Preneed Trust Investments
 9 Months Ended
Sep. 30, 2017
Preneed Trust Investments [Abstract]  
PRENEED TRUST INVESTMENTS
PRENEED TRUST INVESTMENTS
Preneed Cemetery Trust Investments
Preneed cemetery trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed cemetery contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. Preneed cemetery trust investments can be reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed cemetery trust investments on our Consolidated Balance Sheets at December 31, 2016 and September 30, 2017 were as follows (in thousands):
 
December 31, 2016
 
September 30, 2017
Preneed cemetery trust investments, at market value
$
71,834

 
$
73,889

Less: allowance for contract cancellation
(2,138
)
 
(2,161
)
Preneed cemetery trust investments, net
$
69,696

 
$
71,728


Upon cancellation of a preneed cemetery contract, a customer is generally entitled to receive a refund of the corpus, and in some instances, a portion of all of the earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including investment income. As a result, when realized or unrealized losses of a trust result in the trust being underfunded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At September 30, 2017, none of our preneed cemetery trust investments were underfunded.
Earnings from our preneed cemetery trust investments are recognized as revenue when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned.
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 and common stock. Where quoted market prices are not available for the specific security, fair values are estimated by using quoted prices of similar securities in active markets or other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including municipal bonds, foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. There were no transfers between Levels 1 and 2 in the three and nine months ended September 30, 2017. There are no Level 3 investments in the preneed cemetery trust investment portfolio. See Note 7 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.
The cost and fair market values associated with preneed cemetery trust investments at September 30, 2017 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
4,698

 
$
—

 
$
—

 
$
4,698

Fixed income securities:
 
 
 
 
 
 
 
 
 
Foreign debt
2
 
4,834

 
275

 
(168
)
 
4,941

Corporate debt
2
 
19,335

 
1,145

 
(553
)
 
19,927

Preferred stock
2
 
16,329

 
383

 
(524
)
 
16,188

Mortgage-backed securities
2
 
1,089

 
240

 
(23
)
 
1,306

Common stock
1
 
24,574

 
3,376

 
(3,119
)
 
24,831

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed Income
2
 
1,200

 
81

 
—

 
1,281

Trust securities
 
 
$
72,059

 
$
5,501

 
$
(4,387
)
 
$
73,173

Accrued investment income
 
 
$
716

 
 
 
 
 
$
716

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
73,889

Market value as a percentage of cost
 
 
 
 
 
 
 
 
101.5
%

The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
15

Due in one to five years
2,718

Due in five to ten years
5,751

Thereafter
33,879

Total
$
42,363


The cost and fair market values associated with preneed cemetery trust investments at December 31, 2016 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
10,852

 
$
—

 
$
—

 
$
10,852

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
496

 
18

 
(4
)
 
510

Foreign debt
2
 
7,574

 
160

 
(656
)
 
7,078

Corporate debt
2
 
20,621

 
1,569

 
(1,123
)
 
21,067

Preferred stock
2
 
16,287

 
8

 
(947
)
 
15,348

Mortgage-backed securities
2
 
949

 
372

 
(4
)
 
1,317

Common stock
1
 
13,250

 
2,191

 
(1,838
)
 
13,603

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
 
 
1,223

 
107

 
—

 
1,330

Trust securities
 
 
$
71,252

 
$
4,425

 
$
(4,572
)
 
$
71,105

Accrued investment income
 
 
$
729

 
 
 
 
 
$
729

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
71,834

Market value as a percentage of cost
 
 
 
 
 
 
 
 
99.8
%

We determine whether or not the assets in the preneed cemetery trust investments have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria, including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis of the investment due to an other-than-temporary impairment is likewise recorded as a reduction in Deferred preneed cemetery receipts held in trust on our Consolidated Balance Sheets. In the three months ended September 30, 2016, we recorded a $0.1 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the three months ended September 30, 2017. In the nine months ended September 30, 2016, we recorded a $0.8 million impairment and no impairments have been recorded in the nine months ended September 30, 2017. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to 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.
At September 30, 2017, we had certain investments within our preneed cemetery trust investments that had tax lots in loss positions for more than one year. Based on our analyses of these securities, the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.
Our preneed cemetery trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of September 30, 2017 are shown in the following table (in thousands):
 
September 30, 2017
 
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
$
153

 
$
(2
)
 
$
1,657

 
$
(166
)
 
$
1,810

 
$
(168
)
Corporate debt
2,158

 
(410
)
 
624

 
(143
)
 
2,782

 
(553
)
Preferred stock
273

 
(2
)
 
8,111

 
(522
)
 
8,384

 
(524
)
Mortgage-backed securities
200

 
(23
)
 
—

 
—

 
200

 
(23
)
Common stock
8,473

 
(2,247
)
 
