Security National Financial Corp (SNFCA) 2025 Q4 法說會逐字稿

Good afternoon, everyone. Welcome to Security National Financial Corporation's fourth-quarter 2025 earnings call. We thank you for joining us today to review our financial and operational results for the period ended December 31, 2025.

Before we begin, I'd like to remind everyone that our remarks today will include forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially from those projected.

Such risks include, but are not limited to, changes in economic conditions, interest rates, regulatory developments, competitive pressures, and other factors detailed in our findings with the Securities and Exchange Commission. We caution you not to place undue reliance on these forward-looking statements, which speak only as of today's date. We undertake no obligation to publicly update or revise these statements to reflect future events or circumstances, except as required by law.

With that, I'd like to turn the call over to our Chairman, President, and our Chief Executive Officer, Scott Quist. Scott?

Thank you, Ms. Heather. First of all, happy St. Patrick's Day, everyone. Thank you for attending our Q4 earnings call. And I believe it could accurately be characterized as our year-end 2025 conference investor call.

For the 12 months into December 31, 2025, SNFC's after-tax earnings from operations increased 10.8% from $29 million in 2024, using round numbers, to $32 million in 2025, on a 3% increase in revenues to $345 million. Absent the pandemic related years of 2020 and 2021, and I did -- I have started excluding those years simply because of the extraordinary circumstances those years presented both in terms of the interest rate environment, which as many will recall, actually for a very short period of time gave negative rates, but also the mortality increase, which boosted our cemetery mortuary earnings, which circumstances are unlikely to duplicate in the future. So I choose to compare ourselves to more normal times.

So again, absent the pandemic related years of 2020 and 2021, this was our best net profit year ever, beating 2024 by nearly 11%, which is significant, realizing that 2024 was our previous best year ever, again absent 2020 and 2021. 2025 was a very good year for our company. And I believe the fourth quarter in particular delivered excellent results.

Regarding the Life segment, Mr. Sill will be addressing this for following my remarks, I would urge your awareness that first one to the implementation of ASU 2018-12, Long Duration Targeted Improvements, otherwise known as LDTI, our Life segments 2024 full-year results were restated upwards by approximately $2 million.

Regarding my use of the phrase very good in describing our year-end results, I think anytime a financial services company achieves a 2% return on total assets is very good. Our entire team, mortgage, life insurance, and cemetery mortuary joined together to produce that result. Going to my use of the word excellent in describing quarterly results, I think anytime we achieve a nearly 200% increase over the prior year's Q4 is excellent.

Turning now to our specific business segment results, 2025 is our Insurance segment's best operational year ever. We did and are continuing to expand considerable strategic thought, effort, and expense to improve our sales systems, both from the agent and managerial views and our end customers view in order to grow our top-line revenue. We have brought on and continue to bring on new capable talent and have continued to refine and improve our sales support and commission system.

Our Cemetery Mortuary segment delivered a nearly 30% EBITDA margin for the year, which is very good, especially considering the increasing cremation rates. Here, we have also brought on new sales talent and continue to spend considerable resources refining our sale support systems to grow top-line revenue. We believe revenue will grow as we drive the implementation of our initiatives.

Our Mortgage segment had a fabulous Q4, delivering a 74% net income improvement on a 4.6% revenue decrease. A tremendous amount of thought, work, accountability, and effort has gone into streamlining and rationalizing our corporate, regional, and branch operations, as well as expanding our sales offerings, both in terms of capability and personnel. The improvement and momentum are significant.

It is essential to understand the integrated nature of our company. A major reason for the Life segment's continued improvement is its investment income, much of which is related to our Mortgage segment's operations.

While I agree with my father saying that every tub sits on its own bottom, and thus we need to measure our three business segments financial results in those terms, nevertheless, we are designed such that each segment synergistically supports its siblings. We as a company would not have had our best year ever without the significant push from each of our business segments.

Finally, before turning time over to Mr. Sill, I would note that I am the Chief Executive Officer and President of the holding company; I am not the Chief Executive Officer of our Life segment or our Mortgage segment or our Memorial segments. If I'm keeping those in line, our Life segment is Mr. Adam Quist, Memorial would be Mr. Adam Quist; and Mortgage would be Mr. Andrew Quist.

With that simple explanation, we'll go to Mr. Sill, our Chief Financial Officer. Mr. Sill?

Thank you, Scott. Good afternoon, and thank you for joining us today. As Scott mentioned, my name is Garrett Sill, and I am the Chief Financial Officer of Security National Financial Corporation.

