Item 1A. Risk Factors 10
Item 1B. Unresolved Staff Comments 10
Item 1C. Cybersecurity 10
Item 2. Properties 12
Item 3. Legal Proceedings 16
Item 4. Mine Safety Disclosures 16
Part II
Item 6. [Reserved] 18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 27
Item 8. Financial Statements and Supplementary Data 28
Item 9A. Controls and Procedures 118
Item 9B. Other Information 118
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 119
Part III
Item 10. Directors, Executive Officers, and Corporate Governance 119
Item 11. Executive Compensation 119
Item 14. Principal Accounting Fees and Services 119
Part IV
Item 15. Exhibits, Financial Statement Schedules 119
PART
I
Item
1. Business
Security
National Financial Corporation (the “Company”) operates in three reportable business segments: life insurance, cemetery and
mortuary, and mortgages. The life insurance segment is engaged in the business of selling and servicing selected lines of life insurance,
annuity products, and accident and health insurance. These products are marketed in 42 states through a commissioned sales force of independent
licensed insurance agents who may also sell insurance products of other companies. The cemetery and mortuary segment consists of eleven
mortuaries and five cemeteries in the state of Utah, one cemetery in the state of California, and one cemetery and four mortuaries in
the state of New Mexico. The Company also engages in pre-need selling of funeral, cemetery, mortuary, and cremation services through
its cemetery and mortuary locations. The mortgage segment originates and underwrites or otherwise purchases residential and commercial
loans for new construction, existing homes, and other real estate projects. The mortgage segment operates through 97 retail offices in
26 states and is an approved mortgage lender in several other states.
The
Company’s design and structure are that each business segment is related to the other business segments and contributes to the
profitability of the other segments. The Company’s cemetery and mortuary segment provides a level of public awareness that assists
in the sales and marketing of insurance and pre-need cemetery and funeral products. The Company’s insurance segment invests its
assets (including, in part, pre-need funeral products and services) in investments authorized by the respective insurance departments
of their states of domicile. The Company also pursues growth through acquisitions. The Company’s mortgage segment provides mortgage
loans and other real estate investment opportunities.
The
Company was organized as a holding company in 1979 when Security National Life Insurance Company (“Security National Life”)
became a wholly owned subsidiary of the Company, and the former stockholders of Security National Life became stockholders of the Company.
Security National Life was formed in 1965 and has acquired or purchased significant blocks of business which include Capital Investors
Life Insurance Company (1994), Civil Service Employees Life Insurance Company (1995), Southern Security Life Insurance Company (1998),
Menlo Life Insurance Company (1999), Acadian Life Insurance Company (2002), Paramount Security Life Insurance Company (2004), Memorial
Insurance Company of America (2005 and subsequently sold in 2021 to FOXO Life Insurance Company), Capital Reserve Life Insurance Company
(2007), Southern Security Life Insurance Company, Inc. (2008), North America Life Insurance Company (2011, 2015), Trans-Western Life
Insurance Company (2012), Mothe Life Insurance Company (2012), DLE Life Insurance Company (2012), American Republic Insurance Company
(2015), First Guaranty Insurance Company (2016), Kilpatrick Life Insurance Company (2019), and merger with FOXO Life Insurance Company
(2023).
The
cemetery and mortuary operations have also grown through the acquisition of other cemetery and mortuary companies. The cemetery and mortuary
companies that the Company has acquired are Holladay Memorial Park, Inc. (1991), Cottonwood Mortuary, Inc. (1991), Deseret Memorial,
Inc. (1991), Probst Family Funerals and Cremations L.L.C. (2019), Heber Valley Funeral Home, Inc. (2019), Rivera Funerals, Cremations
and Memorial Gardens (2021), and Holbrook Mortuary (2021).
In
1993, the Company formed SecurityNational Mortgage Company (“SecurityNational Mortgage”) to originate and refinance residential
mortgage loans.
See
Note 15 of the Notes to Consolidated Financial Statements for additional information regarding the business segments of the Company.
Life
Insurance
Products
The
Company, through Security National Life, First Guaranty Insurance Company (“First Guaranty”), and Kilpatrick Life Insurance
Company (“Kilpatrick”), issues and administers selected lines of life insurance and annuities. The Company’s life insurance
business includes funeral plans and interest-sensitive life insurance, as well as other traditional life, accident, and limited health
insurance products. The Company places specific marketing emphasis on funeral plans through pre-need planning. The Company’s insurance
subsidiaries, Kilpatrick, Southern Security Life Insurance Company, Inc. (“Southern Security”) and Trans-Western Life Insurance
Company (“Trans-Western”), do not actively write policies, but service and maintain policies that were issued prior to their
acquisition by Security National Life.
