SNFCA Net Earnings Plunge 29.8% Amid Rising Expenses

Ticker: SNFCA · Form: 10-Q · Filed: Nov 13, 2025 · CIK: 318673

Sentiment: bearish

Topics: Earnings Decline, Increased Expenses, Mortgage Industry, Insurance Sector, Financial Performance, Operational Efficiency, Investment Income

TL;DR

**SNFCA's earnings are getting crushed by rising costs, making it a risky bet despite revenue growth.**

AI Summary

Security National Financial Corporation (SNFCA) reported a significant decline in net earnings for the nine months ended September 30, 2025, falling to $18,659,673 from $26,577,515 in the prior year, a 29.79% decrease. This was primarily driven by a substantial increase in benefits and expenses, which rose to $237,546,570 from $221,029,635, a 7.47% increase. Total revenues, however, saw a modest increase of 2.49%, reaching $261,607,035 compared to $255,253,221 in 2024. Mortgage fee income increased to $83,433,590 from $81,675,278, and net investment income grew to $59,893,212 from $55,790,472. The company's total assets expanded to $1,562,986,091 as of September 30, 2025, up from $1,489,807,214 at December 31, 2024, an increase of 4.91%. Cash and cash equivalents decreased significantly to $100,396,059 from $140,546,421. Key expense increases included amortization of deferred policy and pre-need acquisition costs, which surged to $15,967,631 from $11,332,305, and personnel expenses, which rose to $65,872,791 from $61,907,265.

Why It Matters

SNFCA's substantial drop in net earnings, despite revenue growth, signals potential operational inefficiencies or increased cost pressures that could impact investor returns. The significant increase in amortization of deferred policy and pre-need acquisition costs suggests either aggressive past acquisitions or a change in accounting estimates, which warrants closer scrutiny. For employees, sustained profit declines could lead to cost-cutting measures. Customers might see changes in service offerings if the company seeks to optimize its expense structure. In a competitive landscape, particularly in the mortgage and insurance sectors, declining profitability could weaken SNFCA's market position against more efficient rivals.

Risk Assessment

Risk Level: high — The company experienced a 29.79% decrease in net earnings for the nine months ended September 30, 2025, falling to $18,659,673 from $26,577,515. This significant decline, coupled with a 7.47% increase in total benefits and expenses to $237,546,570, indicates substantial pressure on profitability and operational efficiency, posing a high risk to future earnings.

Analyst Insight

Investors should exercise caution and thoroughly investigate the drivers behind the significant expense increases, particularly the 40.91% jump in amortization of deferred policy and pre-need acquisition costs. Consider holding or reducing exposure until a clear strategy for cost control and margin improvement is articulated and demonstrated by management.

Financial Highlights

revenue
$261.61M
total Assets
$1.56B
net Income
$18.66M
eps
$0.75
cash Position
$100.40M
revenue Growth
+2.49%

Revenue Breakdown

SegmentRevenueGrowth
Mortgage Fee Income$83,433,590+2.27%
Net Investment Income$59,893,212+7.35%

Key Numbers

Key Players & Entities

FAQ

Why did Security National Financial Corporation's net earnings decrease in Q3 2025?

Security National Financial Corporation's net earnings decreased primarily due to a significant increase in total benefits and expenses, which rose by 7.47% to $237,546,570 for the nine months ended September 30, 2025, compared to $221,029,635 in the prior year. This outpaced the modest 2.49% increase in total revenues.

What were the key expense increases for SNFCA in the nine months ended September 30, 2025?

Key expense increases for SNFCA included amortization of deferred policy and pre-need acquisition costs, which surged by 40.91% to $15,967,631 from $11,332,305, and personnel expenses, which rose by 6.41% to $65,872,791 from $61,907,265.

How did SNFCA's revenue streams perform in the nine months ended September 30, 2025?

SNFCA's total revenues increased by 2.49% to $261,607,035. Mortgage fee income rose to $83,433,590 from $81,675,278, and net investment income grew to $59,893,212 from $55,790,472. Insurance premiums and other considerations remained relatively flat at $89,846,164.

What is the current asset position of Security National Financial Corporation?

As of September 30, 2025, Security National Financial Corporation's total assets stood at $1,562,986,091, representing a 4.91% increase from $1,489,807,214 at December 31, 2024. Investments, including fixed maturity securities and mortgage loans, were key contributors to this growth.

What was the change in cash and cash equivalents for SNFCA?

