PERPETUAL CARE TRUSTS

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

PERPETUAL CARE TRUSTS

7.PERPETUAL CARE TRUSTS

At June 30, 2022 and December 31, 2021, the Company’s perpetual care trusts consisted of investments in debt and equity marketable securities and cash equivalents, both directly as well as through mutual and investment funds. All of these investments are carried at fair value. All of the investments subject to the fair value hierarchy are considered either Level 1 or Level 2 assets pursuant to the three-level hierarchy described in Note 13 Fair Value of Financial Instruments. There were no Level 3 assets. The perpetual care trusts are VIEs for which the Company is the primary beneficiary.

A reconciliation of the Company’s perpetual care trust activities for the six months ended June 30, 2022 and 2021 is presented below (in thousands):

	Six months ended June 30,
	2022			2021
Balance—beginning of period	$	339,138		$	316,746
Contributions		9,569			4,420
Distributions		(21,177	)		(24,966	)
Interest and dividends		16,108			19,615
Capital gain distributions		1,483			1,077
Realized gains and losses, net		475			2,994
Other than temporary impairment		—			(55	)
Taxes		(1,530	)		(890	)
Fees		(1,697	)		(2,734	)
Unrealized change in fair value		6,781			10,391
Balance—end of period	$	349,150		$	326,598

During the six months ended June 30, 2022 and 2021, purchases of available for sale securities were approximately $11.2 million and $19.0 million, respectively. During the six months ended June 30, 2022 and 2021, sales, maturities and paydowns of available for sale securities were approximately $0.8 million and $11.1 million, respectively. Cash flows from perpetual care trust related contracts are presented as operating cash flows in Company’s unaudited condensed consolidated statements of cash flows.

The cost and market value associated with the assets held in the perpetual care trusts as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	13,422	$	—	$	—		$	13,422
Fixed maturities:
U.S. governmental securities	2		10		1		—			11
Corporate debt securities	2		—		—		—			—
Other debt securities	2		—		—		—			—
Total fixed maturities			10		1		—			11
Mutual funds—debt securities	1		1,904		6		(317	)		1,593
Mutual funds—equity securities	1		4,078		584		(297	)		4,365
Other investment funds(1)			300,218		22,585		(2,393	)		320,410
Equity securities	1		7,026		2,443		(130	)		9,339
Other invested assets	2		9		1		—			10
Total investments		$	326,667	$	25,620	$	(3,137	)	$	349,150

(1)Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 1 to 30 days, and private credit funds, which have lockup periods ranging from zero to fourteen years with four potential one year extensions at the discretion of the funds’ general partners. As of June 30, 2022, there were $98.4 million in unfunded investment commitments to the private credit funds, which are callable at any time. This asset class also includes $81.3 million of direct loans which are accounted for at amortized cost, net of unamortized origination fees, if any, and are categorized as Level 3 investments in the fair value hierarchy. The interest rates on these direct loans are consistent with market rates, and their amortized cost approximates fair value.

December 31, 2021	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	25,674	$	—	$	—		$	25,674
Fixed maturities:
U.S. governmental securities	2		12		2		—			14
Corporate debt securities	2		—		—		—			—
Other debt securities	2		—		—		—			—
Total fixed maturities			12		2		—			14
Mutual funds—debt securities	1		2,306		28		(35	)		2,299
Mutual funds—equity securities	1		3,894		1,341		(63	)		5,172
Other investment funds(1)			285,826		14,554		(2,776	)		297,604
Equity securities	1		6,817		1,661		(113	)		8,365
Other invested assets	2		9		1		—			10
Total investments		$	324,538	$	17,587	$	(2,987	)	$	339,138

(1)Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 1 to 30 days, and private credit funds, which have lockup periods ranging from zero to 15 years with four potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2021, there were $67.3 million in unfunded investment commitments to the private credit funds, which are callable at any time. This asset class also includes $79.7 million of direct loans which are accounted for at amortized cost, net of unamortized origination fees, if any, and are categorized as Level 3 investments in the fair value hierarchy. The interest rates on these direct loans are consistent with market rates, and their amortized cost approximates fair value.

The contractual maturities of debt securities as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	1	$	—	$	10
Corporate debt securities		—		—		—		—
Other debt securities		—		—		—		—
Total fixed maturities	$	—	$	1	$	—	$	10

December 31, 2021	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	1	$	—	$	13
Corporate debt securities		—		—		—		—
Other debt securities		—		—		—		—
Total fixed maturities	$	—	$	1	$	—	$	13

Temporary Declines in Fair Value

The Company evaluates declines in fair value below cost of each individual asset held in the perpetual care trusts on a quarterly basis.