A
funeral plan is a small face value life insurance policy that generally has face coverage of up to $30,000. The Company believes that
funeral plans represent a marketing niche that has less competition because most insurance companies do not offer similar coverage. The
purpose of the funeral plan policy is to pay the costs and expenses incurred at the time of a person’s death. On a per thousand-dollar
cost of insurance basis, these policies can be more expensive to the policyholder than many types of non-burial insurance due to their
low face amount, requiring the fixed cost of the policy administration to be distributed over a smaller policy size, and the simplified
underwriting practices that result in higher mortality costs.
Markets
and Distribution
The
Company is licensed to sell insurance in 42 states. In marketing its life insurance products, the Company seeks to locate, develop and
service specific niche markets. The Company’s funeral plan policies are sold primarily to people who range in age from 45 to 85
and have low to moderate income. Most of the Company’s funeral plan premiums come from the states of Arkansas, California, Florida,
Georgia, Louisiana, Mississippi, Texas, and Utah.
The
Company sells its life insurance products through direct agents, brokers, and independent licensed agents who may also sell insurance
products of other companies. The commissions on life insurance products range from approximately 50% to 150% of first year premiums.
In those cases where the Company utilizes its direct agents in selling such policies, those agents customarily receive advances against
future commissions.
In
some instances, funeral plan insurance is marketed in conjunction with the Company’s cemetery and mortuary sales force. When it
is marketed by that group, the beneficiary is usually the Company’s cemeteries and mortuaries. Thus, death benefits that become
payable under the policy are paid to the Company’s cemetery and mortuary subsidiaries to the extent of services performed and products
purchased.
In
marketing funeral plan insurance, the Company also seeks and obtains third-party endorsements from other cemeteries and mortuaries within
its marketing areas. Typically, these cemeteries and mortuaries will provide letters of endorsement and may share in mailing and other
lead-generating costs since these businesses are usually made the beneficiary of the policy. The following table summarizes the life
insurance business for the five years ended December 31, 2024:
Life Insurance
(1)
Prior years have been adjusted to include accidental death benefit insurance in force that was inadvertently excluded.
Underwriting
The
factors considered in evaluating an application for ordinary life insurance coverage can include the applicant’s age, occupation,
general health condition, and medical history. Upon receipt of a satisfactory (non-funeral plan insurance) application, which contains
pertinent medical questions, the Company issues insurance based upon its medical limits and requirements subject to the following general
non-medical limits:
Non-Medical Age Nearest
Limits Birthday
51-up Medical information
required (APS or exam)
When
underwriting life insurance, the Company will sometimes issue policies with higher premium rates for substandard risks.
The
Company’s funeral plan insurance is written on a simplified medical application with underwriting requirements being a completed
application, a phone interview of the applicant, and an intelliscript prescription history inquiry. There are several underwriting classes
in which an applicant can be placed.
Annuities
Products
The
Company’s annuity business includes single premium deferred annuities, flexible premium deferred annuities, and immediate annuities.
A single premium deferred annuity is a contract where the individual remits a sum of money to the Company, which is retained on deposit
until such time as the individual may wish to annuitize or surrender the contract for cash. A flexible premium deferred annuity gives
the contract holder the right to make premium payments of varying amounts or to make no further premium payments after his initial payment.
These single and flexible premium deferred annuities can have initial surrender charges. The surrender charges act as a deterrent to
individuals who may wish to prematurely surrender their annuity contracts. An immediate annuity is a contract in which the individual
remits a sum of money to the Company in return for the Company’s obligation to pay a series of payments on a periodic basis over
a designated period, such as an individual’s life, or for such other period as may be designated.
Annuities
have guaranteed interest rates that range from 1% to 6.5% per annum. Rates above the guaranteed interest rate credited are periodically
modified by the Company’s Board of Directors at its discretion. For the Company to make a profit on an annuity product, the Company
must maintain an interest rate spread between its investment income and the interest rates credited to the annuities. Commissions, issuance
expenses, and general and administrative expenses are deducted from this interest rate spread.
Markets
and Distribution
The
general market for the Company’s annuities is middle to older age individuals. A major source of annuity sales comes from direct
agents and are sold in conjunction with other insurance sales. If an individual does not qualify for a funeral plan, the agent will often
sell that individual an annuity to fund final expenses.