Cash and cash equivalents for SNFCA decreased significantly to $100,396,059 as of September 30, 2025, from $140,546,421 at December 31, 2024. This represents a 28.57% reduction in cash holdings.

How did net earnings per share change for Security National Financial Corporation?

Net earnings per Class A Equivalent common share for Security National Financial Corporation decreased to $0.75 for the nine months ended September 30, 2025, down from $1.09 in the same period of 2024. This reflects the overall decline in net earnings.

What are the implications of the increased amortization costs for SNFCA?

The 40.91% increase in amortization of deferred policy and pre-need acquisition costs to $15,967,631 suggests that SNFCA is either recognizing higher costs from past acquisitions or facing changes in the expected profitability or duration of these acquired assets, which directly impacts current period earnings.

What is the significance of the change in 'Accumulated other comprehensive gain (loss)' for SNFCA?

SNFCA's 'Accumulated other comprehensive gain (loss)' shifted from a loss of $(6,951,266) at December 31, 2024, to a gain of $826,844 at September 30, 2025. This positive change is primarily driven by unrealized gains on fixed maturity securities available for sale, indicating an improvement in the fair value of these investments.

Did Security National Financial Corporation engage in any share repurchase activities?

Yes, Security National Financial Corporation engaged in share repurchase activities. The company purchased treasury stock totaling $(1,604,613) for the nine months ended September 30, 2025, compared to $(1,672,232) in the same period of 2024, indicating ongoing efforts to manage share count.

What is the outlook for Security National Financial Corporation given these results?

Given the significant decline in net earnings despite revenue growth, Security National Financial Corporation faces challenges in managing its cost structure. The outlook suggests a need for strategic initiatives to control expenses and improve operational efficiency to restore profitability, especially with rising personnel and amortization costs.

Risk Factors

Industry Context

The life insurance and annuity industry is subject to evolving regulatory landscapes and accounting standards. Companies are increasingly focused on managing interest rate sensitivity and the impact of new financial reporting requirements. Competitive pressures often drive innovation in product offerings and operational efficiency.

Regulatory Implications

The company is navigating the implementation of new accounting pronouncements, which require significant system and process adjustments. Compliance with these standards is crucial for accurate financial reporting and investor confidence. Changes in discount rate assumptions also heighten sensitivity to market interest rate movements.

What Investors Should Do

  1. Monitor expense trends, particularly amortization of deferred costs and personnel expenses, to assess the impact on profitability.
  2. Evaluate the company's liquidity position given the substantial decrease in cash and cash equivalents.
  3. Assess the impact of the new accounting standard adoption on equity and future earnings volatility.
  4. Analyze the company's sensitivity to interest rate changes, given the new methodology for calculating future policy benefits.

Glossary

Deferred Acquisition Cost (DAC)
Costs incurred by an insurance company in the process of acquiring new business, such as commissions and underwriting expenses. These costs are typically capitalized and amortized over the expected life of the policy. (Changes in the accounting for DAC are expected to impact the company's financial reporting under the new accounting standard.)
Accumulated Other Comprehensive Income (AOCI)
A component of stockholders' equity that includes unrealized gains and losses on investments, foreign currency translation adjustments, and pension plan adjustments that have not yet been recognized in net income. (The adoption of the new accounting standard is expected to result in a significant increase in AOCI, primarily due to changes in discount rates for policy benefits.)
Future Policy Benefits
The estimated amount an insurance company expects to pay out in the future to policyholders or beneficiaries under existing insurance contracts. (The calculation methodology for future policy benefits is changing under the new accounting standard, impacting the company's liabilities and equity.)
Discount Rate
The rate used to calculate the present value of future cash flows. In insurance, it's used to determine the present value of future policy benefits. (The new standard requires using a discount rate based on A-rated fixed income instruments, increasing sensitivity to interest rate fluctuations.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Security National Financial Corporation experienced a notable 29.79% decrease in net earnings compared to the prior year, falling to $18.66 million. This was driven by a 7.47% increase in total benefits and expenses, with significant rises in amortization of deferred costs (up 40.91%) and personnel expenses (up 6.41%). While total revenues saw a modest 2.49% increase, the growing expense base outpaced revenue growth, leading to margin compression. The company's total assets grew by 4.91%, but its cash position declined substantially by 28.57%.

Filing Stats: 4,302 words · 17 min read · ~14 pages · Grade level 20 · Accepted 2025-11-13 14:01:20

Filing Documents

- Financial Information

Part I - Financial Information Item 1.

