SECURITY NATIONAL FINANCIAL CORP (SNFCA)

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The
Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i)
increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole
life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on the housing market by originating
mortgage loans.

Insurance
Operations

The
following table shows the condensed financial results for the Company’s insurance operations for 2024 and 2023. See Note 15 of
the Notes to Consolidated Financial Statements.

Profitability
for 2024 increased due to (a) a $4,998,000 increase in insurance premiums and other considerations, (b) a $3,301,000 decrease in
death, surrenders and other policy benefits, (c) a $2,323,000 decrease in amortization of deferred policy acquisition costs, (d) a
$1,092,000 increase in gains on investments and other assets, (e) a $443,000 increase in net investment income, and (f) a $354,000
decrease in interest expense, which were partially offset by (i) a $2,949,000 increase in income tax expense, (ii) a $2,929,000
increase in selling, general and administrative expenses, (iii) a $2,245,000 increase in future policy benefits, (iv) a $931,000
decrease in intersegment revenue, (v) a $102,000 decrease in other revenues, (vi) a $77,000 decrease in mortgage fee income, and
(vii) a $42,000 increase in intersegment interest expense and other expenses.

Cemetery
and Mortuary Operations

The
following table shows the condensed financial results for the Company’s cemetery and mortuary operations for 2024 and 2023. See
Note 15 of the Notes to Consolidated Financial Statements.

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Profitability
in 2024 increased due to (a) a $1,140,000 increase in cemetery pre-need sales, (b) a $260,000 increase in mortuary at-need sales, (c)
a $156,000 increase in gains on investments and other assets, (d) a $139,000 increase in other revenues, and (e) a $26,000 decrease in
intersegment interest expense and other expenses, which were partially offset by (i) a $458,000 increase in selling, general and administrative
expenses, (ii) a $383,000 decrease in net investment income, (iii) a $239,000 increase in amortization of deferred policy acquisition
costs, (iv) a $228,000 decrease in cemetery at-need sales, and (v) a $96,000 increase in income tax expense.

Mortgage
Operations

The
Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of
Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban
Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in
addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail
basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with the Company,
Security National Life, Kilpatrick Life, and unaffiliated financial institutions.

SecurityNational
Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from
third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”)
released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately
0.44% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party
sub-servicer.

US
Treasury rates continue to remain elevated despite the downward trend in inflation data and the Federal Reserve’s action to reduce
rates. This has resulted in higher-than-expected mortgage rates, which in turn has further decreased the demand for loan originations
classified as refinance. The higher-than-expected mortgage rates have also continued to have a negative effect on loan originations classified
as purchases.

For
2024 and 2023, SecurityNational Mortgage originated 7,269 loans ($2,295,830,000 total volume) and 7,185 loans ($2,173,081,000 total volume),
respectively.

The
following table shows the condensed financial results for the Company’s mortgage operations for 2024 and 2023. See Note 15 of the
Notes to Consolidated Financial Statements.

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Losses
in 2024 compared to 2023 decreased due to (a) a $4,251,000 decrease in other expenses, (b) a $3,348,000 increase in the fair value
of loans held for sale, (c) a $2,359,000 increase in income from loan originations, (d) a $2,177,000 decrease in personnel expenses,
(e) a $1,927,000 increase in secondary gains from investors, (f) a $1,854,000 increase in the fair value of loan commitments, (g) a
$1,729,000 decrease in rent and rent related expenses, (h) a $921,000 increase in other revenues, (i) a $904,000 decrease in
intersegment interest expense and other expenses, (j) a $330,000 decrease in advertising expenses, (k) a $306,000 decrease in costs
related to funding mortgage loans, (l) a $257,000 decrease in interest expense, (m) a $42,000 increase in intersegment revenues, and
(n) a $29,000 decrease in depreciation on property and equipment, which were partially offset by (i) a $7,410,000 increase in
commissions, (ii) a $2,717,000 increase in income tax expense, (iii) a $1,143,000 decrease in gains on investments and other assets,
and (iv) a $678,000 decrease in net investment income.

Critical
Accounting Policies and Estimates

The
Company’s significant accounting policies are fundamental to understanding its results of operations and financial condition as
they require that the Company use estimates and assumptions that may affect the value of its assets or liabilities and financial results.
See Note 1 – Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for further information.

Five of these policies, discussed below, relate to
critical estimates because they require management to make difficult, subjective and complex judgments about matters that are inherently
uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions.
Actual results could differ from those estimates.

The
Company’s Management and the Audit Committee of the Board of Directors have reviewed and approved the accounting policies associated
with these critical estimates.

Future
Policy Benefits

Reserves
for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the
policies, mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

These
assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional
life products, include a provision for adverse deviation. For traditional life insurance, once established for a particular series of
products, these assumptions are generally held constant.

Deferred
Acquisition Costs and Value of Business Acquired

Amortization
of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current and future
gross profits or margins on this business. Key assumptions used include the following: yield on investments supporting the liabilities,
amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary to maintain
the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

For
nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies in proportion
to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using
the same assumption used for computing liabilities for future policy benefits and are generally “locked in” at the date the
policies are issued.

Value
of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized
like deferred acquisition costs. The critical issues explained for deferred acquisition costs would also apply for value of business
acquired.

Premium
Deficiency and Loss Recognition Testing

At
least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)
recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate
assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether
the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily
of premium income, less benefits, and expenses. If the current contract liabilities plus the present value of future premiums is greater
than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium
reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the
after-tax net investment earned rate.

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Loan
Loss Reserve

The
Company provides for losses on its mortgage loans held for sale through the mortgage loan loss reserve (a liability account).

The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on
mortgage loans sold to third-party investors. The Company may be required to reimburse third-party investors for costs associated with
early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default in any of the first
four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates
are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

Upon
completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities
incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representations and warranties made
at loan sale. The Company accrues a monthly allowance for indemnification losses to investors based on total production. This estimate
is based on the Company’s historical experience and is included as a component of mortgage fee income. Subsequent updates to the
recorded liability from changes in assumptions are recorded in selling, general and administrative expenses. The estimated liability
for indemnification losses is included in other liabilities and accrued expenses.

Loan
Commitments

The
Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage
loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate
of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change
in fair value of the underlying mortgage loan is measured from the date the mortgage loan commitment is issued and is shown net of related
expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of
the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the
quantity and value of mortgage loans that will be funded within the terms of the commitments.

Results
of Consolidated Operations

2024
Compared to 2023

Total
revenues increased by $16,025,000, or 5.0%, to $334,522,000 for 2024 from $318,497,000 for 2023. Contributing to this increase in total
revenues was primarily a $9,411,000 increase in mortgage fee income, a $4,997,000 increase in insurance premiums and other considerations,
a $1,172,000 increase in net cemetery and mortuary sales, a $958,000 increase in other revenues, and a $105,000 increase in gains on
investments and other assets. This increase in total revenues was offset by a $618,000 decrease in net investment income.

Mortgage
fee income increased by $9,411,000, or 9.6%, to $107,559,000 for 2024, from $98,148,000 for 2023. This increase was primarily due to
a $5,202,000 increase in the fair value of loans held for sale and loan commitments, a $3,264,000 increase in loan fees and interest
income, a $1,850,000 increase in secondary gains from mortgage loans sold to third-party investors into the secondary market. This increase
in mortgage fee income was partially offset by a $905,000 increase in the provision for loan loss reserve.

Insurance
premiums and other considerations increased by $4,997,000, or 4.4%, to $119,656,000 for 2024, from $114,659,000 for 2023. This increase
was due to an increase of $2,555,000 in first year premiums because of increased preneed insurance sales and an increase of $2,442,000
in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium
paying policies in force.

Net
investment income decreased by $618,000, or 0.9%, to $71,725,000 for 2024, from $72,343,000 for 2023. This decrease was primarily attributable
to a $3,416,000 decrease in rental income from real estate held for investment and a $3,290,000 decrease in mortgage loan interest. This
decrease was partially offset by a $2,427,000 increase in interest on cash and cash equivalents, a $1,853,000 increase in insurance assignment
income, a $941,000 decrease in investment expenses, a $461,000 increase in fixed maturity securities income, a $189,000 increase in income
in other investments, a $137,000 increase in policy loan income, and an $82,000 increase in equity securities income.

Net
mortuary and cemetery sales increased by $1,172,000, or 4.2%, to $29,037,000 for 2024, from $27,865,000 for 2023. This increase was primarily
due to a $1,140,000 increase in cemetery pre-need sales and a $260,000 increase in mortuary at-need sales. This increase was partially
offset by a $228,000 decrease in cemetery at-need sales.

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Gains
on investments and other assets increased by $105,000, or 5.7%, to $1,942,000 for 2024, from $1,837,000 for 2023. This increase in gains
on investments and other assets was primarily due to a $614,000 increase in gains on real estate held for investment, a $234,000 increase
in gains on other assets, a $210,000 increase in gains on equity securities mostly attributable to increases in the fair value of these
equity securities, and a $208,000 increase in gains on fixed maturity securities. This increase was partially offset by a $1,161,000
decrease in gains on mortgage loans held for investment.

Other
revenues increased by $958,000, or 26.3%, to $4,604,000 for 2024 from $3,646,000 for 2023. This increase was primarily attributable to
a $1,350,000 legal settlement, which was partially offset by a decrease of $392,000 in other miscellaneous revenues.

Total
benefits and expenses were $300,419,000, or 89.8% of total revenues for 2024, as compared to $302,197,000, or 94.9% of total revenues
for 2023.

Death
benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $1,056,000, or 1.1%, to $98,956,000
for 2024, from $100,012,000 for 2023. This decrease was primarily the result of a $3,274,000 decrease in death benefits and a $27,000
decrease in surrender and other policy benefits. This decrease was partially offset by a $2,245,000 increase in future policy benefits.

Amortization
of deferred policy and pre-need acquisition costs and value of business acquired decreased by $2,084,000, or 11.6%, to $15,940,000 for
2024, from $18,024,000 for 2023. This decrease was primarily due to increased payment consistency from premium-paying products along
with a decrease in new business.

Selling,
general and administrative expenses increased by an aggregate of $1,975,000, or 1.1%, to $176,465,000 for 2024, from $174,490,000 for
2023. This increase was primarily the result of a $7,043,000 increase in commissions, a $1,943,000 increase in personnel expenses, and
a $32,000 increase in depreciation on property and equipment. This increase was partially offset by a $4,432,000 decrease in other expenses,
a $1,710,000 decrease in rent and rent related expenses, a $595,000 decrease in advertising expenses, and a $306,000 decrease in costs
related to funding mortgage loans.

Interest
expense decreased by $611,000, or 12.6%, to $4,254,000 for 2024, from $4,865,000 for 2023. This decrease was primarily due to a decrease
of $354,000 in interest expense on bank loans and a decrease of $257,000 in interest expense on mortgage warehouse lines of credit for
loans held for sale.

Income
tax expense increased by $5,763,000, or 319.2%, to $7,568,000 for 2024, from $1,805,000 for 2023. This increase was primarily due to
an increase in earnings before income taxes for 2024 compared to 2023. The Company’s overall effective tax rate increased from
11.1% for 2023 to 22.2% in 2024, a 11.1% increase in the effective tax rate or a 100.6% change. This increase was partially due to the
prior period reducing the valuation allowance to zero and no valuation allowance adjustment in the current period.

Risks

The
following is a description of the material risks facing the Company and how it mitigates those risks:

Legal
and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses
and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits,
new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those
recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other
public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations
in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying
its operations, thus reducing its exposure to any single product or jurisdiction, and by employing underwriting practices that identify
and minimize the adverse impact of such risks.

Mortgage
Industry Risks. Developments in the mortgage industry and credit markets can adversely affect the Company’s ability to sell
its mortgage loans to investors, which can impact the Company’s financial results by requiring it to assume the risk of holding
and servicing any unsold loans.

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The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company could realize in the future on
mortgage loans sold to third-party investors. The Company’s mortgage subsidiary may be required to reimburse third-party investors
for costs associated with early payoff of loans within the first six months of such loans and to repurchase loans where there is a default
in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s
estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

During
2024 and 2023 the Company increased its loan loss reserve by $150,000 and decreased its loan loss reserve by $1,178,000, respectively,
for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses
is included in other liabilities and accrued expenses and, as of December 31, 2024 and 2023, the balances were $697,000 and $547,000,
respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2024. There is a
risk, however, that future loan losses may exceed the loan loss reserve.

As
of December 31, 2024, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal
amount of $11,400,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $4,134,000 were
in foreclosure proceedings. The Company has not received or recognized any interest income on the $11,400,000 in mortgage loans with
delinquencies exceeding 90 days. During 2024 and 2023, the Company decreased its allowance for credit losses by $1,934,000 and increased
it by $1,184,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses for
the period. The main reasons for the decrease in 2024 when compared to 2023 were due to a decrease in the commercial loan held for investment
portfolio, further refinement of the Company’s quantitative loss analysis and general market improvements related to the residential
mortgage loan held for investment single family portfolio. The allowances for credit losses on the Company’s mortgage loans held
for investment portfolio as of December 31, 2024 and 2023 were $1,885,000 and $3,819,000, respectively.

Interest
Rate Risk. Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability
of the Company to market its mortgage and cemetery and mortuary products. This change in rates may cause certain interest-sensitive products
to become uncompetitive or may cause disintermediation. The Company aims to mitigate this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this risk to the purchaser, and by attempting to match the maturity schedule
of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature,
the Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

Mortality
and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean
that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or make other claims
earlier than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through
sound underwriting practices, asset and liability duration matching, and sound actuarial practices.

Estimates.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Material
estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative
assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining
the liability for future policy benefits; those used in determining the value of loans held for sale; and those used in determining loan
loss reserve. Although some variability is inherent in these estimates, management believes the amounts provided are fairly stated in
all material respects.

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Liquidity
and Capital Resources

The
Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments
and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from
the proceeds from the sale or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating
and refinancing mortgage loans and fees on mortgage loans held for sale that are sold to investors into the secondary market. It should
be noted that current conditions in the financial markets and economy may affect the realization of these expected cash flows. The Company
considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally
are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the
maintenance of existing policies, debt service, and to meet current operating expenses.

As
of December 31, 2024, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under
its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational
Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage
is required to repay the outstanding advances of approximately $10,587,449 on the warehouse line of credit that has not provided a covenant
waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant
waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and
external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate
other warehouse lines of credit with other lenders.

During
2024 and 2023, the Company’s operations provided cash of $57,320,000 and of $53,875,000, respectively. The increase in cash provided
by operations was due primarily to the increase in net earnings.

The
Company expects to pay out liabilities under its funeral plans over the long term given the nature of those plans. Funeral plans are
small face value life insurance policies that payout upon a person’s death to cover funeral burial costs; policyholders generally
keep these policies in force until, and do not surrender prior to, death. Because of the long-term nature of these liabilities, the Company
can hold to maturity or for the targeted investment period its corresponding bond, real estate, and mortgage loan investments, thus reducing
the risk of liquidating these long-term investments because of any sudden changes in their fair values.