The
following table summarizes the annuity business for the five years ended December 31, 2024:
Accident
and Health
Products
Through
its various acquisitions, the Company occasionally acquires small blocks of accident and health insurance policies, which it continues
to service. The Company offered a low-cost comprehensive diver’s accident insurance policy that provided worldwide coverage for
medical expense reimbursement in the event of a diving accident. This product was discontinued in March 2024.
Markets
and Distribution
The
Company marketed its diver’s accident insurance policies through the internet.
The
following table summarizes the accident and health insurance business for the five years ended December 31, 2024:
Reinsurance
The
primary purpose of reinsurance is to enable an insurance company to issue an insurance policy in an amount larger than the risk the insurance
company is willing to assume for itself. The insurance company remains obligated for the amounts reinsured (ceded) in the event the reinsurers
do not meet their obligations.
The
Company currently cedes and assumes certain risks with various authorized unaffiliated reinsurers pursuant to reinsurance treaties, which
are generally renewed annually. The premiums paid by the Company are based on a number of factors, primarily including the age of the
insured and the risk ceded to the reinsurer.
It
is the Company’s policy to retain no more than $100,000 of ordinary insurance per life insured, with the excess risk being reinsured.
The total policy amount of life insurance reinsured by other companies as of December 31, 2024 and 2023, was $325,189,000 and $333,211,000,
which represented approximately 9.4% and 9.3% of the Company’s total life insurance policy amount in force on that date, respectively.
See
“Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes to Consolidated
Financial Statements” for additional disclosure and discussion regarding reinsurance.
Investments
The
investments that support the Company’s life insurance and annuity obligations are determined by the investment committees of the
Company’s subsidiaries and ratified by the full boards of directors of the respective subsidiaries. A significant portion of the
Company’s investments must meet statutory requirements governing the nature and quality of permitted investments by its insurance
subsidiaries. The Company maintains a diversified investment portfolio consisting of common stocks, preferred stocks, municipal bonds,
corporate bonds, mortgage loans, real estate, and other securities and investments.
See
“Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes to Consolidated
Financial Statements” for additional disclosure and discussion regarding investments.
Cemetery
and Mortuary
Products
Through
its cemetery and mortuary segment, the Company markets a variety of products and services both on a pre-need basis (prior to death) and
an at-need basis (at the time of death). The products include plots, interment vaults, mausoleum crypts, markers, caskets, urns, and
other death care related products. These services include professional services of funeral directors, opening and closing of graves,
use of chapels and viewing rooms, and use of automobiles and clothing. The Company has a mortuary at each of its cemeteries, other than
Holladay Memorial Park and Singing Hills Memorial Park, and has ten separate stand-alone mortuary facilities.
Markets
and Distribution
The
Company’s pre-need cemetery and mortuary sales are marketed to persons of all ages but are generally purchased by persons 45 years
of age and older. The Company is limited in its geographic distribution of these products to areas lying within an approximate 20-mile
radius of its mortuaries and cemeteries. The Company’s at-need sales are similarly limited in the geographic area.
The
Company actively seeks to sell its cemetery and funeral products to customers on a pre-need basis. The Company employs cemetery sales
representatives on a commission basis to sell these products. Many of these pre-need cemetery and mortuary sales representatives are
also licensed insurance salesmen and sell funeral plan insurance. In some instances, the Company’s cemetery and mortuary facilities
are the named beneficiaries of the funeral plan policies.
Potential
customers are located via telephone sales prospecting, responses to letters mailed by the pre-planning consultants, billboards and other
outside advertising, referrals, and door-to-door canvassing. The Company trains its sales representatives and helps generate leads for
them.
Mortgage
Loans
Products
The
Company, through SecurityNational Mortgage, is active in the residential real estate market. SecurityNational Mortgage is approved by
the U.S. Department of Housing and Urban Development (HUD), the Federal National Mortgage Association (Fannie Mae), and other secondary
market investors, to originate a variety of residential mortgage loan products, which are subsequently sold to investors. The Company
uses internal and external funding sources to fund mortgage loans.
Security
National Life originates and funds commercial real estate loans, residential construction loans, and land development loans for internal
investment.
Markets
and Distribution
The
Company’s residential mortgage lending services are marketed primarily to real estate brokers, builders and directly to consumers.
The Company has a strong retail origination presence in the Utah, Florida, Texas, Nevada and Arizona markets and many other states across
the country. See “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and “Notes
to Consolidated Financial Statements” for additional disclosure and discussion regarding mortgage loans.
Recent
Acquisitions and Other Business Activities
Real
Estate Development
The
Company is capitalizing on the opportunity to develop commercial and residential assets on its existing and recently acquired properties.
