Security National Financial Corporation and its wholly owned subsidiaries engage in the life insurance, cemetery and mortuary, and mortgage businesses.
Segments
The company operates in three reportable business segments: Life Insurance, Cemetery and Mortuary, and Mortgage.
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 40 states through a commis...
Security National Financial Corporation and its wholly owned subsidiaries engage in the life insurance, cemetery and mortuary, and mortgage businesses.
Segments
The company operates in three reportable business segments: Life Insurance, Cemetery and Mortuary, and Mortgage.
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 40 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 eight 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 100 retail offices in 23 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.
Life Insurance segment
Products
The company, through Security National Life, First Guaranty Insurance Company (‘First Guaranty’), and Kilpatrick Life Insurance Company (‘Kilpatrick’), issues and distributes 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 health insurance products. The company places specific marketing emphasis on funeral plans through pre-need planning. The company’s insurance subsidiaries, 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 purchased prior to their acquisition by Security National Life.
Markets and Distribution
The company is licensed to sell insurance in 40 states. The company, in marketing its life insurance products, 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 120% 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.
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 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 rate 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 come 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.
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 offers a comprehensive diver’s accident insurance policy that provides worldwide coverage for medical expense reimbursement in the event of a diving accident.
Markets and Distribution
The company markets its diver’s accident insurance policies through the internet.
Investments
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.
Cemetery and Mortuary segment
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 six 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 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 exceeds the replacement costs, thus creating the opportunity for development and redevelopment of the land that the company 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 as 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 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 93% 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 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 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 on the basis of 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; and 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 each 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. EverLEND Mortgage is not required to have an audit for 2021 since it ceased operations in December 2021.
History
Security National Financial Corporation was founded in 1965. The company was incorporated in 1978.
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