Security National Financial Corporation (SNFCA) is a diversified financial services company with a rich history dating back to its inception in 1965. Over the past five decades, the company has evolved from a small life insurance provider to a multi-faceted financial services conglomerate, offering a range of products and services across the insurance, mortgage, and cemetery and mortuary industries.
Company Origins and Early Growth
The company's roots can be traced back to 1965 when it was founded as Security National Life Insurance Company in Salt Lake City, Utah. Initially, the company focused on providing traditional life insurance products to its customers. During its early years, SNFC faced common challenges associated with a growing insurance company, including navigating regulatory requirements and establishing a solid customer base. However, the company's dedication to providing quality products and services soon paid off, as it steadily expanded its insurance operations throughout Utah and the surrounding states.
Diversification and Expansion
The 1980s marked a significant turning point for SNFC as it diversified its business model. The company acquired a cemetery and mortuary operation, broadening its service offerings to include funeral planning and cemetery management. This strategic move not only strengthened SNFC's portfolio but also allowed it to better serve the needs of its customers. Today, the company's cemetery and mortuary segment operates nine mortuaries in Utah and three in New Mexico, as well as five cemeteries in Utah, one in California, and one in New Mexico.
The 1990s witnessed another major milestone for SNFC with the establishment of its mortgage lending division, SecurityNational Mortgage Company. This new venture enabled the company to capitalize on the growing demand for mortgage financing, further diversifying its revenue streams. Currently, SecurityNational Mortgage Company is a HUD-approved lender that originates and refinances mortgage loans on a retail basis.
Resilience and Adaptability
Despite the economic challenges of the early 2000s, including the housing market crisis, SNFC demonstrated its resilience. The company managed to navigate these turbulent times by maintaining a diversified business model, allowing it to weather the storm and emerge stronger. Over the years, SNFC has continued to refine and expand its operations, remaining dedicated to providing quality services to its clients across its insurance, cemetery and mortuary, and mortgage lending divisions. The company's commitment to innovation and adaptability has been a driving force behind its longevity and success.
Financials
Security National's financial performance has shown improvement in recent quarters. For the third quarter of 2024, the company reported net income of $11.8 million and revenue of $88.3 million. This represents a significant increase compared to the same period in the previous year, when the company reported net income of $4.0 million and revenue of $80.2 million. The company's operating cash flow for the most recent quarter was an impressive $34.9 billion, with free cash flow of $34.3 billion.
Looking at the company's three main business segments, all showed growth in the reported periods. The life insurance segment saw a 4% increase in revenues from external customers for both the three-month and nine-month periods ended September 30, 2024, compared to the same periods in 2023. This increase was primarily due to a 4.1% rise in insurance premiums and other considerations. The segment's profit before income taxes increased by 72% for the three-month period and 40% for the nine-month period.
The cemetery and mortuary segment experienced a 15% increase in revenues from external customers for the three-month period and a 9% increase for the nine-month period ended September 30, 2024, compared to the same periods in 2023. This growth was driven by higher gains on investments and other assets, as well as increases in mortuary at-need sales and cemetery pre-need sales. The segment's profit before income taxes increased by 93% for the three-month period and 31% for the nine-month period.
The mortgage segment showed the strongest revenue growth, with a 20% increase for the three-month period and a 5% increase for the nine-month period ended September 30, 2024, compared to the same periods in 2023. This growth was primarily due to higher gains on the fair value of loans held for sale and loan commitments, as well as higher income from loan originations. The segment's profit before income taxes improved from a $3.49 million profit in the three-month period to a $1.81 million profit in the nine-month period.
Liquidity
Security National's liquidity position appears to be strong, with cash and cash equivalents of $170.7 million as of the end of the most recent quarter. The company has two warehouse lines of credit - one with U.S. Bank for up to $15 million and one with Western Alliance Bank for up to $25 million. Both lines mature in 2025, providing additional financial flexibility for the company's operations.
Recent Challenges and Future Outlook
The company has faced a few challenges in recent years, including the ongoing COVID-19 pandemic, which has impacted its operations in the mortgage and cemetery and mortuary segments. Additionally, the company was the subject of a short report in 2021 that raised concerns about its accounting practices and corporate governance. While the company has addressed these concerns, the lingering effects of the short report and the pandemic have contributed to the volatility in the company's financial performance.
Despite these challenges, Security National remains committed to its diversified business model and is focused on expanding its presence in the insurance, mortgage, and cemetery and mortuary industries. The company's management team has emphasized the importance of adapting to changing market conditions and leveraging its long-standing relationships with customers and partners to drive future growth.
Looking ahead, Security National's recent financial results suggest a positive trajectory for the company. The strong performance across all three business segments indicates that the company's diversified model is working effectively. The life insurance segment's steady growth in premiums and improved profitability, combined with the cemetery and mortuary segment's increased sales and the mortgage segment's higher gains on loans, demonstrate the company's ability to capitalize on various market opportunities.
The company's solid liquidity position, with significant cash reserves and available credit lines, provides a strong foundation for future growth and investment. This financial flexibility allows Security National to pursue strategic opportunities and weather potential economic uncertainties.
While specific long-term guidance is not available, the company's recent performance and strategic focus on its core business segments suggest that Security National is well-positioned for continued growth. The company's ability to adapt to changing market conditions and its diverse revenue streams provide a degree of resilience in the face of economic fluctuations.
Overall, Security National Financial Corporation is a well-established financial services provider with a diverse portfolio of products and services. The company's recent financial performance demonstrates its ability to generate growth across its various business segments. While challenges remain, including potential economic uncertainties and ongoing industry changes, Security National's long history of adapting to market conditions and its commitment to serving its customers suggest that it is well-positioned to continue its growth trajectory and strengthen its market position in the years to come.