The cost to acquire existing for-sale assets currently exceeds the replacement costs, thus creating the opportunity for development and
redevelopment of the land that the Company currently owns. The Company has developed, or is in the process of developing, assets that
have an initial development cost exceeding $100,000,000, primarily relating to the Center53 Development and multiple single family residential
development projects. The Company plans to continue its development endeavors based upon its assessment of the market demand.
Center53
Development
Center53
Development is an office development project comprising nearly 20 acres of land that is currently owned by the Company in the central
valley of Salt Lake City. At final completion, the multi-year phased development is expected to create a campus atmosphere and include
nearly one million square-feet of office space in five buildings, ranging from four to eleven stories, and will be serviced by three
parking structures with approximately 4,000 stalls. In 2015, the Company broke ground and commenced development on the first phase which
included a six-story building of nearly 200,000 square feet and a parking garage with 748 parking stalls. The first phase of the project
was completed in July 2017 and is currently 88% leased. The second phase of the project began in March 2020 and includes a second six-story
building of nearly 221,000 square feet and a parking garage with approximately 870 stalls. The Company began its occupancy of a portion
of the building in October 2021 and the remainder of the building is currently 100% leased. The Company plans to initiate future phases
of the Center53 Development for additional Class A office space in the central valley of Salt Lake City.
Regulation
The
Company’s insurance subsidiaries are subject to comprehensive regulations in the jurisdictions in which they do business under
statutes and regulations administered by state insurance commissioners. Such regulation relates to, among other things, prior approval
of the acquisition of a controlling interest in an insurance company; standards of solvency which must be met and maintained; licensing
of insurers and their agents; nature of and limitations on investments; deposits of securities for the benefit of policyholders; approval
of policy forms and premium rates; periodic examinations of the affairs of insurance companies; annual and other reports required to
be filed on the financial condition of insurers or for other purposes; and requirements regarding aggregate reserves for life policies
and annuity contracts, policy claims, unearned premiums, and other matters. The Company’s insurance subsidiaries are subject to
this type of regulation in any state in which they conduct relevant business. Such regulations may cause unforeseen costs and operational
restrictions, and delay implementation of the Company’s business plans.
The
Company’s life insurance subsidiaries are currently subject to regulations in Utah, Louisiana, Mississippi and Texas under insurance
holding company legislation, and other states where applicable. Generally, intercompany transfers of assets and dividend payments from
insurance subsidiaries are subject to prior notice of approval from the relevant state insurance department when they are deemed “extraordinary”
under relevant state law. The insurance subsidiaries are required, under state insurance laws, to file detailed annual reports with the
supervisory agencies in each of the states in which they do business. Their business and accounts are also subject to examination by
these agencies every three to five years. The Company’s life insurance subsidiaries completed their last examinations in 2021 and
2022 for the period ending December 31, 2020 and the resulting final examination reports were approved by the insurance departments and
are public records. Security National Life, First Guaranty, Kilpatrick, and Southern Security have received notice of a regularly scheduled
multi-year examination for the years 2021-2024 that will commence in the second quarter of 2025.
The
Texas Department of Banking also audits pre-need insurance policies that are issued in the state of Texas. Pre-need policies include
the life and annuity products sold as the funding mechanism for funeral plans through funeral homes by Security National agents. The
Company is required to send the Texas Department of Banking an annual report that summarizes the number of policies in force and the
face amount or death benefit for each policy. This annual report is also required to indicate the number of new policies issued for that
year, all death claims paid that year, and all premiums received.
The
Company’s cemetery and mortuary subsidiaries are subject to the Federal Trade Commission’s comprehensive funeral industry
rules and to state regulations in the various states where such operations are domiciled. The morticians must be licensed by the respective
state in which they provide their services. Similarly, the mortuaries and cemeteries are governed and licensed by state statutes and
city ordinances in Utah, California, and New Mexico. The subsidiaries are required to keep annual reports on file including financial
information concerning the number of spaces sold and, where applicable, funds provided to the Endowment Care Trust Fund. Licenses are
issued annually based on such reports. The cemeteries maintain city or county licenses where they conduct business.
The
Company’s mortgage subsidiaries are subject to the rules and regulations of the U.S. Department of Housing and Urban Development
(HUD), and to various state licensing acts and regulations and the Consumer Financial Protection Bureau (CFPB). These regulations, among
other things, specify minimum capital requirements; procedures for loan origination and underwriting, licensing of brokers and loan officers
and quality review audits and specify the fees that can be charged to borrowers. Each year, the Company is required to have an audit
completed for its mortgage subsidiary by an independent registered public accounting firm to verify compliance with the relevant regulations.
