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Trust Investments

9 Months Ended

Sep. 30, 2020

Preneed Trust Investments [Abstract]

TRUST INVESTMENTS

Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. Preneed trust investments are reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance. These earnings are recognized as earned, in Other revenue, when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned.

Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights which we are required by various state laws to deposit into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized, as earned, in Other revenue.

Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. treasury debt, common stock and equity mutual funds. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. See Note 9 to the Consolidated Financial Statements included herein for further information of the fair value measurement.

As of September 30, 2020, we have net unrealized losses of $7.3 million in our trusts. At September 30, 2020, these net unrealized losses represented 3% of our original cost basis of $245.8 million. Our trusts have been and continue to be impacted by current market conditions in the U.S. and global financial markets. The decline in fair value is largely due to changes in interest rates and other market conditions. Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. In addition, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.

Changes in unrealized gains and/or losses related to these securities are reflected in Other comprehensive income and offset by the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus interests in those unrealized gains and/or losses. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to the preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.

For available-for-sale debt securities in an unrealized loss position, we first assess whether we intend to sell or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If our assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any unrealized loss that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.

Preneed Cemetery Trust Investments

The components of Preneed cemetery trust investments on our Consolidated Balance Sheet at December 31, 2019 and September 30, 2020 are as follows (in thousands):


	December 31, 2019		September 30, 2020
Preneed cemetery trust investments, at market value	$	74,572	$	77,968
Less: allowance for contract cancellation	(2,190)		(2,388)
Preneed cemetery trust investments	$	72,382	$	75,580

The cost and market values associated with preneed cemetery trust investments at September 30, 2020 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	1,332	$	—	$	—	$	1,332
Fixed income securities:

Foreign debt	2	15,664		1,148		(1,162)		15,650
Corporate debt	2	16,594		1,188		(813)		16,969
Preferred stock	2	12,526		523		(927)		12,122
Mortgage-backed securities	2	323		—		(189)		134
Common stock	1	26,137		4,729		(7,701)		23,165
Mutual funds:
Fixed Income	2	7,024		728		(250)		7,502
Trust securities		$	79,600	$	8,316	$	(11,042)	$	76,874
Accrued investment income		$	1,094					$	1,094
Preneed cemetery trust investments								$	77,968
Market value as a percentage of cost								96.6		%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):


Due in one year or less	$	—
Due in one to five years	12,456
Due in five to ten years	9,244
Thereafter	23,175
Total fixed income securities	$	44,875

The cost and market values associated with preneed cemetery trust investments at December 31, 2019 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	5,729	$	—	$	—	$	5,729
Fixed income securities:
Foreign debt	2	5,609		312		(243)		5,678
Corporate debt	2	16,916		1,044		(649)		17,311
Preferred stock	2	14,206		904		(164)		14,946
Mortgage-backed securities	2	517		—		(114)		403
Common stock	1	28,569		2,766		(3,017)		28,318
Mutual funds:
Fixed income	2	1,463		72		(85)		1,450
Trust Securities		$	73,009	$	5,098	$	(4,272)	$	73,835
Accrued investment income		$	737					$	737
Preneed cemetery trust investments								$	74,572
Market value as a percentage of cost								101.1		%

The following table summarized our fixed income securities within our preneed cemetery trust investments in an unrealized loss position at September 30, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	September 30, 2020
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	3,048	$	(309)	$	144	$	(853)	$	3,192	$	(1,162)
Corporate debt	4,073		(330)		1,363		(483)		5,436		(813)
Preferred stock	5,022		(711)		441		(216)		5,463		(927)
Mortgage-backed securities	—		—		134		(189)		134		(189)
Total fixed income securities with an unrealized loss	$	12,143	$	(1,350)	$	2,082	$	(1,741)	$	14,225	$	(3,091)


	December 31, 2019
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	268	$	(42)	$	758	$	(201)	$	1,026	$	(243)
Corporate debt	1,368		(168)		4,520		(481)		5,888		(649)
Preferred stock	4,135		(164)		—		—		4,135		(164)
Mortgage-backed securities	—		—		402		(114)		402		(114)
Total fixed income securities with an unrealized loss	$	5,771	$	(374)	$	5,680	$	(796)	$	11,451	$	(1,170)

Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Investment income	$	323	$	449	$	1,308	$	1,421
Realized gains	1,180		2,857		5,001		6,392
Realized losses	(1,527)		(918)		(3,163)		(4,490)
Expenses and taxes	(396)		(357)		(1,081)		(982)
Net change in deferred preneed cemetery receipts held in trust	420		(2,031)		(2,065)		(2,341)
	$	—	$	—	$	—	$	—

Purchases and sales of investments in the preneed cemetery trusts for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Purchases	$	(13,488)	$	(10,297)	$	(33,299)	$	(42,750)
Sales	11,672		9,200		24,690		34,566

Preneed Funeral Trust Investments

The components of Preneed funeral trust investments on our Consolidated Balance Sheet at December 31, 2019 and September 30, 2020 are as follows (in thousands):


	December 31, 2019		September 30, 2020
Preneed funeral trust investments, at market value	$	99,246	$	95,730
Less: allowance for contract cancellation	(2,911)		(2,907)
Preneed funeral trust investments	$	96,335	$	92,823

The cost and market values associated with preneed funeral trust investments at September 30, 2020 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	18,546	$	—	$	—	$	18,546
Fixed income securities:
U.S treasury debt	1	819		10		—		829

Foreign debt	2	15,132		1,133		(1,083)		15,182
Corporate debt	2	15,258		1,086		(766)		15,578
Preferred stock	2	11,772		484		(858)		11,398
Mortgage-backed securities	2	351		—		(187)		164
Common stock	1	24,925		4,659		(7,171)		22,413
Mutual funds:

Fixed income	2	6,128		678		(173)		6,633
Other investments	2	3,943		—		—		3,943
Trust securities		$	96,874	$	8,050	$	(10,238)	$	94,686
Accrued investment income		$	1,044					$	1,044
Preneed funeral trust investments								$	95,730
Market value as a percentage of cost								97.7		%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):


Due in one year or less	$	829
Due in one to five years	12,042
Due in five to ten years	8,234
Thereafter	22,046
Total fixed income securities	$	43,151

The cost and market values associated with preneed funeral trust investments at December 31, 2019 are detailed below (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	24,160	$	—	$	—	$	24,160
Fixed income securities:
U.S. treasury debt	1	822		—		—		822
Foreign debt	2	5,587		309		(232)		5,664
Corporate debt	2	16,109		992		(646)		16,455
Preferred stock	2	14,094		874		(198)		14,770
Mortgage-backed securities	2	585		—		(117)		468
Common stock	1	27,652		2,773		(2,869)		27,556
Mutual funds:
Equity	1	772		617		(4)		1,385
Fixed income	2	4,364		107		(107)		4,364
Other investments	2	2,902		—		—		2,902
Trust securities		$	97,047	$	5,672	$	(4,173)	$	98,546
Accrued investment income		$	700					$	700
Preneed funeral trust investments								$	99,246
Market value as a percentage of cost								101.5		%

The following table summarized our fixed income securities within our preneed funeral trust investment in an unrealized loss position at September 30, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	September 30, 2020
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	2,753	$	(302)	$	133	$	(781)	$	2,886	$	(1,083)
Corporate debt	4,038		(327)		1,298		(439)		5,336		(766)
Preferred stock	4,716		(644)		438		(214)		5,154		(858)
Mortgage-backed securities	—		—		137		(187)		137		(187)
Total fixed income securities with an unrealized loss	$	11,507	$	(1,273)	$	2,006	$	(1,621)	$	13,513	$	(2,894)


	December 31, 2019
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	274	$	(43)	$	723	$	(189)	$	997	$	(232)
Corporate debt	1,403		(172)		4,433		(474)		5,836		(646)
Preferred stock	4,412		(198)		—		—		4,412		(198)
Mortgage-backed securities	—		—		439		(117)		439		(117)
Total fixed income securities with an unrealized loss	$	6,089	$	(413)	$	5,595	$	(780)	$	11,684	$	(1,193)

Preneed funeral trust investment security transactions recorded in Other, net on the Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Investment income	$	328	$	373	$	1,310	$	1,235
Realized gains	1,114		2,821		4,920		6,978
Realized losses	(1,540)		(911)		(1,964)		(4,093)
Expenses and taxes	(226)		(296)		(511)		(646)
Net change in deferred preneed funeral receipts held in trust	324		(1,987)		(3,755)		(3,474)
	$	—	$	—	$	—	$	—