As mentioned in our last call, the accelerated filing status brought with it some significant changes and challenges to the company. The most significant change was the adoption and formalization of the company's internal controls over financial reporting. The company's internal controls can generally fall into two categories: business process controls and information and technology general controls. The runway was short in 2025 to bring the company up to speed with our new control stance, but we got there.

Fortunately, we have a much longer runway in 2026, and we'll use the framework developed last year to refine, enhance, and remediate our controls both from a 404A and a 404B perspective.

2025 also brought a significant change for our financial statements. As Scott mentioned, as we officially adopted ASU 2018-12, better known as Targeted Improvements to the Accounting for Long Duration Contracts, or LDTI. With our filing on Monday, this project is completed, and I can officially erase it from my office's whiteboard. It has been a three-year effort, and I want to thank our actuary and finance teams as well as Deloitte for the efforts involved.

Regarding our adoption of LDTI, I would encourage you to review pages 49 through 52 of our 10-K as those pages add some clarity to the various effects to the company's financial statements as we restated our annual results for 2024 for comparison purposes. The simplest way for me to explain the effect of LDTI is to focus on two key items.

First, under old accounting standards, deferred acquisition costs, or DAC, was amortized based on the premium paying period of the policy. Under our new accounting standards, or LDTI, DAC is now amortized over the life of the policy. The result is a lower DAC amortization, which means accelerated earnings.

Second, we use a standardized discount rate when calculating our future policy reserves or our reserves, and we apply the standardized rate to our import business every quarter. The result is the changes in interest rates will cause our reserves to increase as interest rates decrease and to decrease as interest rates increase. The change in reserves due to interest rate changes flows through our accumulated other comprehensive income, which is a component of our stockholders' equity.

Now, I just want to mention a few items regarding our consolidated financial statements. First on our balance sheet, invested assets increased nearly $72 million or 7.5% as we increased our investment in key areas. We also saw a favorable swing in our fixed income or our bond portfolio with the easing of interest rates in 2025. Our deferred acquisition costs, or DAC, balances increased almost $9 million or [6.9%] because of LDTI, which I mentioned earlier. In all, our total assets increased $67 million or 4.5%.

Most of our liabilities remain relatively flat except for our future policy benefits or reserves, which increased nearly $48 million or 6.3%. This is largely due to the change in our discount rate at year end. As a reminder, this increase in reserve flows directly to stockholders' equity and was partially offset by the appreciation in our bond portfolio. These two items, along with our earnings, pushed our stockholders' equity to $410 million or an increase of 7.5%.

Moving to our statement of earnings. The 3% increase in revenue that Scott mentioned was primary a result of good investment returns, which is shown in the net investment income and gains on investment lines of that statement. The $10 million increase in revenues was muted by the increased costs that totaled approximately $6 million. The most significant areas of increase were personnel expenses, which was up about $2 million, and other expenses increased by about $3 million.

The most noticeable increases in the subcategory of our other expenses were bad debt, professional fees, insurance premiums, and data processing. The net result was an increase in net earnings year over year of $3 million or 10%.

In closing, 2025 was a good financial year for the company as we saw growth in total assets, stockholders' equity, and net earnings year over year. We still have a significant amount of work as we continue to navigate our accelerated finance status, but I am confident that we can meet the rigorous standards.

Next, we'll hear from Andrew Quist, President and Chief Executive Officer of Security National Mortgage. Thank you.

Thank you, Garrett. And good afternoon, fellow shareholders. As Garrett mentioned, I'm Andrew Quist, President and CEO of Security National Mortgage Company.

In the fourth quarter of 2025, Security National Mortgage Company had a pretax net loss of $1,161,000 compared to a net loss of $4,400,000 in the fourth quarter of 2024, a decrease to our net loss of $3,239,000 or a 74% reduction. Though still a net loss averaging more than $1 million a month improvement over the same quarter last year shows significant progress in our company and a trajectory I'm proud of.

This improvement came on reduced origination volumes. In the fourth quarter of 2025, we originated $540 million of loan volume compared to $573 million in the fourth quarter of 2024, a 6% year-over-year decrease. On a sequential quarter basis, origination volumes were down 13%.

Based on the Mortgage Bankers Association's reported total industry origination volumes for Q4, Security National Mortgage Company's market share decreased to 9 basis points from 11 basis points in the third quarter. This reduction in origination volume and market share was the result of the company separating from loan originators that could not originate loans profitably and continued underperformance in refinance volumes.

Turning to refinance volumes, Security National improved from 14% refinance volume in the third quarter to 19% in Q4, with 23% refinance volume in December alone, which marks a three-year high in that metric. I believe this shows our focus on capturing more of the refinance market and improving our skill set in this area is working. Again, we will always be a purchase transaction-based lender, but improving our capture of refinance loans is key to gaining market share and improving origination volumes in this environment.