The
Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may
sell investments other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term
investments on a temporary basis to meet the expected short-term requirements of the Company’s insurance products. The Company’s
investment philosophy is intended to provide a rate of return for the expected duration of its cemetery and mortuary policies that will
exceed the accruing of liabilities under those policies regardless of future interest rate movements.

The
Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing
of mortgage loans held for sale. The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans
to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries. Bonds owned by the
insurance subsidiaries amounted to $348,774,000 (at estimated fair value) and $362,663,000 (at estimated fair value) as of December 31,
2024 and 2023, respectively. This represented 38.0% and 38.7% of the total investments of the Company as of December 31, 2024, and 2023,
respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners.
Under this rating system, there are six categories used for rating bonds. As of December 31, 2024, 2.4% (or $8,431,000) and as of December
31, 2023, 1.8% (or $6,954,000) of the insurance subsidiaries’ total bond investments were invested in bonds in rating categories
three through six, which are considered non-investment grade.

See
Note 2 of the Notes to Consolidated Financial Statements for the schedule of the maturity of fixed maturity securities available for
sale and for the schedule of principal payments for mortgage loans held for investment.

See
Note 7 of the Notes to Consolidated Financial Statements for a description of the Company’s sources of liquidity.

25

If
market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately
$668,293,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based
on the respective basis point swing (the change in the fair values were calculated using a modeling technique):

The
Company’s life insurance subsidiaries are subject to risk-based capital guidelines established by statutory regulators requiring
minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. As of December 31, 2024
and 2023, the life insurance subsidiaries were in compliance with the regulatory criteria.

The
Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $445,758,000 as of December
31, 2024, as compared to $418,450,000 as of December 31, 2023. This increase was primarily due to a $26,122,000 increase in stockholders’
equity and an increase of $1,185,000 in bank loans and other loans payable. Stockholders’ equity as a percentage of total capitalization
was 76.1% and 74.8% as of December 31, 2024 and 2023, respectively.

Lapse
rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 7.0%
for 2024 as compared to a rate of 4.4% for 2023.

The
combined statutory capital and surplus of the Company’s life insurance subsidiaries was $120,216,000 and $107,385,000 as of December
31, 2024 and 2023, respectively. The life insurance subsidiaries cannot pay dividends to their parent company without the approval of
state insurance regulatory authorities.

Forward-Looking
Statements

The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide
prospective information about their businesses without fear of litigation so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially
from those projected in such statements. The Company desires to take advantage of the “safe harbor” provisions of the act.

This
Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s
projected financial results and its plans and strategies. However, the actual results and needs of the Company may vary materially from
forward-looking statements and projections made from time to time by the Company based on management’s then-current expectations.
The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree of risk, and
there can be no assurance that forward-looking statements and projections will prove accurate.

Factors
that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted
in such forward looking statements include among others, the following possibilities: (i) heightened competition, including the intensification
of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (ii) adverse
state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital
and reserve requirements, benefit mandates and tax treatment of insurance products; (iii) fluctuations in interest rates causing a reduction
of investment income or increase in interest expense and in the market value of interest rate sensitive investment; (iv) failure to obtain
new customers, retain existing customers or reductions in policies in force by existing customers; (v) higher service, administrative,
or general expenses due to the need for additional advertising, marketing, administrative or management information systems expenditures;
(vi) loss or retirement of key executives or employees; (vii) increases in medical costs; (viii) changes in the Company’s liquidity
due to changes in asset and liability matching; (ix) restrictions on insurance underwriting based on genetic testing and other criteria;
(x) adverse changes in the ratings obtained by independent rating agencies; (xi) failure to maintain adequate reinsurance; (xii) possible
claims relating to sales practices for insurance products and claim denials; (xiii) adverse trends in mortality and morbidity; (xiv)
deterioration of real estate markets; and (xv) lawsuits in the ordinary course of business.

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Off-Balance
Sheet Agreements

The
Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December
31, 2024, the Company’s commitments were approximately $216,368,000 for these loans, of which $152,361,000 had been funded. The
Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made.
The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and
the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.

Contractual
Obligations

In
the ordinary course of the Company’s operations, the Company enters certain contractual obligations. Such obligations include operating
leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes to Consolidated
Financial Statements for more information about these obligations.

Captive
Insurance Participation

The
Company has a limited equity interest in a captive insurance entity (the “Captive’) that provides workers compensation, general
liability and automobile insurance . This program permits the Company to pool insurance risks and resources with like-minded companies
in order to obtain more competitive pricing for claims administration, stop loss insurance premiums and to limit its risk of loss in
any particular year. The Captive also provides access to a wide array of safety-related services and regular safety training to help
the Company control claims. The maximum exposure to a loss related to the Company’s involvement in the Captive is limited to approximately
$443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf. See Note 10, “Reinsurance,
Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program. The Company has
been a member of the Captive since 2006 and does not expect any material losses to result from the issuance of the standby letter of
credit given the Company’s past performance.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The
Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i)
increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole
life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating
mortgage loans.

Insurance
Operations

The
following table shows the condensed financial results for the Company’s insurance operations for 2023 and 2022. See Note 15 of
the Notes to Consolidated Financial Statements.

Profitability
for 2023 increased due to (a) a $9,656,000 increase in insurance premiums and other considerations, (b) a $5,247,000 increase in net
investment income, (c) a $1,602,000 increase in intersegment revenue, (d) a $1,422,000 increase in gains on investments and other assets
primarily due to an increase in the fair value of equity securities, and (e) a $987,000 decrease in selling, general and administrative
expenses, which were partially offset by (i) a $5,150,000 increase in future policy benefits, (ii) a $1,936,000 increase in death, surrenders
and other policy benefits, (iii) a $266,000 decrease in other revenues, (iv) a $176,000 increase in intersegment interest expense and
other expenses, (v) a $133,000 increase in amortization of deferred policy acquisition costs primarily due to an increase in the average
outstanding balance of deferred policy and pre-need acquisition costs, (vi) a $111,000 increase in interest expense, and (vii) a $66,000
decrease in mortgage fee income.

19

Cemetery
and Mortuary Operations

The
following table shows the condensed financial results for the Company’s cemetery and mortuary operations for 2023 and 2022. See
Note 15 of the Notes to Consolidated Financial Statements.

Profitability
in 2023 increased due to (a) a $2,196,000 increase in cemetery pre-need sales, (b) a $1,513,000 increase in gains on investments and
other assets (primarily attributable to an increase in the fair value of equity securities classified as restricted assets and cemetery
perpetual care trust investments), (c) a $507,000 increase in net investment income, (d) a $99,000 increase in other revenues, (e) a
$59,000 decrease in amortization of deferred policy acquisition costs, and (f) a $44,000 decrease in intersegment interest expense and
other expenses, which were partially offset by (i) a $878,000 decrease in cemetery at-need sales, (ii) a $546,000 increase in selling,
general and administrative expenses, (iii) a $447,000 decrease in mortuary at-need sales, (iv) a $111,000 decrease in intersegment revenues,
and (v) a $85,000 increase in costs of goods sold.

Mortgage
Operations

The
Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of
Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban
Development (HUD), which originates mortgage loans that qualify for government insurance in the event of default by the borrower, in
addition to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail
basis. Mortgage loans originated or refinanced by SecurityNational Mortgage are funded through loan purchase agreements with Security
National Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational
Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from
third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”)
released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately
4% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.
On October 31, 2022, the Company sold certain of its MSRs. The MSRs related to mortgage loans previously originated by the Company in
aggregate unpaid principal amount of approximately $7.02 billion. As a result of the sale, the book value of the Company’s MSRs
decreased $51,185,906.

Mortgage
rates have followed the US Treasury yields up in response to the higher-than-expected inflation and the expectation that the Federal
Reserve will continue to raise rates in the near term. As expected, the rapid increase in mortgage rates has resulted in a decrease in
loan originations classified as ‘refinance’. Higher mortgage rates have also had a negative effect on loan originations classified
as ‘purchases’, although not as significant as those in the refinance classification.

For
2023 and 2022, SecurityNational Mortgage originated 7,185 loans ($2,173,081,000 total volume) and 10,663 loans ($3,373,554,000 total
volume), respectively.

20

The
following table shows the condensed financial results for the Company’s mortgage operations for 2023 and 2022. See Note 15 of the
Notes to Consolidated Financial Statements.

Included
in other revenues is service fee income. Profitability in 2023 decreased due to (a) an $85,300,000 decrease in secondary gains from investors,
(b) a $15,004,000 decrease in other revenues due to the sale of certain MSRs in October 2022, (c) a $1,535,000 increase in intersegment
interest expense and other expenses, (d) a $1,527,000 decrease in income from loan originations, and (e) a $241,000 decrease in gains
on investments and other assets, which were partially offset by (i) a $23,662,000 decrease in commissions, (ii) a $17,871,000 decrease
in personnel expenses, (iii) a $13,180,000 decrease in other expenses, (iv) an $8,356,000 increase in the fair value of loans held for
sale, (v) a $3,185,000 increase in the fair value of loan commitments, (vi) a $3,077,000 decrease in interest expense, (vii) a $1,100,000
decrease in costs related to funding mortgage loans, (viii) a $1,011,000 decrease in advertising expenses, (ix) a $392,000 increase in
net investment income, (x) a $175,000 increase in intersegment revenues, (xi) a $42,000 decrease in depreciation on property and equipment,
and (xii) a $52,000 decrease in rent and rent related expenses.

Critical
Accounting Policies and Estimates

The
following is a summary of the Company’s significant accounting policies and a review of the Company’s most critical accounting
estimates. See Note 1 of the Notes to Consolidated Financial Statements.

Insurance
Operations

In
accordance with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations
received for interest sensitive products are reflected as increases in liabilities for policyholder account balances and not as revenues.
Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy
initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products
are reflected as decreases in liabilities for policyholder account balances and not as expenses.

The
Company receives investment income earned from the funds deposited into account balances, a portion of which is passed through to the
policyholders in the form of interest credited. Interest credited to policyholder account balances and benefit claims more than policyholder
account balances are reported as expenses in the consolidated financial statements.

Premiums
and other considerations received for traditional life insurance products are recognized as revenues when due. Future policy benefits
are recognized as expenses over the life of the policy by means of the provision for future policy benefits.

The
costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized, and amortized into expenses. For nonparticipating traditional
life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual
premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used
for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued. For
interest sensitive products, these costs are amortized generally in proportion to expected gross profits from surrender charges and investment,
mortality, and expense margins. This amortization is adjusted when the Company revises the estimate of current or future gross profits
or margins. For example, deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are
higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated
maturity.

21

Death
and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under
insurance retention limits. The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits,
expense levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders)
and persistency. The Company can mitigate adverse experiences through sound underwriting, asset and liability duration matching, sound
actuarial practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.

Cemetery
and Mortuary Operations

Pre-need
sales of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets,
are deferred until the services are performed or the caskets are delivered.

Pre-need
sales of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery
interment rights, are recognized in accordance with the retail land sales provisions of GAAP. Under GAAP, recognition of revenue and
associated costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected.
Revenues related to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets
the criteria of GAAP, described above.

Pre-need
sales of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery
merchandise, are deferred until the merchandise is delivered, fulfilling the performance obligation.

Pre-need
sales of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue
and costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.

Prearranged
funeral and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged
funeral business are accounted for under the guidance of the provisions of GAAP. Obtaining costs, which include only costs that vary
with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise
is delivered or services are performed.

Revenues
and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured,
and there are no significant company obligations remaining.

Mortgage
Operations

Mortgage
fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale
of mortgage loans. The Company has elected to use fair value accounting for all mortgage loans that are held for sale. Accordingly, all
revenues and costs are now recognized when the mortgage loan is funded and any changes in fair value are shown as a component of mortgage
fee income.

The
Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse, unless defects are identified
in the representations and warranties made at loan sale. It may be required, however, to repurchase a loan or pay a fee instead of repurchasing
under certain events, which include the following:

22

Loan
purchase commitments generally specify a date 30 to 45 days after delivery upon which the underlying loans should be settled. Depending
on market conditions, these commitment settlement dates can be extended at a cost to the Company.

It
is the Company’s policy to cure any documentation problems regarding such loans at a minimal cost for up to a six-month period
and to pursue efforts to enforce loan purchase commitments from third-party investors concerning the loans. The Company believes that
six months allows adequate time to remedy any documentation issues, to enforce purchase commitments, and to exhaust other alternatives.
Remedial methods include the following:

Once
purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month period, the
loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and the previously recorded
sales revenue that was to be received from a third-party investor is written off against the loan loss reserve. Any loan that later becomes
delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.

Determining
fair value. The cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by
the Company. Market value, while often difficult to determine and may contain significant unobservable inputs, is based on the following
guidelines:

The
appraised value of the real estate underlying the original mortgage loan adds significance to the Company’s determination of fair
value because, if the loan becomes delinquent, the Company has sufficient value to collect the unpaid principal balance or the carrying
value of the loan, thus minimizing credit risk. Most loans originated are sold to third-party investors. The amounts expected to be sold
to investors are shown on the consolidated balance sheets as loans held for sale.

Use
of Significant Accounting Estimates

The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported
amounts and disclosures. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which
could have a material impact on the financial statements. The following is a summary of our significant accounting estimates, and critical
issues that impact them:

Loan
Commitments

The
Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage
loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate
of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change
in fair value of the underlying mortgage loan is measured from the date the mortgage loan commitment is issued and is shown net of related
expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of
the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the
quantity and value of mortgage loans that will be funded within the terms of the commitments.

23

Deferred
Acquisition Costs

Amortization
of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current and future
gross profits or margins on this business. Key assumptions used include the following: yield on investments supporting the liabilities,
amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary to maintain
the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

For
nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies in proportion
to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using
the same assumption used for computing liabilities for future policy benefits and are generally “locked in” at the date the
policies are issued.

Value
of Business Acquired

Value
of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized
like deferred acquisition costs. The critical issues explained for deferred acquisition costs would also apply for value of business
acquired.

Mortgage
Loans Foreclosed to Real Estate Held for Investment or Sale

These
properties are recorded at the lower of cost or fair value upon foreclosure. The Company believes that in an orderly market, fair value
approximates the replacement cost of a home, and the rental income provides a cash flow stream for investment analysis. The Company believes
the highest and best use of the properties are as income producing assets since it is the Company’s intent to hold the properties
as rental properties, matching the income from the investment in rental properties with the funds required for estimated future policy
benefits. Accordingly, the fair value determination is generally weighted more heavily toward the rental analysis. The fair value is
also estimated by obtaining an independent appraisal, which typically considers area comparable properties and property condition.