In addition to the government regulations, the Company must meet loan requirements, and underwriting guidelines of various investors
who purchase the loans.
Income
Taxes
The
Company’s insurance subsidiaries, Security National Life, First Guaranty and Kilpatrick are taxed under the Life Insurance Company
Tax Act of 1984. Under the act, life insurance companies are taxed at standard corporate rates on life insurance company taxable income.
Life insurance company taxable income is gross income less general business deductions and reserves for future policyholder benefits
(with modifications). Under The Tax Cuts and Jobs Act (the “Tax Act”), December 31, 2017 policyholder surplus account balances
result in taxable income over a period of eight years.
Security
National Life, First Guaranty and Kilpatrick calculate their life insurance taxable income after establishing a provision representing
a portion of the costs of acquisition of such life insurance business. The effect of the provision is that a certain percentage of the
Company’s premium income is characterized as deferred expenses and recognized over a five or ten-year period. The Tax Act changed
this recognition period for amounts deferred after December 31, 2017 to a five or fifteen-year period.
The
Company’s non-life insurance company subsidiaries are taxed in general under the regular corporate tax provisions. The Company’s
subsidiaries Southern Security and Trans-Western are regulated as life insurance companies but do not meet the Internal Revenue Code
definition of a life insurance company, so they are taxed as insurance companies other than life insurance companies.
Competition
The
life insurance industry is highly competitive. There are approximately 700 legal reserve life insurance companies in business in the
United States. These insurance companies differentiate themselves through marketing techniques, product features, pricing, and customer
service. The Company’s insurance subsidiaries compete with many insurance companies, many of which have greater financial resources,
longer business histories, and more diversified lines of insurance products than the Company. In addition, such companies generally have
larger sales forces. Further, the Company competes with mutual insurance companies which may have a competitive advantage because all
profits accrue to policyholders. Because the Company is smaller by industry standards and lacks broad diversification of risk, it may
be more vulnerable to losses than larger, better-established companies. The Company believes that its policies and rates for the markets
it serves are generally competitive.
The
cemetery and mortuary industry are highly competitive. In the Utah, California, and New Mexico markets where the Company competes, there
are several cemeteries and mortuaries which have longer business histories, more established positions in the community, and stronger
financial positions than the Company. In addition, some of the cemeteries with which the Company must compete for sales are owned by
municipalities and, as a result, can offer lower prices than can the Company. The Company bears the cost of a pre-need sales program
that is not incurred by those competitors which do not have a pre-need sales force. The Company believes that its products and prices
are generally competitive with those in the industry.
The
mortgage industry is highly competitive with many mortgage companies and banks in the same geographic area in which the Company is operating.
The mortgage industry in general is sensitive to changes in interest rates and the refinancing market is particularly vulnerable to changes
in interest rates.
Seasonality
The
Company’s business is generally not subject to seasonal fluctuations.
Human
Capital Management
As
of December 31, 2024, the Company employed 1,186 full-time and 235 part-time employees. Of the full-time employees, 678 were employed
by the mortgage segment, 388 by the life insurance segment, and 120 by the cemetery and mortuary segment. The Company requires monthly
acknowledgement of its anti-discrimination and anti-harassment policies and communicates to its employees how to report concerns that
relate to their employment experience.
Employee
Benefits
All
eligible employees may elect coverage under the Company’s group health (including health savings and flexible spending), retirement,
supplemental life and voluntary benefit programs. As of December 31, 2024, 757 employees had elected to participate in the Company’s
group health insurance plans.
The
Company sponsors a 401(k) retirement plan for each business segment. These retirement plans qualify under section 401(k) of the Internal
Revenue Code and, if approved by the Company’s Board of Directors, the Company makes a matching contribution in Company stock based
on the employee’s contribution amount.
The
Company provides other time off benefits such as paid sick time and paid vacation time. The Company provides discounts on certain services
provided by the Company to its employees. Additionally, the Company offers an employee assistance program that provides 24/7 counseling
services for employees who may be facing challenges outside of the workplace.
Available
Information
The
Company’s internet address is www.securitynational.com. The Company’s investor relations website is www.investor.securitynational.com
and the Company promptly makes available on this website, free of charge, the reports that it files or furnishes with the Securities
and Exchange Commission.
Item
1A. Risk Factors
As
a smaller reporting company, the Company is not required to provide information typically disclosed under this item.
Item
1B. Unresolved Staff Comments
None.
As a smaller reporting company, the Company is not required to provide information typically disclosed under this item.
