mortuary policies that will

exceed the accruing of liabilities under those policies 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 $340,331,000 (at estimated fair value)

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 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 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 $402,064,000 as of June 30, 2023,

of mortgage loans.

The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans to investors

in accordance with the requirements and laws governing the Company’s life insurance subsidiaries.

Bonds owned by the insurance

subsidiaries amounted to $341,252,000 (at estimated fair value) and $345,598,000 (at estimated fair value) as of September 30, 2023 and

December 31, 2022, respectively.

This represented 38.5% and 36.4% of the total investments of the Company as of September 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 bonds.

As of September 30, 2023, 1.9%

(or $6,307,000) and as of 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’s life insurance subsidiaries are 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.

As of September 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 $406,325,000 as of September 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 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.

This decrease was primarily due to a decrease of $53,281,000 in bank loans

and other loans payable, which was partially offset by a $5,107,000 increase in stockholders’ equity.

Stockholders’ equity

as a percent of total capitalization was 73.3% and 64.4% as of September 30, 2023, and December 31, 2022, respectively.

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

The Company’s lapse rate for life insurance in 2022

was 4.3% as compared to a rate of 4.8% for 2021.

was 4.3% as compared to a lapse rate of 4.8% for 2021.

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 $99,865,000 and $94,254,000 as of June

combined statutory capital and surplus of the Company’s life insurance subsidiaries was $103,984,000 and $94,254,000 as of September

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

11 unchanged sentences

and community banks.

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