Future
Policy Benefits

Reserves
for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the
policies, mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

These
assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional
life products, include a provision for adverse deviation. For traditional life insurance, once established for a particular series of
products, these assumptions are generally held constant.

24

Unearned
Premium Reserve

The
universal life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into
revenues over the estimated expected gross profits from surrender charges and investment, mortality, and expense margins. The same issues
that impact deferred acquisition costs apply to unearned revenue.

Premium
Deficiency and Loss Recognition Testing

At
least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)
recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate
assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether
the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily
of premium income, less benefits, and expenses. If the current contract liabilities plus the present value of future premiums is greater
than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium
reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the
after-tax net investment earned rate.

Deferred
Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future Cost of Pre-need Sales

The
revenue and cost associated with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is
delivered or the service is performed.

The
Company, through its cemetery and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive
future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the
customer an increasing benefit life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder or
potential mortuary customer utilizes one of the Company’s facilities, the guaranteed funeral arrangement contract that has been
assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference
between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance
policy.

Mortgage
Servicing Rights

Mortgage
Service Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents)
when mortgage loans are sold. Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans
sold, in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities,
collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound)
funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real
estate owned and property dispositions. The Company initially accounts for MSRs at fair value and subsequently accounts for them using
the amortization method. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated
future net servicing income of the underlying financial assets. The Company periodically assesses MSRs accounted for using the amortization
method for impairment.

Mortgage
Allowance for Credit Losses and Loan Loss Reserve

The
Company provides for losses on its mortgage loans held for investment through an allowance for credit losses (a contra-asset account)
and through the mortgage loan loss reserve (a liability account).

The
mortgage allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the Company’s mortgage
loans held for investment to present the net amount expected to be collected. When a loan becomes delinquent, the Company proceeds to
foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment for the lower
of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment. The Company will rent the
properties until it is deemed desirable to sell them.

25

The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on
mortgage loans sold to third-party investors. The Company may be required to reimburse third-party investors for costs associated with
early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default in any of the first
four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates
are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

Upon
completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities
incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representations and warranties made
at loan sale. The Company accrues a monthly allowance for indemnification losses to investors based on total production. This estimate
is based on the Company’s historical experience and is included as a component of mortgage fee income. Subsequent updates to the
recorded liability from changes in assumptions are recorded in selling, general and administrative expenses. The estimated liability
for indemnification losses is included in other liabilities and accrued expenses.

Deferred
Tax Assets and Liabilities

Deferred
tax assets and liabilities require various estimates and judgments and may be affected favorably or unfavorably by various internal and
external factors. These estimates and judgments occur in the calculation of certain deferred tax assets and liabilities that arise from
temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes and in estimating the ultimate
amount of deferred tax assets recoverable in future periods. Factors affecting the deferred tax assets and liabilities include, but are
not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes
to overall levels of pre-tax earnings. Changes in these estimates, judgments or factors may result in an increase or decrease to the
Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes.

Results
of Consolidated Operations

2023
Compared to 2022

Total
revenues decreased by $71,155,000, or 18.3%, to $318,497,000 for 2023 from $389,652,000 for 2022. Contributing to this decrease in total
revenues was primarily a $75,352,000 decrease in mortgage fee income and a $15,171,000 decrease in other revenues. This decrease in total
revenues was offset by a $9,657,000 increase in insurance premiums and other considerations, a $6,145,000 increase in net investment
income, a $2,695,000 increase in gains on investments and other assets, and an $871,000 increase in net cemetery and mortuary sales.

Mortgage
fee income decreased by $75,352,000, or 43.4%, to $98,148,000 for 2023, from $173,500,000 for 2022. This decrease was primarily due to
an $85,366,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, and a $2,579,000
decrease in loan fees and interest income. This decrease in mortgage fee income was partially offset by a $11,541,000 increase in the
fair value of loans held for sale and loan commitments and a $1,052,000 decrease in the provision for loan loss reserve.

Insurance
premiums and other considerations increased by $9,657,000, or 9.2%, to $114,658,000 for 2023, from $105,002,000 for 2022. This increase
was due to an increase of $9,238,000 in first year premiums because of increased preneed insurance sales and an increase of $419,000
in renewal premiums due to the growth of the Company in recent years, particularly in whole life products, which resulted in more premium
paying policies in force.

Net
investment income increased by $6,145,000, or 9.3%, to $72,343,000 for 2023, from $66,198,000 for 2022. This increase was primarily attributable
to a $4,476,000 increase in fixed maturity securities income, a $2,583,000 increase in interest on cash and cash equivalents, a $477,000
decrease in investment expenses, a $223,000 increase in rental income from real estate held for investment, a $106,000 increase in equity
securities income, a $99,000 increase in income in other investments, and a $5,000 increase in insurance assignment income. This increase
was partially offset by a $1,708,000 decrease in mortgage loan interest and a $116,000 decrease in policy loan income.

26

Net
mortuary and cemetery sales increased by $871,000, or 3.2%, to $27,865,000 for 2023, from $26,994,000 for 2022. This increase was primarily
due to a $2,196,000 increase in cemetery pre-need sales. This increase was partially offset by a $878,000 decrease in cemetery at-need
sales and a $447,000 decrease in mortuary at-need sales.

Gains
on investments and other assets increased by $2,695,000, or 314.3%, to $1,837,000 in gains for 2023, from $858,000 in losses for 2022.
This increase in gains on investments and other assets was primarily due to a $4,157,000 increase in gains on equity securities mostly
attributable to increases in the fair value of these equity securities. This increase was partially offset by a $527,000 decrease in
gains on fixed maturity securities, a $485,000 decrease in gains on other assets, and a $450,000 decrease in gains on real estate held
for investment.

Other
revenues decreased by $15,171,000, or 80.6%, to $3,646,000 for 2023 from $18,817,000 for 2022. This decrease was primarily attributable
to a decrease in servicing fee revenue because of the sale of certain mortgage servicing rights in October 2022.

Total
benefits and expenses were $302,197,000, or 94.9% of total revenues for 2023, as compared to $355,275,000, or 91.2% of total revenues
for 2022.

Death
benefits, surrenders and other policy benefits, and future policy benefits increased by an aggregate of $7,086,000, or 7.6%, to $100,012,000
for 2023, from $92,926,000 for 2022. This increase was primarily the result of a $5,150,000 increase in future policy benefits and a
$2,012,000 increase in death benefits. This increase was partially offset by a $76,000 decrease in surrender and other policy benefits.

Amortization
of deferred policy and pre-need acquisition costs and value of business acquired increased by $74,000, or 0.4%, to $18,024,000 for 2023,
from $17,950,000 for 2022. This increase was primarily due to an increase in the average outstanding balance of deferred policy and pre-need
acquisition costs.

Selling,
general and administrative expenses decreased by an aggregate of $57,358,000, or 24.7%, to $174,490,000 for 2023, from $231,848,000 for
2022. This decrease was primarily the result of a $23,391,000 decrease in commissions, a $16,970,000 decrease in personnel expenses,
a $13,739,000 decrease in other expenses, a $1,987,000 decrease in advertising expenses, a $1,100,000 decrease in costs related to funding
mortgage loans, a $145,000 decrease in depreciation on property and equipment, and a $26,000 decrease in rent and rent related expenses.

Interest
expense decreased by $2,965,000, or 37.9%, to $4,865,000 for 2023, from $7,830,000 for 2022. This decrease was primarily due to a decrease
of $3,077,000 in interest expense on mortgage warehouse lines of credit for loans held for sale, which was partially offset by a $112,000
increase in interest expense on bank loans.

Cost
of goods and services sold of the cemeteries and mortuaries increased by $85,000, or 1.8%, to $4,806,000 for 2023, from $4,721,000 for
2022. This increase was primarily due to a $218,000 increase in cemetery at-need sales and a $40,000 increase in cemetery pre-need sales,
which was partially offset by a $173,000 decrease in mortuary at-need sales.

Income
tax expense decreased by $6,881,000, or 79.2%, to $1,805,000 for 2023, from $8,687,000 for 2022. This decrease was primarily due to
a decrease in earnings before income taxes for 2023 compared to 2022. The Company’s overall effective tax rate decreased from
25.3% for 2022 to 11.1% in 2023, a 14.2% decrease in the effective tax rate or a 56.1% change.

Risks

The
following is a description of the material risks facing the Company and how it mitigates those risks:

Legal
and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses
and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits,
new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those
recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other
public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations
in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying
its operations, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices that identify
and minimize the adverse impact of such risks.

27

Mortgage
Industry Risks. Developments in the mortgage industry and credit markets can adversely affect the Company’s ability to sell
its mortgage loans to investors, which can impact the Company’s financial results by requiring it to assume the risk of holding
and servicing any unsold loans.

The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company could realize in the future on
mortgage loans sold to third-party investors. The Company’s mortgage subsidiary may be required to reimburse third-party investors
for costs associated with early payoff of loans within the first six months of such loans and to repurchase loans where there is a default
in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s
estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

During
2023 and 2022 the Company decreased its loan loss reserve by $1,178,000 and increased its loan loss reserve by $1,079,000, respectively,
for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses
is included in other liabilities and accrued expenses and, as of December 31, 2023 and 2022, the balances were $547,000 and $1,726,000,
respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2023. There is a
risk, however, that future loan losses may exceed the loan loss reserve.

As
of December 31, 2023, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal
amount of $6,149,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $2,263,000 were
in foreclosure proceedings. The Company has not received or recognized any interest income on the $6,149,000 in mortgage loans with delinquencies
exceeding 90 days. During 2023 and 2022, the Company increased its allowance for credit losses by $1,184,000 and by $270,000, respectively,
which was charged to bad debt expense and included in selling, general and administrative expenses for the period. The Company also increased
its allowance for credit losses by $665,000 at the beginning of 2023 due to the adoption of the new accounting standard (Refer to Note
1 of the Notes to the Consolidated Financial Statements). The allowances for credit losses on the Company’s mortgage loans held
for investment portfolio as of December 31, 2023 and 2022 were $3,819,000 and $1,970,000, respectively.

Interest
Rate Risk. Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability
of the Company to market its mortgage and cemetery and mortuary products. This change in rates may cause certain interest-sensitive products
to become uncompetitive or may cause disintermediation. The Company aims to mitigate this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this risk to the purchaser, and by attempting to match the maturity schedule
of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature,
the Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

Mortality
and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean
that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or other claims earlier
than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting
practices, asset and liability duration matching, and sound actuarial practices.

Banking
Environment.

On
March 10, 2023, and March 12, 2023, Silicon Valley Bank and Signature Bank were placed in receivership with the Federal Deposit Insurance
Corporation (FDIC). Normal banking activities resumed shortly thereafter. On May 1, 2023, First Republic Bank was placed in receivership
with the FDIC and was immediately purchased by a national bank.

The
Company does not maintain any deposit or other accounts or credit facilities with Silicon Valley Bank, Signature Bank or First Republic
Bank. The Company may periodically transfer funds to these banks to pay for services rendered by third party vendors that continue to
maintain banking relationships with these banks. The Company continues to monitor the banking industry and its relationships with regional
and community banks.

28

Estimates.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Material
estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of
derivative assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those
used in determining the value of mortgage loans foreclosed to real estate held for investment or sale; those used in determining the
liability for future policy benefits and unearned revenue; those used in determining the estimated future costs for pre-need sales;
those used in determining the value of mortgage servicing rights; those used in determining the value of loans held for sale; those
used in determining allowances for credit losses; those used in determining loan loss reserve; and those used in determining
deferred tax assets and liabilities. Although some variability is inherent in these estimates, management believes the amounts
provided are fairly stated in all material respects.

Liquidity
and Capital Resources

The
Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments
and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from
the proceeds from the sale or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating
and refinancing mortgage loans and fees on mortgage loans held for sale that are sold to investors into the secondary market. It should
be noted that current conditions in the financial markets and economy may affect the realization of these expected cash flows. The Company
considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally
are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the
maintenance of existing policies, debt service, and to meet current operating expenses.

As
of December 31, 2023, the Company’s subsidiary SecurityNational Mortgage was not in compliance with the net income covenants under
its warehouse lines of credit and its operating cash flow covenant for its standby letter of credit with its primary bank. SecurityNational
Mortgage has received or is in the process of receiving waivers from the warehouse banks. In the unlikely event SecurityNational Mortgage
is required to repay the outstanding advances of approximately $7,732,000 on the warehouse line of credit that has not provided a covenant
waiver, SecurityNational Mortgage has sufficient cash and borrowing capacity on the warehouse lines of credit that have provided covenant
waivers to fund its origination activities. The Company has done an internal analysis of the funding capacities of both internal and
external sources and has determined that there are sufficient funds to continue its business model. The Company continues to negotiate
other warehouse lines of credit with other lenders.

During
2023 and 2022, the Company’s operations provided cash of $54,008,000 and of $130,450,000, respectively. The decrease in cash provided
by operations was due primarily to decreased proceeds from the sale of loans held for sale.

The
Company expects to pay out liabilities under its funeral plans over the long term given the nature of those plans. Funeral plans are
small face value life insurance policies that payout upon a person’s death to cover funeral burial costs; policyholders generally
keep these policies in force until, and do not surrender prior to, death. Because of the long-term nature of these liabilities, the Company
can hold to maturity or for the targeted investment period its corresponding bond, real estate, and mortgage loan investments, thus reducing
the risk of liquidating these long-term investments because of any sudden changes in their fair values.

The
Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may
sell investments other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term
investments on a temporary basis to meet the expected short-term requirements of the Company’s insurance products. The Company’s
investment philosophy is intended to provide a rate of return for the expected duration of its cemetery and mortuary policies that will
exceed the accruing of liabilities under those policies regardless of future interest rate movements.

29

The
Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing
of mortgage loans held for sale. The warehoused mortgage loans are typically held for sale on a short-term basis before selling the loans
to investors in accordance with the requirements and laws governing the Company’s life insurance subsidiaries. Bonds owned by the
insurance subsidiaries amounted to $362,663,000 (at estimated fair value) and $345,598,000 (at estimated fair value) as of December 31,
2023 and 2022, respectively. This represented 38.7% and 36.4% of the total investments of the Company as of December 31, 2023, and 2022,
respectively. Generally, all bonds owned by the life insurance subsidiaries are rated by the National Association of Insurance Commissioners.
Under this rating system, there are six categories used for rating bonds. As of December 31, 2023, 1.8% (or $6,954,000) and as of December
31, 2022, 2.2% (or $7,833,000) of the insurance subsidiaries’ total bond investments were invested in bonds in rating categories
three through six, which are considered non-investment grade.

See
Note 2 of the Notes to Consolidated Financial Statements for the schedule of the maturity of fixed maturity securities available for
sale and for the schedule of principal payments for mortgage loans held for investment.