Item
1C. Cybersecurity
The
Company maintains a strong information security program and systems (“Cybersecurity System”) to guard against unauthorized
access, malicious software, corruption of data, disruption of its networks and systems and unauthorized release of confidential information.
The Company’s Cybersecurity System is comprised of multiple layers of controls to reduce the risk of cybersecurity incidents.
Risk
Management and Strategy
The
Company’s Cybersecurity System includes administrative, technical, and physical safeguards and is designed to provide an appropriate
level of protection to maintain the confidentiality, integrity and availability of the Company’s and its customers’ information.
This includes protecting against known and evolving threats to the security of the Company’s systems and information, and against
unauthorized access, compromise, or loss of data. The Cybersecurity System is managed centrally, so the same security controls, policies
and procedures are implemented across the organization. The Company maintains cybersecurity policies including an Acceptable Use Policy
that all system users sign to acknowledge that they understand their security responsibilities. All system users receive security awareness
training which includes phishing attack simulation testing.
A
key element of the Company’s Cybersecurity System is to mature the program to align with the Center for Internet Security (CIS)
Critical Security Controls security framework. CIS controls are designed based on real-world data about cyber-attacks, to ensure that
the measures are effective against current threats. The framework provides a prioritized set of actions, which enables the Company to
focus its efforts on the most effective defensive measures first. This prioritization helps in optimizing the use of resources for maximum
impact on security. This strategy provides a structured and effective approach to cybersecurity, helping the Company to protect its assets,
comply with regulations, manage risks, and improve its overall security posture.
The
Company maintains cyber insurance coverage that may, subject to policy terms, conditions, and limitations, cover certain aspects of cybersecurity
risks; however, such insurance coverage may be unavailable or insufficient to cover all losses or all types of claims that may arise
in the continually evolving area of cyber risk.
Governance
The
Company has established controls and procedures to escalate enterprise-level issues, including cybersecurity matters, to the appropriate
management levels within its organization and to its Board of Directors, or members or committees thereof, as appropriate. The Company’s
Board of Directors has oversight for enterprise risk management, including its approach to managing cybersecurity risk, and has delegated
oversight responsibility of information security risks to its Audit Committee.Matters determined to present potential material impacts
to the Company’s financial results, operations, and/or reputation are reported by management to the Company’s Board of Directors
or its Audit Committee, as appropriate, in accordance with its escalation framework.
In
addition, the Company has established procedures to ensure that management personnel are informed in a timely manner of known cybersecurity
risks and incidents that may materially impact the Company’s operations and that timely public disclosure is made as appropriate.
The Company’s Cybersecurity System is led by the Chief Information Officer (“CIO”) in collaboration with a third-party
virtual Chief Information Security Officer (“vCISO”) and other third-party cybersecurity service providers which in turn
assist in monitoring the Company’s exposure from significant information technology suppliers, significant software as service
providers and major vendors with access to the Company’s information technology systems. The Company’s CIO has 10+ years
of cybersecurity industry experience. Further, team members who support the Company’s cybersecurity program have relevant educational
and industry experience through various roles involving information technology, security, auditing, compliance, systems, and programming,
as well as cybersecurity certifications such as a Certified Information Systems Security Professional (CISSP) and Certified Information
Security Manager (CISM). During the last three years, the Company has not experienced a material security breach and, as a result, the
Company has not incurred any material expenses from such a breach. Furthermore, during such time, the Company has not been penalized
or paid any amount under any information security breach settlement.
Item
2. Properties
The
tables below set forth the location of the Company’s office facilities and certain other information relating to these properties.
1818 Marshall St. Shreveport LA Insurance Operations Owned 12,274 N/A N/A
812 Sheppard St. Minden LA Insurance Sales Owned 1,560 N/A N/A
4901 S. Memory Lane Holladay UT Funeral Service Sales Owned 1,200 N/A N/A
40977 Oak Dr. Forest Falls CA Mortgage Sales Leased 250 $ - / mo month to month
4501 Mohawk Dr. Larkspur CO Mortgage Sales Leased 250 $ 50 / mo month to month
5982 s Zeno Ct Aurora CO Mortgage Sales Leased 50 $ - / mo month to month
2546 Findlater Henderson NV Mortgage Sales Leased 120 $ - / mo month to month
Item
2. Properties (Continued)
709 Pacific Ave Tillamook OR Mortgage Sales Leased 120 $ - / mo month to month
3292 Winbrook Dr. Memphis TN Mortgage Sales Leased 169 $ 200 / mo month to month
27903 99th St. Trevor WI Mortgage Sales Leased 300 $ 150 / mo month to month
645 3rd St. #7 Beloit WI Mortgage Sales Leased 110 $ 567 / mo month to month
255 E 2nd St. #1 Powell WY Mortgage Sales Leased 200 $ 300 / mo month to month
The
Company believes the office facilities it occupies are in good operating condition and adequate for current operations. The Company will
generally enter into additional leases, modify existing leases or extend current leases based on its assessments of current market demand
for its services. Those leases are expected to be month to month where possible.