An aging of unrealized losses on the Company’s investments in debt and equity securities within the perpetual care trusts as of June 30, 2022 and December 31, 2021 is presented below (in thousands):

	Less than 12 months				12 months or more				Total
June 30, 2022	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	1	$	—	$	—	$	—	$	1	$	—
Corporate debt securities		—		—		—		—		—		—
Other debt securities		—		—		—		—		—		—
Total fixed maturities		1		—		—		—		1		—
Mutual funds—debt securities		823		201		364		116		1,187		317
Mutual funds—equity securities		1,540		219		392		78		1,932		297
Other investment funds		24,535		2,393		—		—		24,535		2,393
Equity securities		317		50		76		80		393		130
Total	$	27,216	$	2,863	$	832	$	274	$	28,048	$	3,137

	Less than 12 months				12 months or more				Total
December 31, 2021	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	990	$	—	$	990	$	—
Corporate debt securities		—		—		1,959		—		1,959		—
Other debt securities		—		—		—		—		—		—
Total fixed maturities		—		—		2,949		—		2,949		—
Mutual funds—debt securities		863		25		454		10		1,317		35
Mutual funds—equity securities		661		60		1		3		662		63
Other investment funds		26,533		2,776		—		—		26,533		2,776
Equity securities		962		112		1		1		963		113
Total	$	29,019	$	2,973	$	3,405	$	14	$	32,424	$	2,987

For all securities in an unrealized loss position, the Company evaluated the severity of the impairment and length of time that a security has been in a loss position and concluded the decline in fair value below the asset’s cost was temporary in nature. In addition, the Company is not aware of any circumstances that would prevent the future market value recovery for these securities.

Other-Than-Temporary Impairment of Trust Assets

The Company assesses its perpetual care trust assets for other-than-temporary declines in fair value on a quarterly basis. During the six months ended June 30, 2022, the Company determined, based on its review, that there were no other than temporary impairments to the investment portfolio in the perpetual care trusts. During the six months ended June 30, 2021, the Company determined, based on its review, that there were 6 securities with an aggregate cost basis of approximately $84,000 and an aggregate fair value of approximately $30,000, resulting in an impairment of $54,000, with such impairment considered to be other than temporary due to credit indicators. Accordingly, the Company adjusted the cost basis of these assets to their current value with the offset going against the liability for perpetual care trust corpus.

Impairment of Direct Loans

On a quarterly basis, the perpetual care trusts evaluate the carrying value of each direct loan for impairment. A direct loan is considered impaired when, based on current information and events, it is determined that the trusts will not be able to collect the amounts due according to the loan contract, including scheduled interest payments. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. The trusts would generally place direct loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain and they are 90 days past due for interest or principal, unless the direct loan is both well-secured and in the process of collection. When placed on nonaccrual, the trusts would reverse any accrued unpaid interest receivable against interest income and amortization of any net deferred fees is suspended. Generally, the trusts would return a direct loan to accrual status when all delinquent interest and principal become current under the terms of the credit agreement and collectability of remaining principal and interest is no longer doubtful. In certain circumstances, the trusts may place a direct loan on nonaccrual status but conclude it is not impaired. The trusts may retain independent third-party valuations on such nonaccrual positions to support impairment decisions.

When the trusts identify a direct loan as impaired, they measure the impairment based on the present value of expected future cash flows, discounted at the receivable’s effective interest rate, or the estimated fair value of the collateral, less estimated costs to sell. If it is determined that the value of an impaired receivable is less than the recorded investment, the trusts would recognize impairment with a charge to deferred revenue. When the value of the impaired loan is calculated by discounting expected cash flows, interest income would be recognized using the loan’s effective interest rate over the remaining life of the loan.

The trusts individually develop the allowance for credit losses for any identified impaired loans. In developing the allowance for credit losses, the trusts consider, among other things, the following credit quality indicators:

•business characteristics and financial conditions of obligors;

•current economic conditions and trends;

•actual charge-off experience;

•current delinquency levels;

•value of underlying collateral and guarantees;

•regulatory environment; and

•any other relevant factors predicting investment recovery.

There were no such impairments during the three and six months ended June 30, 2022 and 2021.