See
Note 7 of the Notes to Consolidated Financial Statements for a description of the Company’s sources of liquidity.

If
market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately
$657,153,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based
on the respective basis point swing (the change in the fair values were calculated using a modeling technique):

The
Company’s life insurance subsidiaries are subject to risk-based capital guidelines established by statutory regulators requiring
minimum capital levels based on the perceived risk of assets, liabilities, disintermediation, and business risk. As of December 31, 2023
and 2022, the life insurance subsidiaries were in compliance with the regulatory criteria.

The
Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $418,450,000 as of December
31, 2023, as compared to $454,499,000 as of December 31, 2022. This decrease was primarily due to a decrease of $56,158,000 in bank loans
and other loans payable which was partially offset by a $20,108,000 increase in stockholders’ equity. Stockholders’ equity
as a percent of total capitalization was 74.8% and 64.4% as of December 31, 2023 and 2022, respectively.

Lapse
rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 4.4%
for 2023 as compared to a rate of 4.3% for 2022.

The
combined statutory capital and surplus of the Company’s life insurance subsidiaries was $107,385,000 and $94,254,000 as of December
31, 2023 and 2022, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of
state insurance regulatory authorities.

Forward-Looking
Statements

The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide
prospective information about their businesses without fear of litigation so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially
from those projected in such statements. The Company desires to take advantage of the “safe harbor” provisions of the act.

This
Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s
projected financial results and its plans and strategies. However, the actual results and needs of the Company may vary materially from
forward-looking statements and projections made from time to time by the Company based on management’s then-current expectations.
The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree of risk, and
there can be no assurance that forward-looking statements and projections will prove accurate.

30

Factors
that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted
in such forward looking statements include among others, the following possibilities: (i) heightened competition, including the intensification
of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (ii) adverse
state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital
and reserve requirements, benefit mandates and tax treatment of insurance products; (iii) fluctuations in interest rates causing a reduction
of investment income or increase in interest expense and in the market value of interest rate sensitive investment; (iv) failure to obtain
new customers, retain existing customers or reductions in policies in force by existing customers; (v) higher service, administrative,
or general expenses due to the need for additional advertising, marketing, administrative or management information systems expenditures;
(vi) loss or retirement of key executives or employees; (vii) increases in medical costs; (viii) changes in the Company’s liquidity
due to changes in asset and liability matching; (ix) restrictions on insurance underwriting based on genetic testing and other criteria;
(x) adverse changes in the ratings obtained by independent rating agencies; (xi) failure to maintain adequate reinsurance; (xii) possible
claims relating to sales practices for insurance products and claim denials; (xiii) adverse trends in mortality and morbidity; (xiv)
deterioration of real estate markets; and (xv) lawsuits in the ordinary course of business.

Off-Balance
Sheet Agreements

The
Company has commitments to fund existing construction and land development loans pursuant to the various loan agreements. As of December
31, 2023, the Company’s commitments were approximately $146,953,000 for these loans, of which $104,977,000 had been funded. The
Company advances funds in accordance with the loan agreements once the work has been completed and an independent inspection is made.
The maximum loan commitment ranges between 50% and 80% of appraised value. The Company receives fees and interest for these loans and
the interest rate is generally fixed at 5.25% to 8.50% per annum. Maturities range between six and eighteen months.

Contractual
Obligations

In
the ordinary course of the Company’s operations, the Company enters into certain contractual obligations. Such obligations include
operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes
to Consolidated Financial Statements for more information about these obligations.

Captive
Insurance Participation

The
Company has a limited equity interest in a captive insurance entity (the “Captive’) that provides workers compensation, general
liability and automobile insurance . This program permits the Company to pool insurance risks and resources with like-minded companies
in order to obtain more competitive pricing for claims administration, stop loss insurance premiums and to limit its risk of loss in
any particular year. The Captive also provides access to a wide array of safety-related services and regular safety training to help
the Company control claims. The maximum exposure to a loss related to the Company’s involvement in the Captive is limited to approximately
$443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf. See Note 10, “Reinsurance,
Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program. The Company has
been a member of the Captive since 2006 and does not expect any material losses to result from the issuance of the standby letter of
credit given the Company’s past performance.

Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The
Company’s operations over the last several years generally reflect three strategies which the Company expects to continue: (i)
increased attention to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole
life products; (ii) increased emphasis on cemetery and mortuary business; and (iii) capitalizing on the housing market by originating
mortgage loans. The Company has adjusted its strategies to respond to the changing economic circumstances resulting from COVID-19.

Insurance
Operations

The
following table shows the condensed financial results for the Company’s insurance operations for the years ended December 31, 2022
and 2021. See Note 15 of the Notes to Consolidated Financial Statements.

Intersegment
revenues for the Company’s insurance operations were comprised primarily of interest income from the warehouse lines provided to
the Company’s mortgage lending affiliates to fund loans held for sale. Profitability for 2022 decreased due to (a) a $4,974,000
decrease in gains on investments and other assets primarily due to a decrease in the fair value of equity securities, (b) a $3,345,000
increase in selling, general and administrative expenses, (c) a $2,596,000 increase in future policy benefits, (d) a $1,741,000 increase
in amortization of deferred policy acquisition costs primarily due to an increase in the average outstanding balance of deferred policy
and pre-need acquisition costs, (e) a $1,641,000 increase in interest expense, (f) a $968,000 decrease in intersegment revenue, and (g)
a $220,000 decrease in other revenues, which were partially offset by (i) a $6,473,000 increase in net investment income, (ii) a $4,890,000
increase in insurance premiums and other considerations, (iii) a $3,152,000 decrease in death, surrenders and other policy benefits,
and (iv) a $193,000 decrease in intersegment interest expense and other expenses.

In
response to the COVID-19 pandemic, the Company’s life insurance sales force began using virtual and tele sales processes to market
products. During the third quarter 2021, the life insurance sales force returned to in person sales, however, it continues to use virtual
and tele sales where needed. Currently, approximately 75% of insurance operations office staff work in the office with the flexibility
for hybrid-remote or completely remote working arrangements as needed.

19

Cemetery
and Mortuary Operations

The
following table shows the condensed financial results for the Company’s cemetery and mortuary operations for the years ended December
31, 2022 and 2021. See Note 15 of the Notes to Consolidated Financial Statements.

Profitability
in 2022 decreased due to (a) a $2,398,000 increase in selling, general and administrative expenses, (b) a $2,308,000 decrease in gains
on investments and other assets primarily attributable to a $579,000 decrease in gains on real estate sales and a $1,729,000 decrease
in gains on equity securities classified as restricted assets and cemetery perpetual care trust investments primarily due to a decrease
in the fair value of equity securities, (c) a $2,066,000 decrease in cemetery pre-need sales, (d) a $1,017,000 increase in costs of goods
sold, (e) a $225,000 increase in intersegment interest expense and other expenses, and (f) a $66,000 increase in amortization of deferred
policy acquisition costs, which were partially offset by (i) a $4,751,000 increase in mortuary at-need sales, (ii) a $791,000 increase
in net investment income, (iii) a $311,000 increase in cemetery at-need sales, (iv) a $205,000 increase in other revenues (v) a $137,000
increase in intersegment revenues, and (vi) a $54,000 decrease in interest expense.

In
response to the COVID-19 pandemic, the cemetery and mortuary’s pre-need sales force began using virtual selling processes to market
its products and services including some in home sales as local regulations permitted. During the third quarter 2021, the sales force
returned mostly to in home sales, however, it continues to use virtual selling where needed. Currently, the cemetery and mortuary operations
office staff works in the office with the flexibility for hybrid-remote or completely remote working arrangements as needed.

Mortgage
Operations

The
Company’s wholly owned subsidiary, SecurityNational Mortgage, is a mortgage lender incorporated under the laws of the State of
Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing and Urban
Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower, in addition
to various conventional mortgage loan products. SecurityNational Mortgage originates and refinances mortgage loans on a retail basis.
Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan purchase agreements with
Security National Life, Kilpatrick Life and unaffiliated financial institutions.

SecurityNational
Mortgage receives fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees earned from
third party investors that purchase the mortgage loans. Mortgage loans are generally sold with mortgage servicing rights (“MSRs”)
released to third-party investors or retained by SecurityNational Mortgage. SecurityNational Mortgage currently retains the MSRs on approximately
7% of its loan origination volume. These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer.
In December 2021, the Company ceased operations in EverLEND Mortgage and merged its operations into SecurityNational Mortgage. On October
31, 2022, the Company sold certain of its MSRs. The MSRs related to mortgage loans previously originated by the Company in aggregate
unpaid principal amount of approximately $7.02 billion. As a result of the sale, the book value of the Company’s MSRs decreased
$51,185,906 and generated a gain of $34,051,938 included in mortgage fee income on the consolidated statements of earnings.

20

For
the twelve months ended December 31, 2022 and 2021, SecurityNational Mortgage originated 10,663 loans ($3,373,554,000 total volume) and
19,342 loans ($5,502,894,000 total volume), respectively. For the twelve months ended December 31, 2021, EverLEND Mortgage originated
323 loans ($108,295,000 total volume).

Mortgage
rates have followed the US Treasury yields up in response to the higher than expected inflation and the expectation that the Federal
Reserve will continue to raise rates in the near term. As expected, the rapid increase in mortgage rates has resulted in a decrease in
loan originations classified as ‘refinance’. Higher mortgage rates have also had a negative effect on loan originations classified
as ‘purchase’, although not as significant as those in the refinance classification.

The
following table shows the condensed financial results for the Company’s mortgage operations for the years ended December 31, 2022
and 2021. See Note 15 of the Notes to Consolidated Financial Statements.

Included
in other revenues is service fee income. Profitability in 2022 has decreased due to (a) a $76,689,000 decrease in secondary gains from
investors, (b) a $12,125,000 decrease in income from loan originations, (c) $1,196,000 decrease in the fair value of loan commitments,
(d) a $1,124,000 increase in intersegment expenses, (e) a $242,000 decrease in intersegment revenues, (e) a $51,000 increase in depreciation
on property and equipment, and (f) a $51,000 decrease in the fair value of loans held for sale, which were partially offset by (i) a
$55,003,000 decrease in commissions, (ii) an $8,481,000 decrease in other expenses, (iii) a $4,360,000 decrease in personnel expenses,
(iv) a $3,002,000 decrease in costs related to funding mortgage loans, (v) a $2,230,000 decrease in intersegment interest expense, (vi)
a $1,474,000 decrease in advertising expenses, (vii) a $884,000 decrease in interest expense, (viii) $669,000 increase in net investment
income, (ix) a $297,000 increase in other revenues, (x) a $199,000 increase in gains on investments and other assets, (xi) and a $64,000
decrease in rent and rent related expenses.

In
response to the COVID-19 pandemic, the mortgage operations has integrated employee work from home accommodations into its standard operating
procedures. A large percentage of fulfillment employees are in office however the flexibility remains to accommodate in office or work
from home functionality.

Critical
Accounting Policies and Estimates

The
following is a brief summary of the Company’s significant accounting policies and a review of the Company’s most critical
accounting estimates. See Note 1 of the Notes to Consolidated Financial Statements.

Insurance
Operations

In
accordance with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations
received for interest sensitive products are reflected as increases in liabilities for policyholder account balances and not as revenues.
Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy
initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products
are reflected as decreases in liabilities for policyholder account balances and not as expenses.

21

The
Company receives investment income earned from the funds deposited into account balances, a portion of which is passed through to the
policyholders in the form of interest credited. Interest credited to policyholder account balances and benefit claims in excess of policyholder
account balances are reported as expenses in the consolidated financial statements.

Premiums
and other considerations received for traditional life insurance products are recognized as revenues when due. Future policy benefits
are recognized as expenses over the life of the policy by means of the provision for future policy benefits.

The
costs related to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally
commissions), defined as deferred policy acquisition costs, are capitalized and amortized into expense. For nonparticipating traditional
life products, these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual
premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used
for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued. For
interest sensitive products, these costs are amortized generally in proportion to expected gross profits from surrender charges and investment,
mortality and expense margins. This amortization is adjusted when the Company revises the estimate of current or future gross profits
or margins. For example, deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are
higher than originally estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated
maturity.

Death
and other policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under
insurance retention limits. The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits,
expense levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders)
and persistency. The Company has the ability to mitigate adverse experience through sound underwriting, asset and liability duration
matching, sound actuarial practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.

Cemetery
and Mortuary Operations

Pre-need
sales of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets,
are deferred until the services are performed or the caskets are delivered.

Pre-need
sales of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery
interment rights, are recognized in accordance with the retail land sales provisions of GAAP. Under GAAP, recognition of revenue and
associated costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected.
Revenues related to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets
the criteria of GAAP, described above.

Pre-need
sales of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery
merchandise, are deferred until the merchandise is delivered, fulfilling the performance obligation.

Pre-need
sales of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue
and costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.

Prearranged
funeral and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged
funeral business are accounted for under the guidance of the provisions of GAAP. Obtaining costs, which include only costs that vary
with and are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise
is delivered or services are performed.

Revenues
and costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured,
and there are no significant company obligations remaining.

22

Mortgage
Operations

Mortgage
fee income consists of origination fees, processing fees, interest income and certain other income related to the origination and sale
of mortgage loans. The Company has elected to use fair value accounting for all mortgage loans that are held for sale. Accordingly, all
revenues and costs are now recognized when the mortgage loan is funded and any changes in fair value are shown as a component of mortgage
fee income.

The
Company, through its mortgage subsidiaries, sells mortgage loans to third-party investors without recourse, unless defects are identified
in the representations and warranties made at loan sale. It may be required, however, to repurchase a loan or pay a fee instead of repurchase
under certain events, which include the following:

Loan
purchase commitments generally specify a date 30 to 45 days after delivery upon which the underlying loans should be settled. Depending
on market conditions, these commitment settlement dates can be extended at a cost to the Company.

It
is the Company’s policy to cure any documentation problems regarding such loans at a minimal cost for up to a six-month time period
and to pursue efforts to enforce loan purchase commitments from third-party investors concerning the loans. The Company believes that
six months allows adequate time to remedy any documentation issues, to enforce purchase commitments, and to exhaust other alternatives.
Remedial methods include the following:

Once
purchase commitments have expired and other alternatives to remedy are exhausted, which could be earlier than the six-month time period,
the loans are repurchased and transferred to mortgage loans held for investment at the lower of cost or fair value and the previously
recorded sales revenue that was to be received from a third-party investor is written off against the loan loss reserve. Any loan that
later becomes delinquent is evaluated by the Company at that time and any impairment is adjusted accordingly.

Determining
fair value. Cost for loans held for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the
Company. Market value, while often difficult to determine and may contain significant unobservable inputs, is based on the following
guidelines:

23

The
appraised value of the real estate underlying the original mortgage loan adds significance to the Company’s determination of fair
value because, if the loan becomes delinquent, the Company has sufficient value to collect the unpaid principal balance or the carrying
value of the loan, thus minimizing credit risk.