Item
2. Properties (Continued)
The
following table summarizes the location and acreage of the seven Company owned cemeteries, each of which includes one or more mausoleums.
The acreage represents estimates of acres that are based upon survey reports, title reports, appraisal reports, or the Company’s
inspection of the cemeteries. The Company estimates that there are approximately 1,200 spaces per developed acre.
Net Saleable Acreage
(1) Includes both reserved and occupied spaces.
(2) Includes an open easement with a total acreage of approximately 62 acres.
Item
2. Properties (Continued)
The
following table summarizes the location, square footage and the number of viewing rooms and chapels of the twelve Company owned mortuaries:
Date Viewing Square
Name of Mortuary Location Acquired Room(s) Chapel(s) Footage
Item
3. Legal Proceedings
The
Company is not a party to any material legal proceedings outside the ordinary course of business or to any other legal proceedings, which
if adversely determined, would be expected to have a material adverse effect on its financial condition or results of operation.
Item
4. Mine Safety Disclosures
Not
applicable.
PART
II
Item
5. Market for the Registrant’s Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities
The
Company’s Class A Common Stock trades on The Nasdaq Global Select Market under the symbol “SNFCA.” As of March 27,
2025, the closing stock price of the Class A Common Stock was $12.61 per share. As of March 27, 2025, there were 1,605 registered stockholders
of record of the Company’s Class A Common Stock and 45 registered stockholders of record of the Company’s Class C Common
Stock. Because many of the Company’s shares of Class A Common Stock are held by brokers and other institutions on behalf of the
stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders.
The
following were the high and low market closing stock prices for the Class A Common Stock by quarter as reported by NASDAQ since January
1, 2023:
Price Range (1)
High Low
Period (Calendar Year)
The
Class C Common Stock is not registered or traded on a national exchange. See Note 12 of the Notes to Consolidated Financial Statements.
The
Company has never paid a cash dividend on its Class A or Class C Common Stock. The Company currently anticipates that all its earnings
will be retained for use in the operation and expansion of its business and does not intend to pay any cash dividends on its Class A
or Class C Common Stock in the foreseeable future. Any future determination as to cash dividends will depend upon the earnings and financial
position of the Company and such other factors as its Board of Directors may deem appropriate. The Company paid a 5% stock dividend on
Class A and Class C Common Stock each year from 1990 through 2019, a 7.5% stock dividend for the year 2020, and a 5.0% stock dividend
for the years 2021 through 2024.
On
April 15, 2024, the Company executed a 10b5-1 agreement with a broker to repurchase shares of the Company’s Class A Common Stock.
Under the terms of the agreement, the broker is permitted to repurchase up to $1,000,000 of the Company’s Class A Common Stock.
Purchases commenced May 15, 2024. The agreement is subject to the daily time, price and volume conditions of Rule 10b-18. The agreement
expired on December 31, 2024.
The
following table shows the Company’s repurchase activity of its common stock during the three-month period ended December 31, 2024,
under the 10b5-1 agreement.
(1) Includes fees and commissions paid on stock repurchases.
The
graph below compares the cumulative total stockholder return of the Company’s Class A Common Stock with the cumulative total return
on the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Insurance Index for the period from December 31,
2020 through December 31, 2024. The graph assumes that the value of the investment in the Company’s Class A Common Stock and in
each of the indexes was $100 as of December 31, 2020 and that all dividends were reinvested.
The
comparisons in the graph below are based on historical data and are not intended to forecast the possible future performance of the Company’s
Class A Common Stock.
The
stock performance graph set forth above is required by the Securities and Exchange Commission and shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Form 10-K into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed soliciting material or filed under such acts.
Item
6. [Reserved]
As
a smaller reporting company, the Company is not required to provide information typically disclosed under this item.
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The
Company’s operations over the last several years generally reflect three strategies 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) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on the housing market by originating
mortgage loans.
Insurance
Operations
The
following table shows the condensed financial results for the Company’s insurance operations for 2024 and 2023. See Note 15 of
the Notes to Consolidated Financial Statements.