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024 3-4 Condensed Consolidated Statements of Earnings for the three and nine month periods ended September 30, 2025 and 2024 (unaudited) 5 Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended September 30, 2025 and 2024 (unaudited) 6 Condensed Consolidated Statements of Stockholders' Equity as of September 30, 2025 and September 30, 2024 (unaudited) 7-8 Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2025 and 2024 (unaudited) 9-10 Notes to Condensed Consolidated Financial Statements (unaudited) 11 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 69 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 75 Item 4.

Controls and Procedures

Controls and Procedures 76

- Other Information

Part II - Other Information Item 1.

Legal Proceedings

Legal Proceedings 76 Item 1A.

Risk Factors

Risk Factors 76 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 77 Item 3. Defaults Upon Senior Securities 77 Item 4. Mine Safety Disclosures 77 Item 5. Other Information 77 Item 6. Exhibits 78

Signatures

Signatures 79 2 SECURITY NATIONAL FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) Part I - Financial Information Item 1. Financial Statements. September 30, 2025 December 31, 2024 Assets Investments: Fixed maturity securities, available for sale, at estimated fair value (amortized cost of $ 388,640,665 and $ 376,012,071 for 2025 and 2024, respectively; net of allowance for credit losses of $ 532,868 and $ 420,993 for 2025 and 2024, respectively) $ 389,193,589 $ 366,546,129 Equity securities at estimated fair value (cost of $ 12,128,914 and $ 11,386,454 for 2025 and 2024, respectively) 17,691,024 15,771,681 Mortgage loans held for investment (net of allowance for credit losses of $ 2,677,001 and $ 1,885,390 for 2025 and 2024, respectively) 329,164,691 301,747,358 Real estate held for investment (net of accumulated depreciation of $ 35,724,258 and $ 31,419,539 for 2025 and 2024, respectively) 216,563,881 197,693,338 Real estate held for sale 1,619,403 1,278,033 Other investments and policy loans (net of allowance for credit losses of $ 1,534,957 and $ 1,536,926 for 2025 and 2024, respectively) 83,124,030 74,855,041 Accrued investment income 9,746,368 8,499,168 Total investments 1,047,102,986 966,390,748 Cash and cash equivalents 100,396,059 140,546,421 Loans held for sale at estimated fair value 159,460,525 131,181,148 Receivables (net of allowance for credit losses of $ 1,542,731 and $ 1,678,531 for 2025 and 2024, respectively) 15,098,066 15,858,743 Restricted assets (including $ 15,016,744 and $ 12,323,535 for 2025 and 2024 respectively, at estimated fair value) 31,673,039 23,806,836 Cemetery perpetual care trust investments (including $ 6,154,575 and $ 5,689,706 for 2025 and 2024, respectively, at estimated fair value) 9,685,678 8,836,503 Receivable from reinsurers 13,721,510 13,831,093 Cemetery land and improvements 11,160,991 10,594,632

financial statements

financial statements. The Company is nearing completion of its analysis and implementation of the new standard, including the identification of cohorts, system updates, and design. The Company has engaged its team of actuaries, accountants, and systems specialists and consulted external system providers as part of the implementation. The adoption of this guidance is expected to have an impact on its financial position, results of operations, and disclosures, as well as systems, processes and controls. Based upon the modified retrospective transition method, the Company estimates that the January 1, 2024, Transition Date impact from adoption will include an increase to total stockholders' equity of approximately $ 4 million to $ 6 million. This expected increase includes the estimated impact to accumulated other comprehensive income ("AOCI"), which, as of the Transition Date, is expected to result in an increase of approximately $ 4 million to $ 6 million, net of income tax. The most significant drivers of the expected increase in AOCI are the anticipated impacts of the changes in the discount rates as of the Transition Date to be used in measuring the liability for future policy benefits for traditional and limited payment contracts. The expected increase to total stockholders' equity also includes the estimated impact to retained earnings, which is immaterial. After implementation, cash flow assumptions, such as mortality, lapse, and expense, will be reviewed at least annually and, if necessary, they will be updated to reflect actual experience and current expectations in the calculation of the Company's future policy benefits. Historically, cash flow assumptions were locked in at policy issuance and remained in place for the life of the business—even when material variances emerged between assumptions and actual experience—except in the case of a premium deficiency. Under the new guidance, net premiums are capped at 100 percent of gross premiums at the cohort

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