Reviewing full-year results, Security National Mortgage had a net loss of $4,761,000 in 2025 compared to a net loss of $6,213,000 in 2024. This was a $1,452,000 reduction in our loss or a 23% improvement. I believe gap results understate the year-over-year improvement at SNMC. On an operating basis, the year-over-year improvement was over $4 million in 2025. This was on flat origination volumes. Security National Mortgage funded $2.3 billion in both 2025 and 2024.

In summary, Security National Mortgage showed significant improvement in the fourth quarter, beating last year's results by over $1 million a month on average. We also improved our full-year results in 2025 by 23%. I'm confident we will continue on this path of improvement. And I want to express a heartfelt thank you to our loan officers and our employees for their continued work to improve SNMC. It is bearing results. Thank you.

Thank you, Andrew. My name is Adam Quist, and I'm President and CEO of the Security National Life Insurance Companies. And so my comments will focus specifically on the performance of our life companies, which Scott mentioned in 2025 delivered their strongest operational year ever.

For the year 2025, the Life segment's net earnings rose to $37.4 million on pretax net income, up nearly 8% year over year. We accomplished this by generating approximately $208 million in total revenue, an increase of about 5% over 2024. These results reflect our strong investment performance, the continued stability of our insurance operations, and the progress we are making in strengthening both our distribution and operations platforms.

Let me further highlight a few of the key drivers behind those results. First, investment income was the most meaningful contributor to our performance this year. Net investment income increased to approximately $76 million, representing about a 12% growth over the prior year. This was largely due to returns associated with our residential real estate investment strategies. Our life companies benefit from a diversified investment portfolio, and an important component of that portfolio are the assets generated in synergy with our mortgage setting.

As Scott stated, the integrated structure of Security National continues to provide a unique advantage for our life companies, allowing us to deploy capital efficiently while generating what we view as strong risk-adjusted returns over the long term within the life cycle.

Second, our core premium revenue remained very stable, holding roughly $120 million for this year. This reflects the durability of our policyholder base and the strength of our agent, (inaudible). Over the past two years, we have invested significant time and resources into improving our sales management, sales systems, agent support infrastructure, and the overall agent, partner, and customer experience. Those investments are helping us maintain a consistent production base while positioning us for future growth.

To be clear, our goal is not to just have stable premium revenue. Our goal is to grow premium. While it is a process, I believe the investments we have made the past two years are starting to show their fruits.

Third, we continue to make targeted investments in personnel while maintaining discipline expense management. We did see some increases in operating expenses as we expanded our sale support capabilities, invested in technology, and continued modernizing our internal infrastructure. These investments are intentional and strategic. They are aimed at strengthening our distribution platform and ensuring that our life companies are positioned for long-term growth.

Again, it is important to remember that, as Garrett mentioned, our results reflect the implementation of ASU 2018-12, or the LDTI accounting standards. While the accounting presentation has changed somewhat, as you can see in our results, the underlying economics and performance of the life companies remain strong. I want to echo Garrett and extend my gratitude to our finance and actuarial teams as the implementation of LDTI was a heavy lift and required significant effort from both teams.

Beyond the financial results, our focus remains on three core priorities. First, expanding and strengthening our sales leadership and sales distributions. We continue to recruit new agents and develop new leadership within our sales organization.

Second, improving the systems that support our leaders, agents, and funeral home partners. Over the past two years, we have worked to refine our sales support tools, commission systems, and operational process. Our goal is simple: to increase our value to agents and partners and make it easier for our agents and partners to do business with us as we help them grow their production. We are continuing to invest in technology, policy application and administration capabilities, and digital tools that improve both agent productivity and our operational efficiency.

Our third priority is to continue to build infrastructure that supports sustainable, strong investment returns for our life companies over the long term. We have invested significant human and financial capital in strengthening this capability. Of course, we are not immune to the broader macroeconomic conditions, which lay outside of our control.

A meaningful portion of our portfolio is real estate-related investments. We can all read in the popular press of the broader economic trends affecting those markets, sometimes to the positive and sometimes not. Nevertheless, we believe the platform and strategy we are implementing through disciplined underwriting, strong partnerships, and thoughtful capital deployment will continue to generate attractive risk adjusted returns over the long term.

To summarize, 2025 was the strongest operational year in the history of our life companies. We saw stable premium production, meaningful growth and investment income, and improved profitability, all while continuing to invest in the systems and infrastructure that will support and enable future growth. Thank you for your continued support, and I look forward to sharing our progress with you on future calls.

I will now turn the time over to Steve Kehl to report on our Funeral Homes and Cemeteries division.