1,936

 
(872
)
 
10,409

 
(3,119
)
Mutual Funds:
 
 
 
 
 
 
 
 
 
 
 
Fixed Income
—

 
—

 
—

 
—

 
—

 
—

Total temporary impaired securities
$
11,257

 
$
(2,684
)
 
$
12,328

 
$
(1,703
)
 
$
23,585

 
$
(4,387
)
Our preneed cemetery trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of December 31, 2016 are shown in the following table (in thousands):
 
December 31, 2016
 
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:
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
$
228

 
$
(4
)
 
$
—

 
$
—

 
$
228

 
$
(4
)
Foreign debt
2,523

 
(180
)
 
2,868

 
(475
)
 
5,391

 
(655
)
Corporate debt
6,939

 
(233
)
 
2,168

 
(890
)
 
9,107

 
(1,123
)
Preferred stock
3,217

 
(121
)
 
11,635

 
(826
)
 
14,852

 
(947
)
Mortgage-backed securities
51

 
(5
)
 
—

 
—

 
51

 
(5
)
Common stock
2,608

 
(202
)
 
3,385

 
(1,636
)
 
5,993

 
(1,838
)
Total temporary impaired securities
$
15,566

 
$
(745
)
 
$
20,056

 
$
(3,827
)
 
$
35,622

 
$
(4,572
)

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, 2016 and 2017 were as follows (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2017
 
2016
 
2017
Investment income
$
578

 
$
474

 
$
1,546

 
$
1,755

Realized gains
126

 
—

 
415

 
2,215

Realized losses
(673
)
 
—

 
(4,081
)
 
(1,312
)
Expenses and taxes
(139
)
 
(336
)
 
(832
)
 
(1,213
)
Decrease (increase) in deferred preneed cemetery receipts held in trust
108

 
(138
)
 
2,952

 
(1,445
)
 
$
—

 
$
—

 
$
—

 
$
—


Purchases and sales of investments in the preneed cemetery trusts for the three and nine months ended September 30, 2016 and 2017 were as follows (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2017
 
2016
 
2017
Purchases
$
(1,434
)
 
$
(915
)
 
$
(19,540
)
 
$
(19,355
)
Sales
$
5,973

 
$
—

 
$
18,003

 
$
13,189


Preneed Funeral Trust Investments
Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. Preneed funeral trust investments are reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed funeral trust investments on our Consolidated Balance Sheets at December 31, 2016 and September 30, 2017 were as follows (in thousands):
 
December 31, 2016
 
September 30, 2017
Preneed funeral trust investments, at market value
$
91,980

 
$
92,151

Less: allowance for contract cancellation
(2,740
)
 
(2,707
)
Preneed funeral trust investments, net
$
89,240

 
$
89,444


Upon cancellation of a preneed funeral contract, a customer is generally entitled to receive a refund of the corpus and in some instances, a portion of all earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including investment income. As a result, when realized or unrealized losses of a trust result in the trust being underfunded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At September 30, 2017, none of our preneed funeral trust investments were underfunded.
Earnings from our preneed funeral trust investments are recognized as revenue when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned.
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 and common stock. 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 other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including municipal bonds, 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. There were no transfers between Levels 1 and 2 for the three and nine months ended September 30, 2017. There are no Level 3 investments in the preneed funeral trust investment portfolio. See Note 7 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.
The cost and fair market values associated with preneed funeral trust investments at September 30, 2017 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
15,636

 
$
—

 
$
—

 
$
15,636

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S treasury debt
1
 
1,490

 
13

 
(4
)
 
1,499

Foreign debt
2
 
4,882

 
282

 
(166
)
 
4,998

Corporate debt
2
 
20,244

 
1,165

 
(571
)
 
20,838

Preferred stock
2
 
16,837

 
457

 
(526
)
 
16,768

Mortgage-backed securities
2
 
1,273

 
255

 
(25
)
 
1,503

Common stock
1
 
24,488

 
3,392

 
(3,133
)
 
24,747

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
2
 
1,998

 
87

 
(38
)
 
2,047

Other investments
2
 
3,374

 
—

 
—

 
3,374

Trust securities
 
 
$
90,222

 
$
5,651

 
$
(4,463
)
 
$
91,410

Accrued investment income
 
 
$
741

 
 
 
 
 
$
741

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
92,151

Market value as a percentage of cost
 
 
 
 
 
 
 
 
101.3
%

The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
78

Due in one to five years
4,320

Due in five to ten years
6,208

Thereafter
35,000

Total
$
45,606



The cost and fair market values associated with preneed funeral trust investments at December 31, 2016 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
22,787

 
$
—

 
$
—

 
$
22,787

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. treasury debt
1
 
1,491

 
21

 
(10
)
 