The
majority of loans originated are sold to third-party investors. The amounts expected to be sold to investors are shown on the consolidated
balance sheets as loans held for sale.

Use
of Significant Accounting Estimates

The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported
amounts and disclosures. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which
could have a material impact on the financial statements. The following is a summary of our significant accounting estimates, and critical
issues that impact them:

Loan
Commitments

The
Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage
loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and an estimate
of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense. The change
in fair value of the underlying mortgage loan is measured from the date the mortgage loan commitment is issued and is shown net of related
expenses. Following issuance, the value of a loan commitment can be either positive or negative depending upon the change in value of
the underlying mortgage loans. Fallout rates and other factors from the Company’s recent historical data are used to estimate the
quantity and value of mortgage loans that will fund within the terms of the commitments.

Deferred
Acquisition Costs

Amortization
of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current and future
gross profits or margins on this business. Key assumptions used include the following: yield on investments supporting the liabilities,
amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary to maintain
the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

For
nonparticipating traditional life products, these costs are amortized over the premium paying period of the related policies in proportion
to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using
the same assumption used for computing liabilities for future policy benefits and are generally “locked in” at the date the
policies are issued.

Value
of Business Acquired

Value
of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized
similar to deferred acquisition costs. The critical issues explained for deferred acquisition costs would also apply for value of business
acquired.

Mortgage
Loans Foreclosed to Real Estate Held for Investment or Sale

These
properties are recorded at the lower of cost or fair value upon foreclosure. The Company believes that in an orderly market, fair value
approximates the replacement cost of a home and the rental income provides a cash flow stream for investment analysis. The Company believes
the highest and best use of the properties are as income producing assets since it is the Company’s intent to hold the properties
as rental properties, matching the income from the investment in rental properties with the funds required for estimated future policy
benefits. Accordingly, the fair value determination is generally weighted more heavily toward the rental analysis. The fair value is
also estimated by obtaining an independent appraisal, which typically considers area comparable properties and property condition.

24

Future
Policy Benefits

Reserves
for future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the
policies, mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

These
assumptions are made based upon historical experience, industry standards and a best estimate of future results and, for traditional
life products, include a provision for adverse deviation. For traditional life insurance, once established for a particular series of
products, these assumptions are generally held constant.

Unearned
Premium Reserve

The
universal life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into
revenues over the estimated expected gross profits from surrender charges and investment, mortality and expense margins. The same issues
that impact deferred acquisition costs apply to unearned revenue.

Premium
Deficiency and Loss Recognition Testing

At
least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)
recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate
assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether
the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily
of premium income, less benefits and expenses. If the current contract liabilities plus the present value of future premiums is greater
than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium
reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the
after tax net investment earned rate.

Deferred
Pre-need Cemetery and Funeral Contracts Revenues and Estimated Future Cost of Pre-need Sales

The
revenue and cost associated with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is
delivered or the service is performed.

The
Company, through its cemetery and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive
future goods and services at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the
customer an increasing benefit life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder or
potential mortuary customer utilizes one of the Company’s facilities, the guaranteed funeral arrangement contract that has been
assigned will provide the funeral goods and services at the contracted price. The increasing life insurance policy will cover the difference
between the original contract prices and current prices. Risks may arise if the difference cannot be fully met by the life insurance
policy.

Mortgage
Servicing Rights

Mortgage
Service Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents)
when mortgage loans are sold. Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans
sold, in exchange for fees and other remuneration. The servicing functions typically performed include, among other responsibilities,
collecting and remitting loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound)
funds for payment of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real
estate owned and property dispositions. The Company initially accounts for MSRs at fair value and subsequently accounts for them using
the amortization method. MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated
future net servicing income of the underlying financial assets. The Company periodically assesses MSRs accounted for using the amortization
method for impairment.

25

Mortgage
Allowance for Loan Losses and Loan Loss Reserve

The
Company provides for losses on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account) and
through the mortgage loan loss reserve (a liability account). The allowance for loan losses is an allowance for losses on the Company’s
mortgage loans held for investment. The allowance is comprised of two components. The first component is an allowance for collectively
evaluated impairment that is based upon the Company’s historical experience in collecting similar receivables. The second component
is based upon individual evaluation of loans that are determined to be impaired.

Upon
determining impairment, the Company establishes an individual impairment allowance based upon an assessment of the fair value of the
underlying collateral. In addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income.
When a loan becomes delinquent, the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as
incurred. Once foreclosed, an adjustment for the lower of cost or fair value is made, if necessary, and the amount is classified as real
estate held for investment. The Company will rent the properties until it is deemed desirable to sell them.

The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company will realize in the future on
mortgage loans sold to third-party investors. The Company may be required to reimburse third-party investors for costs associated with
early payoff of loans within six months of origination of such loans and to repurchase loans where there is a default in any of the first
four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates
are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

Upon
completion of a transfer that satisfies the conditions to be accounted for as a sale, the Company initially measures at fair value liabilities
incurred in a sale relating to any guarantee or recourse provisions in the event of defects in the representations and warranties made
at loan sale. The Company accrues a monthly allowance for indemnification losses to investors based on total production. This estimate
is based on the Company’s historical experience and is included as a component of mortgage fee income. Subsequent updates to the
recorded liability from changes in assumptions are recorded in selling, general and administrative expenses. The estimated liability
for indemnification losses is included in other liabilities and accrued expenses.

The
Company believes the allowance for loan losses and the loan loss reserve represent probable loan losses incurred as of the balance sheet
date.

Deferred
Tax Assets and Liabilities

Deferred
tax assets and liabilities require various estimates and judgments and may be affected favorably or unfavorably by various internal and
external factors. These estimates and judgments occur in the calculation of certain deferred tax assets and liabilities that arise from
temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes and in estimating the ultimate
amount of deferred tax assets recoverable in future periods. Factors affecting the deferred tax assets and liabilities include, but are
not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and changes
to overall levels of pre-tax earnings. Changes in these estimates, judgments or factors may result in an increase or decrease to the
Company’s deferred tax assets and liabilities with a related increase or decrease in the Company’s provision for income taxes.

Results
of Consolidated Operations

2022
Compared to 2021

Total
revenues decreased by $81,043,000, or 17.2%, to $389,652,000 for 2022 from $470,695,000 for the fiscal year 2021. Contributing to this
decrease in total revenues was a $89,918,000 decrease in mortgage fee income and a $7,123,000 decrease in gains on investments and other
assets and other than temporary impairments. This decrease in total revenues was offset by a $7,933,000 increase in net investment income,
a $4,747,000 increase in insurance premiums and other considerations, a $2,997,000 increase in net cemetery and mortuary sales, a $281,000
increase in other revenues, and a $40,000 decrease in other than temporary impairments.

26

Mortgage
fee income decreased by $89,918,000, or 34.1%, to $173,500,000 for 2022, from $263,418,000 for 2021. This decrease was primarily due
to a $76,546,000 decrease in secondary gains from mortgage loans sold to third-party investors into the secondary market, a $13,258,000
decrease in loan fees and interest income, a $1,247,000 decrease in the fair value of loans held for sale and loan commitments. This
decrease in mortgage fee income was partially offset by a $1,133,000 decrease in the provision for loan loss reserve.

Insurance
premiums and other considerations increased by $4,747,000, or 4.7%, to $105,002,000 for 2022, from $100,255,000 for 2021. This increase
was due to an increase of $2,253,000 in renewal premiums due to the growth of the Company in recent years, particularly in whole life
products, which resulted in more premium paying policies in force and an increase of $2,494,000 in first year premiums as a result of
increased final expense insurance sales.

Net
investment income increased by $7,933,000, or 13.6%, to $66,198,000 for 2022, from $58,265,000 for 2021. This increase was primarily
attributable to a $6,191,000 increase in mortgage loan interest, a $2,228,000 increase in rental income from real estate held for investment,
a $1,626,000 increase in fixed maturity securities income, a $1,431,000 increase in interest on cash and cash equivalents, a $388,000
increase in income in other investments, and a $65,000 increase in equity securities income. This increase was partially offset by a
$3,039,000 increase in investment expenses, a $949,000 decrease in insurance assignment income, and an $8,000 decrease in policy loan
income.

Net
mortuary and cemetery sales increased by $2,997,000, or 12.5%, to $26,994,000 for 2022, from $23,997,000 for 2021. This increase was
primarily due to a $4,751,000 increase in mortuary at-need sales and a $311,000 increase in cemetery at-need sales. This increase was
partially offset by a $2,065,000 decrease in cemetery pre-need sales

Gains
on investments and other assets decreased by $7,123,000, or 113.7%, to $858,000 in losses for 2022, from $6,265,000 in gains for 2021.
This decrease in gains on investments and other assets was primarily due to a $5,243,000 decrease in gains on equity securities mostly
attributable to decreases in the fair value of these equity securities, a $1,197,000 decrease in gains on other assets mostly attributable
to a decrease in gains recognized on the sale of mortgage loans held for investment, and a $683,000 decrease in gains on fixed maturity
securities.

Other
revenues increased by $282,000, or 1.5%, to $18,817,000 for 2022 from $18,535,000 for 2021. This increase was primarily attributable
to an increase in servicing fee revenue.

Total
benefits and expenses were $355,275,000, or 91.2% of total revenues for 2022, as compared to $418,895,000, or 89.0% of total revenues
for 2021.

Death
benefits, surrenders and other policy benefits, and future policy benefits decreased by an aggregate of $556,000, or 0.6%, to $92,926,000
for 2022, from $93,482,000 for 2021. This decrease was primarily the result of a $3,870,000 decrease in death benefits ($4,296,000 for
COVID-19 related deaths). This decrease was partially offset by a $2,596,000 increase in future policy benefits and a $718,000 increase
in surrender and other policy benefits.

Amortization
of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,807,000, or 11.2%, to $17,950,000 for
2022, from $16,143,000 for 2021. This increase was primarily due to an increase in the average outstanding balance of deferred policy
and pre-need acquisition costs.

Selling,
general and administrative expenses decreased by $66,590,000, or 22.3%, to $231,848,000 for 2022, from $298,438,000 for 2021. This decrease
was primarily the result of a $54,965,000 decrease in commissions, a $7,268,000 decrease in other expenses, a $3,002,000 decrease in
costs related to funding mortgage loans, a $928,000 decrease in advertising expenses, a $629,000 decrease in personnel expenses, and
a $359,000 decrease in rent and rent related expenses. This decrease was partially offset by a $561,000 increase in depreciation on property
and equipment.

Interest
expense increased by $703,000, or 9.9%, to $7,830,000 for 2022, from $7,127,000 for 2021. This increase was primarily due to a $1,587,000
increase in interest expense on bank loans, which was partially offset by a decrease of $884,000 in interest expense on mortgage warehouse
lines for loans held for sale.

27

Cost
of goods and services sold of the cemeteries and mortuaries increased by $1,017,000, or 27.5%, to $4,721,000 for 2022, from $3,704,000
for 2021. This increase was primarily due to a $1,196,000 increase in mortuary at-need sales and a $77,000 increase in cemetery at-need
sales, which was partially offset by a $256,000 decrease in cemetery pre-need sales.

Income
tax expense decreased by $3,595,000, or 29.3%, to $8,687,000 for 2022, from $12,282,000 for 2021. This decrease was primarily due to
a decrease in earnings before income taxes for 2022 compared to 2021.

Risks

The
following is a description of the material risks facing the Company and how it mitigates those risks:

Legal
and Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses
and risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits,
new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those
recorded in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other
public policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations
in the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying
its operations, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices that identify
and minimize the adverse impact of such risks.

Mortgage
Industry Risks. Developments in the mortgage industry and credit markets can adversely affect the Company’s ability to sell
its mortgage loans to investors, which can impact the Company’s financial results by requiring it to assume the risk of holding
and servicing any unsold loans.

The
mortgage loan loss reserve is an estimate of probable losses at the balance sheet date that the Company could realize in the future on
mortgage loans sold to third-party investors. The Company’s mortgage subsidiary may be required to reimburse third-party investors
for costs associated with early payoff of loans within the first six months of such loans and to repurchase loans where there is a default
in any of the first four monthly payments to the investors or, in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s
estimates are based upon historical loss experience and the best estimate of the probable loan loss liabilities.

During
the twelve months ended December 31, 2022 and 2021 the Company increased its loan loss reserve by $1,079,000 and $2,211,000, respectively,
for loan originations, and the charges have been included in mortgage fee income. The estimated liability for indemnification losses
is included in other liabilities and accrued expenses and, as of December 31, 2022 and 2021, the balances were $1,726,000 and $2,447,000,
respectively. The Company believes the loan loss reserve represents probable loan losses incurred as of December 31, 2022. There is a
risk, however, that future loan losses may exceed the loan loss reserve.

As
of December 31, 2022, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal
amount of $2,567,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $1,281,000 were
in foreclosure proceedings. The Company has not received or recognized any interest income on the $2,567,000 in mortgage loans with delinquencies
exceeding 90 days. During the twelve months ended December 31, 2022 and 2021, the Company increased its allowance for loan losses by
$270,000 and by $305,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses
for the period. The allowances for loan losses on the Company’s held for investment portfolio as of December 31, 2022 and 2021
were $1,970,000 and $1,700,000, respectively.

Interest
Rate Risk. Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability
of the Company to market its mortgage and cemetery and mortuary products. This change in rates may cause certain interest-sensitive products
to become uncompetitive or may cause disintermediation. The Company aims to mitigate this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this risk to the purchaser, and by attempting to match the maturity schedule
of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature,
the Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

28

Mortality
and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean
that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or other claims earlier
than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting
practices, asset and liability duration matching, and sound actuarial practices.

COVID-19.
Like most businesses, COVID-19 has impacted the Company, including the temporary adoption of work-from-home arrangements for employees
and a restructuring of selling techniques for its products and services. Throughout 2021 and 2022, the Company continued to adapt to
the impact of COVID-19 and its related economic effects. The Company experienced, like all life insurance companies, higher than expected
death rates during the pandemic. Death rates in 2022 declined over 2021 and 2020, but remain higher than pre-COVID-19 levels.

Banking
Environment. Item 7.01 Regulation FD Disclosure.

Silicon
Valley Bank was placed in receivership with the Federal Deposit Insurance Corporation (“ FDIC “). On March 12, 2023, the
FDIC announced that depositors of Silicon Valley Bank will have access to all of their funds starting Monday, March 13, 2023. On March
12, 2023, Signature Bank was placed in receivership with the FDIC. On March 12, 2023, the FDIC announced that banking activities will
resume on Monday, March 13, 2023.

The
Company does not maintain any deposit or other accounts or credit facilities with Silicon Valley Bank or Signature Bank, or their successors.
The Company holds one bond with a par value of $250,000 in the Company’s debt portfolio and is junior in priority to a debt investment
of Silicon Valley Bank or its successors. The Company continues to monitor the banking industry.

