Life Insurance
The Company, through Security National Life, 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 other insurance subsidiaries, Memorial Insurance Company of America
("Memorial Insurance Company"), Southern Security Life Insurance Company,
Inc. ("Southern Security") and Trans-Western Life Insurance Company
("Trans-Western"), service and maintain policies that were purchased
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 $25,000. The Company believes that funeral plans represent
a marketing niche that has lower 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.
Annuities
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 of time, 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 their discretion. In order for the Company to realize
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.
Accident and Health
With the acquisition of Capital Investors in 1994, the Company acquired a small
block of accident and health policies. Since 1999, the Company has offered a
low-cost comprehensive diver's accident policy that provides worldwide coverage
for medical expense reimbursement in the event of a diving accident.
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 Company is willing
to assume for itself. The 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.
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 Board 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 portfolio consisting of common stocks, preferred
stocks, municipal bonds, investment and non-investment grade bonds, mortgage
loans, real estate, short-term investments and other securities and investments.
Cemetery and Mortuary
Through its cemetery and mortuary operations, 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, flowers 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 three separate
stand-alone mortuary facilities.
Mortgage Loans
The Company, through its wholly owned subsidiary, 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), the Federal Home Loan Mortgage
Corporation (Freddie Mac), 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.