1,502

Municipal bonds
2
 
447

 
17

 
(4
)
 
460

Foreign debt
2
 
7,692

 
170

 
(677
)
 
7,185

Corporate debt
2
 
21,454

 
1,566

 
(1,134
)
 
21,886

Preferred stock
2
 
17,037

 
64

 
(970
)
 
16,131

Mortgage-backed securities
2
 
1,165

 
400

 
(5
)
 
1,560

Common stock
1
 
13,675

 
2,256

 
(1,850
)
 
14,081

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
2
 
2,124

 
115

 
(66
)
 
2,173

Other investments
2
 
3,463

 
—

 
—

 
3,463

Trust securities
 
 
$
91,335

 
$
4,609

 
$
(4,716
)
 
$
91,228

Accrued investment income
 
 
$
752

 
 
 
 
 
$
752

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
91,980

Market value as a percentage of cost
 
 
 
 
 
 
 
 
99.9
%

We determine whether or not the assets in the preneed funeral trust investments have other-than-temporary impairments on a security-by-security basis. This assessment is made based upon a number of criteria including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis of the investment due to an other-than-temporary impairment is likewise recorded as a reduction to Deferred preneed funeral receipts held in trust on our Consolidated Balance Sheets. In the three months ended September 30, 2016, we recorded a $0.1 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the three months ended September 30, 2017. In the nine months ended September 30, 2016, we recorded a $0.9 million impairment and no impairments have been recorded in the nine months ended September 30, 2017. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to 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.
At September 30, 2017, we had certain investments within our preneed funeral trust investments that had tax lots in loss positions for more than one year. Based on our analyses of these securities, the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.
Our preneed funeral trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of September 30, 2017 are shown in the following table (in thousands):
 
September 30, 2017
 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury debt
$
837

 
$
(4
)
 
$
—

 
$
—

 
$
837

 
$
(4
)
Foreign debt
170

 
(4
)
 
1,628

 
(163
)
 
1,798

 
(167
)
Corporate debt
2,273

 
(430
)
 
609

 
(141
)
 
2,882

 
(571
)
Preferred stock
191

 
(6
)
 
8,183

 
(520
)
 
8,374

 
(526
)
Mortgage-backed securities
234

 
(24
)
 
9

 
—

 
243

 
(24
)
Common stock
8,497

 
(2,241
)
 
1,934

 
(892
)
 
10,431

 
(3,133
)
Mutual Funds:
 
 
 
 
 
 
 
 
 
 
 
Fixed income
79

 
(1
)
 
608

 
(37
)
 
687

 
(38
)
Total temporary impaired securities
$
12,281

 
$
(2,710
)
 
$
12,971

 
$
(1,753
)
 
$
25,252

 
$
(4,463
)
Our preneed funeral trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of December 31, 2016 are shown in the following table (in thousands):
 
December 31, 2016
 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury debt
$
834

 
$
(10
)
 
$
—

 
$
—

 
$
834

 
$
(10
)
Municipal bonds
244

 
(5
)
 
—

 
—

 
244

 
(5
)
Foreign debt
2,654

 
(186
)
 
2,905

 
(490
)
 
5,559

 
(676
)
Corporate debt
6,977

 
(215
)
 
2,234

 
(919
)
 
9,211

 
(1,134
)
Preferred stock
3,420

 
(128
)
 
11,750

 
(842
)
 
15,170

 
(970
)
Mortgage-backed securities
55

 
(5
)
 
11

 
(1
)
 
66

 
(6
)
Common stock
2,795

 
(216
)
 
3,390

 
(1,634
)
 
6,185

 
(1,850
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Fixed income
97

 
(7
)
 
644

 
(58
)
 
741

 
(65
)
Total temporary impaired securities
$
17,076

 
$
(772
)
 
$
20,934

 
$
(3,944
)
 
$
38,010

 
$
(4,716
)

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, 2016 and 2017 were as follows (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2017
 
2016
 
2017
Investment income
$
596

 
$
524

 
$
1,639

 
$
1,801

Realized gains
131

 
—

 
525

 
2,296

Realized losses
(716
)
 
(2
)
 
(4,090
)
 
(1,314
)
Expenses and taxes
(253
)
 
(390
)
 
(946
)
 
(1,106
)
Decrease (increase) in deferred preneed funeral receipts held in trust
242

 
(132
)
 
2,872

 
(1,677
)
 
$
—

 
$
—

 
$
—

 
$
—


Purchases and sales of investments in the preneed funeral trusts for the three and nine months ended September 30, 2016 and 2017 were as follows (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2016
 
2017
 
2016
 
2017
Purchases
$
(1,486
)
 
$
(966
)
 
$
(19,917
)
 
$
(19,548
)
Sales
$
6,336

 
$
23

 
$
19,005

 
$
13,266