The
information furnished in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended,
except as shall be expressly set forth by specific reference in such filing.

Estimates.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Material
estimates that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative
assets and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining
the value of mortgage loans foreclosed to real estate held for investment; those used in determining the liability for future policy
benefits and unearned revenue; those used in determining the estimated future costs for pre-need sales; those used in determining the
value of mortgage servicing rights; those used in determining allowances for loan losses for mortgage loans held for investment; those
used in determining loan loss reserve; and those used in determining deferred tax assets and liabilities. Although some variability is
inherent in these estimates, management believes the amounts provided are fairly stated in all material respects.

Liquidity
and Capital Resources

The
Company’s life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments
and sales on personal services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from
the proceeds from the sale or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating
and refinancing mortgage loans and fees on mortgage loans held for sale that are sold to investors into the secondary market. It should
be noted that current conditions in the financial markets and economy caused by COVID-19 may affect the realization of these expected
cash flows. The Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities,
which generally are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of
new policies, the maintenance of existing policies, debt service, and to meet current operating expenses.

During
the twelve months ended December 31, 2022 and 2021, the Company’s operations provided cash of $130,450,000 and of $144,638,000,
respectively. The decrease in cash provided by operations was due primarily to decreased proceeds from the sale of loans held for sale.

29

The
Company’s liability for future policy benefits is expected to be paid out over the long-term due to the Company’s market
niche of selling funeral plans. Funeral plans are small face value life insurance policies that payout upon a person’s death to
cover funeral burial costs. Policyholders generally keep these policies in force and do not surrender them prior to death. Because of
the long-term nature of these liabilities, the Company is able to hold to maturity its bonds, real estate, and mortgage loans thus reducing
the risk of liquidating these long-term investments as a result of any sudden changes in their fair values.

The
Company attempts to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may
sell investments other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term
investments on a temporary basis to meet the expectations of short-term requirements of the Company’s products. The Company’s
investment philosophy is intended to provide a rate of return, which will persist during the expected duration of policyholder and cemetery
and mortuary liabilities regardless of future interest rate movements.

The
Company’s investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing
of mortgage loans held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws
governing the life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $345,598,000 (at estimated fair value)
and $259,005,000 (at estimated fair value) as of December 31, 2022 and 2021, respectively. This represented 36.4% and 31.5% of the total
investments as of December 31, 2022, and 2021, respectively. Generally, all bonds owned by the life insurance subsidiaries are rated
by the National Association of Insurance Commissioners. Under this rating system, there are six categories used for rating bonds. At
December 31, 2022, 2.2% (or $7,833,000) and at December 31, 2021, 3.9% (or $9,991,000) of the Company’s total bond investments
were invested in bonds in rating categories three through six, which are considered non-investment grade.

See
Note 2 of the Notes to Consolidated Financial Statements for the schedule of the maturity of fixed maturity securities available for
sale and for the schedule of principal payments for mortgage loans held for investment.

See
Note 7 of the Notes to Consolidated Financial Statements for a description of the Company’s sources of liquidity.

If
market conditions were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately
$653,982,000), which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based
on the respective basis point swing (the change in the fair values were calculated using a modeling technique):

The
Company is subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the
perceived risk of assets, liabilities, disintermediation, and business risk. At December 31, 2022 and 2021, the life insurance subsidiaries
were in compliance with the regulatory criteria.

The
Company’s total capitalization of stockholders’ equity, and bank loans and other loans payable was $454,499,000 as of December
31, 2022, as compared to $551,054,000 as of December 31, 2021. Stockholders’ equity as a percent of total capitalization was 64.4%
and 54.4% as of December 31, 2022 and December 31, 2021, respectively. Bank loans and other loans payable decreased by $89,574,000 for
the twelve months ended December 31, 2022 as compared to December 31, 2021, and stockholders’ equity decreased by $6,981,000 for
the twelve months ended December 31, 2022 as compared to December 31, 2021, thus causing the increase in the stockholders’ equity
percentage.

Lapse
rates measure the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 4.3%
in 2022 as compared to a rate of 4.8% for 2021.

30

The
combined statutory capital and surplus of the Company’s life insurance subsidiaries was $94,254,000 and $82,823,000 as of December
31, 2022 and 2021, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of
state insurance regulatory authorities.

Forward-Looking
Statements

The
Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide
prospective information about their businesses without fear of litigation so long as those statements are identified as forward-looking
and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially
from those projected in such statements. The Company desires to take advantage of the “safe harbor” provisions of the act.

This
Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s
projected financial results and its future plans and strategies. However, actual results and needs of the Company may vary materially
from forward-looking statements and projections made from time to time by the Company on the basis of management’s then-current
expectations. The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree
of risk, and there can be no assurance that forward-looking statements and projections will prove accurate.

Factors
that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted
in such forward looking statements include among others, the following possibilities: (i) heightened competition, including the intensification
of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (ii) adverse
state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital
and reserve requirements, benefit mandates and tax treatment of insurance products; (iii) fluctuations in interest rates causing a reduction
of investment income or increase in interest expense and in the market value of interest rate sensitive investment; (iv) failure to obtain
new customers, retain existing customers or reductions in policies in force by existing customers; (v) higher service, administrative,
or general expenses due to the need for additional advertising, marketing, administrative or management information systems expenditures;
(vi) loss or retirement of key executives or employees; (vii) increases in medical costs; (viii) changes in the Company’s liquidity
due to changes in asset and liability matching; (ix) restrictions on insurance underwriting based on genetic testing and other criteria;
(x) adverse changes in the ratings obtained by independent rating agencies; (xi) failure to maintain adequate reinsurance; (xii) possible
claims relating to sales practices for insurance products and claim denials; (xiii) adverse trends in mortality and morbidity; (xiv)
deterioration of real estate markets; and (xv) lawsuits in the ordinary course of business.

Off-Balance
Sheet Agreements

The
Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition
and development. As of December 31, 2022, the Company’s commitments were approximately $231,250,000 for these loans, of which $175,754,000
had been funded. The Company advances funds once the work has been completed and an inspection is made. The maximum loan commitment ranges
between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed
5.25% to 8.50% per annum. Maturities generally range between six and eighteen months.

Contractual
Obligations

In
the ordinary course of the Company’s operations, the Company enters into certain contractual obligations. Such obligations include
operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes
to Consolidated Financial Statements for more information about these obligations.

Casualty
Insurance Program

In
conjunction with the Company’s casualty insurance program, limited equity interests are held in a captive insurance entity. This
program permits the Company to self-insure a portion of losses, to gain access to a wide array of safety-related services, to pool insurance
risks and resources in order to obtain more competitive pricing for administration and reinsurance and to limit its risk of loss in any
particular year. The maximum exposure to loss related to the Company’s involvement with this entity is limited to approximately
$443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf. See Note 10, “Reinsurance,
Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program. The Company does
not expect any material losses to result from the issuance of the standby letter of credit because claims are not expected to exceed
premiums paid.

Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company’s
operations over the last several years generally reflect three strategies which the Company expects to continue: (i) increased attention
to “niche” insurance products, such as the Company’s funeral plan policies and traditional whole life products; (ii)
increased emphasis on cemetery and mortuary business; and (iii) capitalizing on an improving housing market by originating mortgage loans.
The Company has adjusted its strategies to respond to the changing economic circumstances resulting from the COVID-19 pandemic.

Insurance
Operations

The following table shows the condensed financial
results for the Company’s insurance operations for the years ended December 31, 2021 and 2020. See Note 15 of the Notes to Consolidated
Financial Statements.

Intersegment revenues for the Company’s insurance
operations were comprised primarily of interest income from the warehouse lines provided to the Company’s mortgage lending affiliates
to fund loans held for sale. Profitability in 2021 increased due to a $7,234,000 increase in insurance premiums, a $2,466,000 increase
in gains on investments and other assets, a $1,280,000 increase in net investment income, a $661,000 increase in other revenues, a $550,000
decrease in selling, general and administrative expenses, a $331,000 decrease in other than temporary impairments, and a $44,000 decrease
in interest expense. This increase was partially offset by a $4,377,000 increase in death, surrenders and other policy benefits ($2,305,000
of which was related to COVID-19 related deaths), a $2,695,000 increase in future policy benefits, a $1,993,000 increase in amortization
of deferred policy acquisition costs, and a $453,000 decrease in intersegment revenue.

In response to
the COVID-19 pandemic, the Company’s life insurance sales force began using virtual and tele sales processes to market products.
During the third quarter 2021, the life insurance sales force returned to in person sales, however, it continues to use virtual and tele
sales where needed. As of December 31, 2021, approximately 75% of insurance operations office staff were working in the office with the
flexibility for hybrid-remote or completely remote working arrangements as needed.

18

Cemetery and Mortuary Operations

The following table shows the condensed financial
results for the Company’s cemetery and mortuary operations for the years ended December 31, 2021 and 2020. See Note 15 of the Notes
to Consolidated Financial Statements.

Profitability in 2021 increased due to a $2,682,000
increase in cemetery pre-need sales, a $1,675,000 increase in gains on investments and other assets (which, in turn, was primarily attributable
to a $1,092,000 increase in gains on real estate sales) and a $582,000 increase in the fair value of equity securities classified as restricted
assets and cemetery perpetual care trust investments, an $846,000 increase in net investment income, a $518,000 increase in mortuary at-need
sales, and a $490,000 increase in cemetery at-need sales. This increase was partially offset by a $2,559,000 increase in selling, general
and administrative expenses, and a $451,000 increase in costs of goods sold.

In response to the COVID-19 pandemic, the cemetery
and mortuary’s pre-need sales force began using virtual selling processes to market its products and services including some in
home sales as local regulations permitted. During the third quarter 2021, the sales force returned mostly to in home sales, however, it
continues to use virtual selling where needed. Currently, the cemetery and mortuary operations office staff works in the office with the
flexibility for hybrid-remote or completely remote working arrangements as needed.

Mortgage Operations

The Company’s
wholly owned subsidiaries, SecurityNational Mortgage and EverLEND Mortgage Company, are mortgage lenders incorporated under the laws of
the State of Utah and approved and regulated by the Federal Housing Administration (FHA), a department of the U.S. Department of Housing
and Urban Development (HUD), which originate mortgage loans that qualify for government insurance in the event of default by the borrower,
in addition to various conventional mortgage loan products. SecurityNational Mortgage and EverLEND Mortgage originate and refinance mortgage
loans on a retail basis. Mortgage loans originated or refinanced by the Company’s mortgage subsidiaries are funded through loan
purchase agreements with Security National Life, Kilpatrick Life and unaffiliated financial institutions.

The Company’s
mortgage subsidiaries receive fees from borrowers that are involved in mortgage loan originations and refinancings, and secondary fees
earned from third party investors that purchase the mortgage loans originated by the mortgage subsidiaries. Mortgage loans originated
by the mortgage subsidiaries are generally sold with mortgage servicing rights released to third-party investors or retained by SecurityNational
Mortgage. SecurityNational Mortgage currently retains the mortgage servicing rights on approximately 54% of its loan origination volume.
These mortgage loans are serviced by either SecurityNational Mortgage or an approved third-party sub-servicer. In December 2021,
the Company ceased operations in EverLEND Mortgage and merged its operations into SecurityNational Mortgage.

For the twelve
months ended December 31, 2021 and 2020, SecurityNational Mortgage originated 19,342 loans ($5,502,894,000 total volume) and 21,206 loans
($5,472,503,000 total volume), respectively. For the twelve months ended December 31, 2021 and 2020, EverLEND Mortgage originated 323
loans ($108,295,000 total volume) and 511 loans ($154,511,000 total volume), respectively.

Record low mortgage
interest rates that prevailed during the third quarter of 2020 and into the first quarter of 2021 trended higher through the second, third
and fourth quarters of 2021. Production volumes remained strong in the second, third and fourth quarters of 2021, particularly for purchase
mortgage transactions but were below those experienced during the earlier low interest rate period.

19

The following table shows the condensed financial
results for the Company’s mortgage operations for the years ended December 31, 2021 and 2020. See Note 15 of the Notes to Consolidated
Financial Statements.

Included in other revenues is service fee income.
Profitability in 2021 has decreased due to a $19,197,000 decrease in the fair value of loans held
for sale, a $15,009,000 increase in personnel expenses, a $10,750,000 decrease in the fair value of loan commitments, a $4,662,000 increase
in other expenses, a $4,225,000 decrease in income from loan originations, a $1,342,000 decrease in secondary gains from investors, a
$664,000 increase in costs related to funding mortgage loans, a $520,000 increase in advertising expenses, a $477,000 increase in rent
and rent related expenses, a $192,000 decrease in net investment income, a $117,000 decrease in intersegment revenues, and a $90,000 increase
in other intersegment expenses. These decreases were partially offset by a $16,506,000 decrease in the provision for loan loss reserve,
a $6,551,000 increase in other revenues, a $5,917,000 decrease in commissions, a $1,281,000 decrease in interest expense, a $470,000 decrease
in intersegment interest expense, a $199,000 increase in gains on investments and other assets, and a $97,000 decrease in depreciation
on property and equipment.

In response to
the COVID-19 pandemic, the mortgage operations has integrated employee work from home accommodations into its standard operating procedures.
A large percentage of fulfillment employees are in office in 2021 compared to 2020, however the flexibility remains to accommodate in
office or work from home functionality.

Mortgage Loan Loss Settlements

Future loan losses can be extremely difficult to estimate.
However, management believes that the Company’s reserve methodology and its current practice of property preservation allow it to
make reasonable estimates of potential losses on mortgage loans sold. The estimated liability for indemnification losses is included in
other liabilities and accrued expenses and, as of December 31, 2021 and 2020, the balances were $2,447,000 and $20,584,000, respectively.

Mortgage Loan Loss Litigation

For a description of the litigation involving SecurityNational
Mortgage and Lehman Brothers Holdings, see Part I, Item 3. Legal Proceedings.

Critical
Accounting Policies and Estimates

The following
is a brief summary of the Company’s significant accounting policies and a review of the Company’s most critical accounting
estimates. See Note 1 of the Notes to Consolidated Financial Statements.

20

Insurance
Operations

In accordance
with generally accepted accounting principles in the United States of America (“GAAP”), premiums and other considerations
received for interest sensitive products are reflected as increases in liabilities for policyholder account balances and not as revenues.
Revenues reported for these products consist of policy charges for the cost of insurance, administration charges, amortization of policy
initiation fees and surrender charges assessed against policyholder account balances. Surrender benefits paid relating to these products
are reflected as decreases in liabilities for policyholder account balances and not as expenses.

The Company receives
investment income earned from the funds deposited into account balances, a portion of which is passed through to the policyholders in
the form of interest credited. Interest credited to policyholder account balances and benefit claims in excess of policyholder account
balances are reported as expenses in the consolidated financial statements.