Years ended December 31 (in thousands of dollars)
Revenues from external customers:
Mortgage fee income 0 77 (100 %)
Gains on investments and other assets 2,055 963 113 %
Profitability
for 2024 increased due to (a) a $4,998,000 increase in insurance premiums and other considerations, (b) a $3,301,000 decrease in
death, surrenders and other policy benefits, (c) a $2,323,000 decrease in amortization of deferred policy acquisition costs, (d) a
$1,092,000 increase in gains on investments and other assets, (e) a $443,000 increase in net investment income, and (f) a $354,000
decrease in interest expense, which were partially offset by (i) a $2,949,000 increase in income tax expense, (ii) a $2,929,000
increase in selling, general and administrative expenses, (iii) a $2,245,000 increase in future policy benefits, (iv) a $931,000
decrease in intersegment revenue, (v) a $102,000 decrease in other revenues, (vi) a $77,000 decrease in mortgage fee income, and
(vii) a $42,000 increase in intersegment interest expense and other expenses.
Cemetery
and Mortuary Operations
The
following table shows the condensed financial results for the Company’s cemetery and mortuary operations for 2024 and 2023. See
Note 15 of the Notes to Consolidated Financial Statements.
Years ended December 31 (in thousands of dollars)
Revenues from external customers:
Gains on investments and other assets 873 717 22 %
Profitability
in 2024 increased due to (a) a $1,140,000 increase in cemetery pre-need sales, (b) a $260,000 increase in mortuary at-need sales, (c)
a $156,000 increase in gains on investments and other assets, (d) a $139,000 increase in other revenues, and (e) a $26,000 decrease in
intersegment interest expense and other expenses, which were partially offset by (i) a $458,000 increase in selling, general and administrative
expenses, (ii) a $383,000 decrease in net investment income, (iii) a $239,000 increase in amortization of deferred policy acquisition
costs, (iv) a $228,000 decrease in cemetery at-need sales, and (v) a $96,000 increase in income tax expense.
Mortgage
Operations
The
Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of
Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban
Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in
addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail
basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with the Company,
Security National Life, Kilpatrick Life, and unaffiliated financial institutions.
SecurityNational
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. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”)
released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately
0.44% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party
sub-servicer.
US
Treasury rates continue to remain elevated despite the downward trend in inflation data and the Federal Reserve’s action to reduce
rates. This has resulted in higher-than-expected mortgage rates, which in turn has further decreased the demand for loan originations
classified as refinance. The higher-than-expected mortgage rates have also continued to have a negative effect on loan originations classified
as purchases.
For
2024 and 2023, SecurityNational Mortgage originated 7,269 loans ($2,295,830,000 total volume) and 7,185 loans ($2,173,081,000 total volume),
respectively.
The
following table shows the condensed financial results for the Company’s mortgage operations for 2024 and 2023. See Note 15 of the
Notes to Consolidated Financial Statements.
Years ended December 31 (in thousands of dollars)
Revenues from external customers:
Change in fair value of loans held for sale 2,870 (478 ) 700 %
Change in fair value of loan commitments 730 (1,124 ) 165 %
Gains on investments and other assets (986 ) 157 (728 %)
Losses
in 2024 compared to 2023 decreased due to (a) a $4,251,000 decrease in other expenses, (b) a $3,348,000 increase in the fair value
of loans held for sale, (c) a $2,359,000 increase in income from loan originations, (d) a $2,177,000 decrease in personnel expenses,
(e) a $1,927,000 increase in secondary gains from investors, (f) a $1,854,000 increase in the fair value of loan commitments, (g) a
$1,729,000 decrease in rent and rent related expenses, (h) a $921,000 increase in other revenues, (i) a $904,000 decrease in
intersegment interest expense and other expenses, (j) a $330,000 decrease in advertising expenses, (k) a $306,000 decrease in costs
related to funding mortgage loans, (l) a $257,000 decrease in interest expense, (m) a $42,000 increase in intersegment revenues, and
(n) a $29,000 decrease in depreciation on property and equipment, which were partially offset by (i) a $7,410,000 increase in
commissions, (ii) a $2,717,000 increase in income tax expense, (iii) a $1,143,000 decrease in gains on investments and other assets,
and (iv) a $678,000 decrease in net investment income.
Critical
Accounting Policies and Estimates
The
Company’s significant accounting policies are fundamental to understanding its results of operations and financial condition as
they require that the Company use estimates and assumptions that may affect the value of its assets or liabilities and financial results.
See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.
Five of these policies, discussed below, relate to
critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently
uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
Actual results could differ from those estimates.