Purchases and sales of investments in the preneed funeral trusts for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Purchases	$	(12,129)	$	(9,869)	$	(31,325)	$	(41,560)
Sales	11,393		8,975		24,994		36,831

Cemetery Perpetual Care Trust Investments

Care trusts’ corpus on our Consolidated Balance Sheet represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2019 and September 30, 2020 are as follows (in thousands):


	December 31, 2019		September 30, 2020
Cemetery perpetual care trust investments, at market value	$	64,047	$	64,824
Obligations due to (from) trust	(631)		(204)
Care trusts’ corpus	$	63,416	$	64,620

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at September 30, 2020 (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	348	$	—	$	—	$	348
Fixed income securities:

Foreign debt	2	12,880		929		(986)		12,823
Corporate debt	2	13,563		1,041		(617)		13,987
Preferred stock	2	11,354		471		(951)		10,874
Mortgage-backed securities	2	256		—		(150)		106
Common stock	1	21,535		3,984		(6,365)		19,154
Mutual funds:

Fixed Income	2	6,316		587		(292)		6,611
Trust securities		$	66,252	$	7,012	$	(9,361)	$	63,903
Accrued investment income		$	921					$	921
Cemetery perpetual care investments								$	64,824
Market value as a percentage of cost								96.5		%

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):


Due in one year or less	$	—
Due in one to five years	9,819
Due in five to ten years	7,657
Thereafter	20,314
Total fixed income securities	$	37,790

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2019 (in thousands):


	Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
Cash and money market accounts	1	$	4,624	$	—	$	—	$	4,624
Fixed income securities:
Foreign debt	2	4,200		238		(175)		4,263
Corporate debt	2	11,658		802		(534)		11,926
Preferred stock	2	10,782		666		(106)		11,342
Mortgage-backed securities	2	324		—		(71)		253
Common stock	1	21,594		3,399		(1,911)		23,082
Mutual funds:
Equity	1	233		146		(1)		378
Fixed income	2	7,156		618		(107)		7,667
Trust securities		$	60,571	$	5,869	$	(2,905)	$	63,535
Accrued investment income		$	512					$	512
Cemetery perpetual care investments								$	64,047
Market value as a percentage of cost								104.9		%

The following table summarized our fixed income securities within our perpetual care trust investment in an unrealized loss position at September 30, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


	September 30, 2020
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	2,307	$	(242)	$	126	$	(745)	$	2,433	$	(987)
Corporate debt	3,553		(263)		1,299		(354)		4,852		(617)
Preferred stock	4,639		(780)		350		(171)		4,989		(951)
Mortgage-backed securities	—		—		106		(149)		106		(149)
Total fixed income securities with an unrealized loss	$	10,499	$	(1,285)	$	1,881	$	(1,419)	$	12,380	$	(2,704)


	December 31, 2019
	In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
	Fair market value		Unrealized Losses		Fair market value		Unrealized Losses		Fair market value		Unrealized Losses
Fixed income securities:
Foreign debt	$	168	$	(26)	$	549	$	(149)	$	717	$	(175)
Corporate debt	1,057		(196)		3,253		(338)		4,310		(534)
Preferred stock	2,989		(106)		—		—		2,989		(106)
Mortgage-backed securities	—		—		252		(71)		252		(71)
Total fixed income securities with an unrealized loss	$	4,214	$	(328)	$	4,054	$	(558)	$	8,268	$	(886)

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Realized gains	$	291	$	773	$	1,315	$	1,921
Realized losses	(414)		(249)		(855)		(1,534)
Net change in Care trusts’ corpus	123		(524)		(460)		(387)
Total	$	—	$	—	$	—	$	—

Perpetual care trust investment security transactions recorded in Other revenue on our Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Investment income	$	1,220	$	2,531	$	3,414	$	5,879
Realized gains (losses), net	(232)		63		(512)		53
Total	$	988	$	2,594	$	2,902	$	5,932

Purchases and sales of investments in the perpetual care trusts for the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2019		2020		2019		2020
Purchases	$	(7,680)	$	(7,960)	$	(21,954)	$	(33,638)
Sales	6,599		7,168		14,578		29,319