Premiums and
other considerations received for traditional life insurance products are recognized as revenues when due. Future policy benefits are
recognized as expenses over the life of the policy by means of the provision for future policy benefits.

The costs related
to acquiring new business, including certain costs of issuing policies and other variable selling expenses (principally commissions),
defined as deferred policy acquisition costs, are capitalized and amortized into expense. For nonparticipating traditional life products,
these costs are amortized over the premium paying period of the related policies, in proportion to the ratio of annual premium revenues
to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities
for future policy benefits and are generally “locked in” at the date the policies are issued. For interest sensitive products,
these costs are amortized generally in proportion to expected gross profits from surrender charges and investment, mortality and expense
margins. This amortization is adjusted when the Company revises the estimate of current or future gross profits or margins. For example,
deferred policy acquisition costs are amortized earlier than originally estimated when policy terminations are higher than originally
estimated or when investments backing the related policyholder liabilities are sold at a gain prior to their anticipated maturity.

Death and other
policyholder benefits reflect exposure to mortality risk and fluctuate from year to year on the level of claims incurred under insurance
retention limits. The profitability of the Company is primarily affected by fluctuations in mortality, other policyholder benefits, expense
levels, interest spreads (i.e., the difference between interest earned on investments and interest credited to policyholders) and persistency.
The Company has the ability to mitigate adverse experience through sound underwriting, asset and liability duration matching, sound actuarial
practices, adjustments to credited interest rates, policyholder dividends and cost of insurance charges.

Cemetery
and Mortuary Operations

Pre-need sales
of funeral services and caskets, including revenue and costs associated with the sales of pre-need funeral services and caskets, are deferred
until the services are performed or the caskets are delivered.

Pre-need sales
of cemetery interment rights (cemetery burial property), including revenue and costs associated with the sales of pre-need cemetery interment
rights, are recognized in accordance with the retail land sales provisions of GAAP. Under GAAP, recognition of revenue and associated
costs from constructed cemetery property must be deferred until a minimum percentage of the sales price has been collected. Revenues related
to the pre-need sale of unconstructed cemetery property will be deferred until such property is constructed and meets the criteria of
GAAP, described above.

Pre-need sales
of cemetery merchandise (primarily markers and vaults), including revenue and costs associated with the sales of pre-need cemetery merchandise,
are deferred until the merchandise is delivered, fulfilling the performance obligation.

Pre-need sales
of cemetery services (primarily merchandise delivery and installation fees and burial opening and closing fees), including revenue and
costs associated with the sales of pre-need cemetery services, are deferred until the services are performed.

Prearranged funeral
and pre-need cemetery customer obtaining costs, including costs incurred related to obtaining new pre-need cemetery and prearranged funeral
business are accounted for under the guidance of the provisions of GAAP. Obtaining costs, which include only costs that vary with and
are primarily related to the acquisition of new pre-need cemetery and prearranged funeral business, are deferred until the merchandise
is delivered or services are performed.

21

Revenues and
costs for at-need sales are recorded when a valid contract exists, the services are performed, collection is reasonably assured, and there
are no significant company obligations remaining.

Mortgage Operations

Mortgage
fee income consists of origination
fees, processing fees,
interest income and certain other income related
to the origination
and sale
of mortgage
loans. The Company has elected to use fair value
accounting for all mortgage loans that are held for sale. Accordingly, all revenues and costs are now recognized when the mortgage loan
is funded and any changes in fair value are shown as a component of mortgage fee income.

The Company, through its mortgage subsidiaries, sells
mortgage loans to third-party investors without recourse, unless defects are identified in the representations and warranties made at
loan sale. It may be required, however, to repurchase a loan or pay a fee instead of repurchase under certain events, which include the
following:

Loan purchase commitments generally specify a date
30 to 45 days after delivery upon which the underlying loans should be settled. Depending on market conditions, these commitment settlement
dates can be extended at a cost to the Company.

It is the Company’s policy to cure any documentation
problems regarding such loans at a minimal cost for up to a six-month time period and to pursue efforts to enforce loan purchase commitments
from third-party investors concerning the loans. The Company believes that six months allows adequate time to remedy any documentation
issues, to enforce purchase commitments, and to exhaust other alternatives. Remedial methods include the following:

Once purchase commitments have expired and other alternatives
to remedy are exhausted, which could be earlier than the six-month time period, the loans are repurchased and transferred to mortgage
loans held for investment at the lower of cost or fair value and the previously recorded sales revenue that was to be received from a
third-party investor is written off against the loan loss reserve. Any loan that later becomes delinquent is evaluated by the Company
at that time and any impairment is adjusted accordingly.

Determining fair value. Cost for loans held
for sale is equal to the amount paid to the warehouse bank and the amount originally funded by the Company. Market value, while often
difficult to determine and may contain significant unobservable inputs, is based on the following guidelines:

22

The appraised value of the real estate underlying
the original mortgage loan adds significance to the Company’s determination of fair value because, if the loan becomes delinquent,
the Company has sufficient value to collect the unpaid principal balance or the carrying value of the loan, thus minimizing credit risk.

The majority
of loans originated are sold to third-party investors. The amounts expected to be sold to investors are shown on the consolidated balance
sheets as loans held for sale.

Use of Significant Accounting
Estimates

The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts and
disclosures. It is reasonably possible that actual experience could differ from the estimates and assumptions utilized which could have
a material impact on the financial statements. The following is a summary of our significant accounting estimates, and critical issues
that impact them:

Loan Commitments

The
Company estimates the fair value of a mortgage loan commitment based on the change in estimated fair value of the underlying mortgage
loan, quoted mortgage-backed security (“MBS”) prices, estimates of the fair value of mortgage servicing rights, and
an estimate of the probability that the mortgage loan will fund within the terms of the commitment net of estimated commission expense.
The change in fair value of the underlying mortgage loan is measured from the date the mortgage loan
commitment is issued and is shown net of related expenses. Following issuance, the value of a loan commitment can be either positive or
negative depending upon the change in value of the underlying mortgage loans. Fallout rates and other factors from the Company’s
recent historical data are used to estimate the quantity and value of mortgage loans that will fund within the terms of the commitments.

Deferred Acquisition Costs

Amortization
of deferred policy acquisition costs (“DAC”) for interest sensitive products is dependent upon estimates of current
and future gross profits or margins on this business. Key assumptions used include the following: yield on investments supporting the
liabilities, amount of interest or dividends credited to the policies, amount of policy fees and charges, amount of expenses necessary
to maintain the policies, amount of death and surrender benefits, and the length of time the policies will stay in force.

For nonparticipating
traditional life products, these costs are amortized over the premium paying period of the related policies in proportion to the ratio
of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumption
used for computing liabilities for future policy benefits and are generally “locked in” at the date the policies are issued.

Value of Business Acquired

Value
of business acquired (“VOBA”) is the present value of estimated future profits of the acquired business and is amortized
similar to deferred acquisition costs. The critical issues explained for deferred acquisition costs would also apply for value of business
acquired.

Mortgage Loans Foreclosed to Real
Estate Held for Investment or Sale

These properties
are recorded at the lower of cost or fair value upon foreclosure. The Company believes that in an orderly market, fair value approximates
the replacement cost of a home and the rental income provides a cash flow stream for investment analysis. The Company believes the highest
and best use of the properties are as income producing assets since it is the Company’s intent to hold the properties as rental
properties, matching the income from the investment in rental properties with the funds required for estimated future policy benefits.
Accordingly, the fair value determination is generally weighted more heavily toward the rental analysis. The fair value is also estimated
by obtaining an independent appraisal, which typically considers area comparable properties and property condition.

23

Future
Policy Benefits

Reserves for
future policy benefits for traditional life insurance products requires the use of many assumptions, including the duration of the policies,
mortality experience, expenses, investment yield, lapse rates, surrender rates, and dividend crediting rates.

These assumptions
are made based upon historical experience, industry standards and a best estimate of future results and, for traditional life products,
include a provision for adverse deviation. For traditional life insurance, once established for a particular series of products, these
assumptions are generally held constant.

Unearned Premium Reserve

The universal
life products the Company sells have significant policy initiation fees (front-end load) that are deferred and amortized into revenues
over the estimated expected gross profits from surrender charges and investment, mortality and expense margins. The same issues that impact
deferred acquisition costs would apply to unearned revenue.

Premium
Deficiency and Loss Recognition Testing

At
least annually, the Company tests the adequacy of the net benefit reserves (liability for future policy benefits, net of DAC and VOBA)
recorded for life insurance and annuity products. The Company tests for recoverability by using the Company’s current best-estimate
assumptions as to policyholder mortality, persistency, maintenance expenses and invested asset returns. These tests evaluate whether
the present value of future contract-related cash flows will support the capitalized DAC and VOBA assets. These cash flows consist primarily
of premium income, less benefits and expenses. If the current contract liabilities plus the present value of future premiums is greater
than the sum of the present values of future policy benefits, commissions, and expenses plus the current DAC and VOBA less unearned premium
reserve balances, then the capitalized assets are deemed recoverable. The present values are calculated using the best estimate of the
after tax net investment earned rate.

Deferred Pre-need Cemetery and Funeral
Contracts Revenues and Estimated Future Cost of Pre-need Sales

The revenue and cost associated
with the sales of pre-need cemetery merchandise and funeral services are deferred until the merchandise is delivered or the service is
performed.

The Company, through its cemetery
and mortuary operations, provides a guaranteed funeral arrangement wherein a prospective customer can receive future goods and services
at guaranteed prices. To accomplish this, the Company, through its life insurance operations, sells to the customer an increasing benefit
life insurance policy that is assigned to the mortuaries. If, at the time of need, the policyholder or potential mortuary customer utilizes
one of the Company’s facilities, the guaranteed funeral arrangement contract that has been assigned will provide the funeral goods
and services at the contracted price. The increasing life insurance policy will cover the difference between the original contract prices
and current prices. Risks may arise if the difference cannot be fully met by the life insurance policy.

Mortgage Servicing Rights

Mortgage Service
Rights (“MSR”) arise from contractual agreements between the Company and third-party investors (or their agents) when mortgage
loans are sold. Under these contracts, the Company is obligated to retain and provide loan servicing functions on the loans sold, in exchange
for fees and other remuneration. The servicing functions typically performed include, among other responsibilities, collecting and remitting
loan payments; responding to borrower inquiries; accounting for principal and interest; holding custodial (impound) funds for payment
of property taxes and insurance premiums; counseling delinquent mortgagors; and supervising the acquisition of real estate owned and property
dispositions. The Company initially accounts for MSRs at fair value and subsequently accounts for them using the amortization method.
MSR amortization is determined by amortizing the MSR balance in proportion to, and over the period of the estimated future net servicing
income of the underlying financial assets. The Company periodically assesses MSRs accounted for using the amortization method for impairment.

Mortgage Allowance for
Loan Losses and Loan Loss Reserve

The Company provides for losses
on its mortgage loans held for investment through an allowance for loan losses (a contra-asset account) and through the mortgage loan
loss reserve (a liability account). The allowance for loan losses is an allowance for losses on the Company’s mortgage loans held
for investment. The allowance is comprised of two components. The first component is an allowance for collectively evaluated impairment
that is based upon the Company’s historical experience in collecting similar receivables. The second component is based upon individual
evaluation of loans that are determined to be impaired.

Upon determining impairment,
the Company establishes an individual impairment allowance based upon an assessment of the fair value of the underlying collateral. In
addition, when a mortgage loan is past due more than 90 days, the Company does not accrue any interest income. When a loan becomes delinquent,
the Company proceeds to foreclose on the real estate and all expenses for foreclosure are expensed as incurred. Once foreclosed, an adjustment
for the lower of cost or fair value is made, if necessary, and the amount is classified as real estate held for investment. The Company
will rent the properties until it is deemed desirable to sell them.

24

The mortgage loan loss reserve is an estimate of probable
losses at the balance sheet date that the Company will realize in the future on mortgage loans sold to third-party investors. The Company
may be required to reimburse third-party investors for costs associated with early payoff of loans within six months of origination of
such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or, in lieu of
repurchase, to pay a negotiated fee to the investors. The Company’s estimates are based upon historical loss experience and the
best estimate of the probable loan loss liabilities.

Upon completion of a transfer that satisfies the conditions
to be accounted for as a sale, the Company initially measures at fair value liabilities incurred in a sale relating to any guarantee or
recourse provisions in the event of defects in the representations and warranties made at loan sale. The Company accrues a monthly allowance
for indemnification losses to investors based on total production. This estimate is based on the Company’s historical experience
and is included as a component of mortgage fee income. Subsequent updates to the recorded liability from changes in assumptions are recorded
in selling, general and administrative expenses. The estimated liability for indemnification losses is included in other liabilities and
accrued expenses.

The Company believes the allowance for loan losses
and the loan loss reserve represent probable loan losses incurred as of the balance sheet date.

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities require various
estimates and judgments and may be affected favorably or unfavorably by various internal and external factors. These estimates and judgments
occur in the calculation of certain deferred tax assets and liabilities that arise from temporary differences in the recognition of revenues
and expenses for tax and financial reporting purposes and in estimating the ultimate amount of deferred tax assets recoverable in future
periods. Factors affecting the deferred tax assets and liabilities include, but are not limited to, changes in tax laws, regulations and/or
rates, changing interpretations of existing tax laws or regulations, and changes to overall levels of pre-tax earnings. Changes in these
estimates, judgments or factors may result in an increase or decrease to the Company’s deferred tax assets and liabilities with
a related increase or decrease in the Company’s provision for income taxes.

Results of Consolidated
Operations

2021 Compared to 2020

Total revenues
decreased by $10,768,000, or 2.2%, to $470,695,000 for
2021 from $481,463,000 for the fiscal year 2020. Contributing to this decrease in total revenues was a $35,515,000
decrease in mortgage fee income. This decrease in total revenues was offset by a $7,234,000
increase in insurance premiums and other considerations, a
$7,218,000 increase in other revenues, a $4,339,000 increase in gains on investments and other
assets, a $3,690,000 increase in net cemetery and mortuary sales, a $1,935,000
increase in net investment income, and a $331,000
decrease in other than temporary impairments.

Mortgage fee
income decreased by $35,515,000, or 11.9%, to $263,418,000 for
2021, from $298,933,000 for 2020. This decrease was primarily due to a $29,947,000 decrease in the fair value of loans held for
sale and loan commitments, a $6,951,000 decrease in loan fees and interest income, and a $1,342,000 decrease in secondary gains from mortgage
loans sold to third-party investors into the secondary market. This decrease in mortgage fee income was partially offset by a $2,727,000
decrease in the provision for loan loss reserve.

Insurance premiums
and other considerations increased by $7,234,000, or 7.8%, to $100,255,000 for
2021, from $93,021,000 for 2020. This increase was due to an increase of $1,859,000 in renewal premiums due to the growth of the
Company in recent years, particularly in whole life products, which resulted in more premium paying policies in force and an increase
of $5,375,000 in first year premiums as a result of increased preneed insurance sales.