Thank you, Adam. Good afternoon, everyone. I'm Steve Kehl, the Chief Operating Officer of Security National Funeral Homes and Cemeteries.

In the fourth quarter of 2025, our earnings before tax increased to $1.74 million compared to $877,000 in the prior-year period. Total revenue rose 9.7% to $8.13 million, up from $7.41 million in the fourth quarter of 2024.

For the full year, earnings before tax were $8.82 million compared to $8.86 million in 2024, while total revenue increased 0.9% to $33.32 million, up from $33.02 million in the prior year. While full-year earnings were modestly below the prior year, our performance reflects underlying stability and continued progress. We are entering the new year with renewed conviction in our strategy and a clear path to sustain growth and long-term value creation.

In the fourth quarter of 2025 for our Funeral Home operations, Funeral Home earnings before tax increased 55.5% to $182,000 compared to $117,000 in the prior-year period. Revenue remains stable at $3.27 million, up modestly from $3.26 million in the fourth quarter of last year. Despite a 4.3% decline in families served, the team delivered a 0.2% increase in average funeral sales, reflecting disciplined execution and a continued focus on value.

For the full year, Funeral Home revenue increased 4% to $13.85 million compared to $13.32 million in 2024. This growth was supported by a 3.5% increase in average funeral sales, along with an increase in the number of families served. Notably, we achieved a 9.3% increase in the number of families choosing to hold a service alongside cremation, reflecting continued success in aligning our offerings with evolving consumer preferences. We believe this performance underscores the effectiveness of our expanded service portfolio and the continued advancement of our funeral directors in guiding families toward more meaningful personalized experiences.

Over the past year, we have made targeted investments in professional development, strengthening capabilities within the arrangement conference, and elevating standards of execution across our funeral home teams, positioning us well for continued growth.

In the fourth quarter of 2025 for our Cemetery division, our Cemetery earnings before tax were $518,000 compared to $934,000 in the prior-year period, and revenue decreased 11.3% to $3.86 million from $4.35 million. The decline in revenue was primarily driven by lower net pre-need land sales, including the absence of larger high-value property transactions in the quarter. Importantly, the team increased the number of pre-need contracts written by 11.8% and achieved a 2.9% increase in cemetery placements, reflecting continued underlying activity and engagement.

For the full year, Cemetery revenue decreased 6.2% to $15.22 million compared to $16.22 million in 2024. Notably, we delivered growth and contract volume across both pre-need and at-need cemetery operations, underscoring sustained demand while also continuing to see an evolution in consumer disposition preferences within our cemeteries.

As our cemetery teams remain focused on educating families on the value of establishing a permanent place of remembrance, we are confident these efforts will translate into future revenue growth and strengthen our long-term position. We continue to prioritize consistent, high-quality arrangement presentations, targeted and education-based community events, and enhanced cemetery park tours, and ongoing training initiatives to ensure our cemetery teams are effectively guiding families through all available options.

Regarding our investment income, in the fourth quarter of 2025, our investment income increased to $1 million compared to a negative $202,000 in the prior-year period. For the full year, our investment income increased 21.9% to $4.25 million compared to $3.48 million in the prior year.

We approach our investment strategy with a long-term perspective, expecting returns to compound steadily over time. Both quarterly and annual investment income have been strengthened by partnerships within both our Mortgage and Life Insurance segments. We also saw favorable growth and unrealized gains on our common stock positions. We remain committed to disciplined capital allocation including continued investment in our internal growth initiatives with our cemetery garden expansions.

In closing, I'd like to express my sincere gratitude to our funeral home, cemetery grounds, and operational support teams. Your commitment to excellence and professionalism truly defines who we are and drives our success. Because of you, we are not only maintaining our standards, we are strengthening them and continuing to serve families with the highest level of compare -- with a level of care, compassion, and respect. Thank you for your time and for your confidence.

I now turn the time back over to our Human Resources Director, Ms. Heather Street.

Thank you, Steve. Before we conclude today's call, we would like to open the floor for questions.

(Event Instructions) Are there any questions at all? See no questions in the chat, as well as through the participant channels. It looks like we've come to the end of our time. We'll note the end of our Q&A. And as if we have no more questions, we'll note the end of our Q&A.

Thank you again for your questions and participation, and we value the engagement and thoughtful input of our shareholders and analysts.

For our latest financial reports or any other investor materials, we invite you to visit the Investor Relations section of our website at www.securitynational.com. We appreciate your continued support for Security National Financial Corporation.

This concludes our fourth-quarter 2025 earnings call. We look forward to speaking with you again soon. Thank you, and have a great day.