Net investment
income increased by $1,935,000, or 3.4%, to $58,265,000 for 2021, from $56,330,000 for 2020.
This increase was primarily attributable to a $3,086,000 increase in mortgage loan interest, a $1,224,000 increase in insurance
assignment income, and a $389,000 increase in rental income from real estate held for investment. This increase was partially offset by
a $1,463,000 decrease in fixed maturity securities income, a $835,000 increase in investment expenses, a $196,000 decrease in equity securities
income, a $191,000 decrease in interest on cash and cash equivalents, and an $84,000 decrease in policy loan income.

25

Net mortuary
and cemetery sales increased by $3,690,000, or 18.2%, to $23,997,000 for
2021, from $20,307,000 for 2020. This increase was primarily due to a $2,682,000 increase in cemetery pre-need sales, a $518,000
increase in mortuary at-need sales, and a $490,000 increase in cemetery at-need sales.

Gains on investments
and other assets increased by $4,339,000, or 225.3%, to $6,265,000 for
2021, from $1,926,000 for 2020. This increase in gains on investments and other assets was primarily due to a $1,940,000 increase
in gains on other assets mostly attributable to gains recognized on the sale of mortgage loans held for investment, a $1,922,000 increase
in gains on equity securities mostly attributable to increases in the fair value of these equity
securities, and a $477,000 increase in gains on fixed maturity securities.

Other revenues
increased by $7,218,000, or 63.8%, to $18,535,000 for
2021 from $11,317,000 for 2020. This increase was primarily attributable to an increase
in servicing fee revenue.

Total benefits
and expenses were $418,895,000, or 89.0% of total revenues for 2021, as compared to $410,013,000,
or 85.2% of total revenues for 2020.

Death benefits,
surrenders and other policy benefits, and future policy benefits increased by an aggregate of $7,072,000,
or 8.2%, to $93,482,000 for 2021, from $86,410,000 for
2020. This increase was primarily the result of a $4,207,000 increase in death benefits ($2,305,000 for COVID-19 related deaths),
a $2,695,000 increase in future policy benefits, and a $170,000 increase in surrender and other policy benefits.

Amortization
of deferred policy and pre-need acquisition costs and value of business acquired increased by $1,836,000, or 12.8%, to $16,143,000
for 2021, from $14,307,000 for 2020. This increase was
primarily due to an increase in the average outstanding balance of deferred policy and pre-need acquisition costs.

Selling, general
and administrative expenses increased by $974,000, or 0.3%, to $298,438,000 for
2021, from $297,464,000 for 2020. This increase was primarily the result of a $15,750,000 increase in personnel expenses, a $5,735,000
increase in other expenses, a $1,245,000 increase in advertising expenses, a $664,000 increase in costs related to funding mortgage loans,
and a $369,000 increase in rent and rent related expenses. This increase was partially offset by a $16,506,000 decrease in the provision
for loan loss reserve, a $6,140,000 decrease in commissions, and a $143,000 decrease in depreciation on property and equipment.

Interest expense
decreased by $1,451,000, or 16.9%, to $7,128,000 for 2021, from $8,579,000 for 2020. This decrease was primarily due to a decrease
of $1,281,000 in interest expense on mortgage warehouse lines for loans held for sale.

Cost of goods
and services sold of the cemeteries and mortuaries increased by $451,000, or 13.9%, to $3,704,000
for 2021, from $3,253,000 for 2020. This increase was primarily due to a $232,000 increase
in cemetery at-need sales, a $151,000 increase in cemetery pre-need sales, and a $68,000 increase in mortuary at-need sales.

Income tax expense
decreased by $3,572,000, or 22.5%, to $12,282,000 for 2021, from $15,854,000 for 2020. This decrease was primarily due to a decrease in
earnings before income taxes for 2021 compared to 2020.

Risks

The following
is a description of the material risks facing the Company and how it mitigates those risks:

Legal and
Regulatory Risks. Changes in the legal or regulatory environment in which the Company operates may create additional expenses and
risks not anticipated by the Company in developing and pricing its products. Regulatory initiatives designed to reduce insurer profits,
new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those recorded
in the consolidated financial statements. In addition, changes in tax law with respect to mortgage interest deductions or other public
policy or legislative changes may affect the Company’s mortgage sales. Also, the Company may be subject to further regulations in
the cemetery and mortuary business. The Company aims to mitigate these risks by offering a wide range of products and by diversifying
its operations, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices that identify
and minimize the adverse impact of such risks.

26

Mortgage Industry Risks. Developments in the
mortgage industry and credit markets can adversely affect the Company’s ability to sell its mortgage loans to investors, which can
impact the Company’s financial results by requiring it to assume the risk of holding and servicing any unsold loans.

The mortgage loan loss reserve is an estimate of probable
losses at the balance sheet date that the Company could realize in the future on mortgage loans sold to third-party investors. The Company’s
mortgage subsidiaries may be required to reimburse third-party investors for costs associated with early payoff of loans within the first
six months of such loans and to repurchase loans where there is a default in any of the first four monthly payments to the investors or,
in lieu of repurchase, to pay a negotiated fee to the investors. The Company’s estimates are based upon historical loss experience
and the best estimate of the probable loan loss liabilities.

During the twelve months ended December 31, 2021 and
2020 the Company increased its loan loss reserve by $2,211,000 and $4,938,000, respectively, for loan originations, and the charges have
been included in mortgage fee income. During the twelve months ended December 31, 2021 and 2020 the Company increased its loan loss reserve
by an additional $-0- and $16,506,000, respectively, to account for changes in estimates specific to settlements of loan losses. The estimated
liability for indemnification losses is included in other liabilities and accrued expenses and, as of December 31, 2021 and 2020, the
balances were $2,447,000 and $20,584,000, respectively. The Company believes the loan loss reserve represent probable loan losses incurred
as of December 31, 2021. There is a risk, however, that future loan losses may exceed the loan loss reserve.

As of December
31, 2021, the Company’s mortgage loans held for investment portfolio consisted of mortgage loans in an aggregate principal amount
of $4,272,000 with delinquencies exceeding 90 days. Of this amount, loans with an aggregate principal amount of $497,000 were in foreclosure
proceedings. The Company has not received or recognized any interest income on the $4,272,000 in mortgage loans with delinquencies exceeding
90 days. During the twelve months ended December 31, 2021 and 2020, the Company decreased and increased its allowance for loan losses
by $305,000 and by $552,000, respectively, which was charged to bad debt expense and included in selling, general and administrative expenses
for the period. The allowances for loan losses on the Company’s held for investment portfolio as of December 31, 2021 and 2020 were
$1,700,000 and $2,005,000, respectively.

Interest Rate
Risk. Fluctuations in interest rates may cause a decrease in the value of the Company’s investments or impair the ability of
the Company to market its mortgage and cemetery and mortuary products. This change in rates may cause certain interest-sensitive products
to become uncompetitive or may cause disintermediation. The Company aims to mitigate this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this risk to the purchaser, and by attempting to match the maturity schedule
of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, the
Company might have to borrow funds or sell assets prior to maturity and potentially recognize a loss on the sale.

Mortality
and Morbidity Risks. The Company’s actuarial assumptions differing from actual mortality and morbidity experienced may mean
that the Company’s relevant products sold were underpriced, may require the Company to liquidate insurance or other claims earlier
than planned, and have other potentially adverse consequences to the business. The Company aims to minimize this risk through sound underwriting
practices, asset and liability duration matching, and sound actuarial practices.

COVID-19.
During 2020, the outbreak of COVID-19 had spread worldwide and was declared a global pandemic by the World Health Organization on March
11, 2020. COVID-19, and its variants, pose a threat to the health and economic well-being of the Company’s employees, customers,
and vendors. The Company continues to closely monitor developments relating to the ongoing COVID-19 pandemic and assessing its impact
on the Company’s business. The continued uncertainty surrounding the COVID-19 pandemic has had and continues to have a significant
impact on the global economy and financial markets. Governments and businesses have taken numerous measures to try to contain the virus
and its variants, which include the implementation of travel bans, self-imposed quarantine periods, social distancing, and various mask
and vaccine mandates. These measures have disrupted and will continue to disrupt businesses globally. Governments and central banks have
reacted with significant monetary and fiscal interventions designed to stabilize the economic conditions.

27

Like most businesses,
COVID-19 has impacted the Company, including the adoption of work from home arrangements and a restructuring of selling techniques for
its products and services. The Company also experienced increased expenses for cleaning services of its offices. Throughout 2021 the Company
continued to adapt to the impact of COVID-19. The Company cannot, with any certainty predict the severity or duration with which COVID-19
will impact the Company’s business, financial condition, results of operations, and cash flows. To the extent the COVID-19 pandemic
adversely affects the Company’s business, financial condition, and results of operations, it may also have the effect of heightening
many of the other Company risks. These uncertainties have the potential to negatively affect the risk of credit default for the issuers
of the Company’s fixed maturity debt securities and individual borrowers with mortgage loans held by the Company.

The Company has
implemented risk management, business continuity plans and has taken preventive measures and other precautions, including some remote
work arrangements. Such measures and precautions have enabled the Company to continue to conduct business.

Estimates.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Material estimates
that are particularly susceptible to significant changes in the near term are those used in determining the value of derivative assets
and liabilities; those used in determining deferred acquisition costs and the value of business acquired; those used in determining the
value of mortgage loans foreclosed to real estate held for investment; those used in determining the liability for future policy benefits
and unearned revenue; those used in determining the estimated future costs for pre-need sales; those used in determining the value of
mortgage servicing rights; those used in determining allowances for loan losses for mortgage loans held for investment; those used in
determining loan loss reserve; and those used in determining deferred tax assets and liabilities. Although some variability is inherent
in these estimates, management believes the amounts provided are fairly stated in all material respects.

Liquidity
and Capital Resources

The Company’s
life insurance subsidiaries and cemetery and mortuary subsidiaries realize cash flow from premiums, contract payments and sales on personal
services rendered for cemetery and mortuary business, from interest and dividends on invested assets, and from the proceeds from the sale
or maturity of investments. The mortgage subsidiaries realize cash flow from fees generated by originating and refinancing mortgage loans
and fees on mortgage loans held for sale that are sold to investors. It should be noted that current conditions in the financial
markets and economy caused by the COVID-19 pandemic may affect the realization of these expected cash flows. The
Company considers these sources of cash flow to be adequate to fund future policyholder and cemetery and mortuary liabilities, which generally
are long-term, and adequate to pay current policyholder claims, annuity payments, expenses related to the issuance of new policies, the
maintenance of existing policies, debt service, and to meet current operating expenses.

During the twelve months ended December 31, 2021 and
2020, the Company’s operations provided cash of $144,638,000 and used cash of $129,627,000, respectively. This change from cash
used in operations to cash from operations was primarily due to the decreased originations of mortgage loans held for sale.

The Company’s liability for future policy benefits
is expected to be paid out over the long-term due to the Company’s market niche of selling funeral plans. Funeral plans are small
face value life insurance policies that payout upon a person’s death to cover funeral burial costs. Policyholders generally keep
these policies in force and do not surrender them prior to death. Because of the long-term nature of these liabilities, the Company is
able to hold to maturity its bonds, real estate, and mortgage loans thus reducing the risk of liquidating these long-term investments
as a result of any sudden changes in their fair values.

The Company attempts
to match the duration of invested assets with its policyholder and cemetery and mortuary liabilities. The Company may sell investments
other than those held to maturity in the portfolio to help in this timing matching. The Company purchases short-term investments on a
temporary basis to meet the expectations of short-term requirements of the Company’s products. The Company’s investment philosophy
is intended to provide a rate of return, which will persist during the expected duration of policyholder and cemetery and mortuary liabilities
regardless of future interest rate movements.

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The Company’s
investment policy is also to invest predominantly in fixed maturity securities, real estate, mortgage loans, and warehousing of mortgage
loans held for sale on a short-term basis before selling the loans to investors in accordance with the requirements and laws governing
the life insurance subsidiaries. Bonds owned by the insurance subsidiaries amounted to $259,005,000 (at estimated fair value) and
$294,384,000 (at estimated fair value) as of December 31, 2021 and 2020, respectively. This represented
31.5% and 38.0% of the total investments as of December 31, 2021, and 2020, respectively. Generally, all bonds owned by the life insurance
subsidiaries are rated by the National Association of Insurance Commissioners. Under this rating system, there are six categories used
for rating bonds. At December 31, 2021, 3.9% (or $9,991,000) and at December 31, 2020, 4.2%
(or $12,418,000) of the Company’s total bond investments were invested in bonds in rating categories three through six, which are
considered non-investment grade.

See Note 2 of the Notes to Consolidated Financial
Statements for the schedule of the maturity of fixed maturity securities available for sale and for the schedule of principal payments
for mortgage loans held for investment.

See Note 7 of the Notes to Consolidated Financial
Statements for a description of the Company’s sources of liquidity.

If market conditions
were to cause interest rates to change, the fair value of the Company’s fixed income portfolio (of approximately $536,594,000),
which includes bonds, preferred stocks and mortgage loans held for investment, could change by the following amounts based on the respective
basis point swing (the change in the fair values were calculated using a modeling technique):

The Company is
subject to risk-based capital guidelines established by statutory regulators requiring minimum capital levels based on the perceived risk
of assets, liabilities, disintermediation, and business risk. At December 31, 2021 and 2020, the life insurance subsidiaries were in compliance
with the regulatory criteria.

The Company’s
total capitalization of stockholders’ equity, and bank loans and other loans payable was $551,054,000 as
of December 31, 2021, as compared to $561,811,000 as of December 31, 2020. Stockholders’
equity as a percent of total capitalization was 54.4% and 47.0% as of December 31, 2021 and December 31, 2020, respectively. Bank loans
and other loans payable decreased by $46,537,000 for the twelve months ended December 31,
2021 as compared to December 31, 2020, and stockholders’ equity increased by $35,780,000 for the twelve months ended December 31,
2021 as compared to December 31, 2020, thus causing the increase in the stockholders’ equity percentage.

Lapse rates measure
the amount of insurance terminated during a particular period. The Company’s lapse rate for life insurance was 4.8% in 2021 as compared
to a rate of 5.9% for 2020.

The combined
statutory capital and surplus of the Company’s life insurance subsidiaries was $82,823,000 and $78,493,000 as of December
31, 2021 and 2020, respectively. The life insurance subsidiaries cannot pay a dividend to their parent company without the approval of
state insurance regulatory authorities.

Forward-Looking Statements

The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements to encourage companies to provide prospective information
about their businesses without fear of litigation so long as those statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected
in such statements. The Company desires to take advantage of the “safe harbor” provisions of the act.

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This
Annual Report on Form 10-K contains forward-looking statements, together with related data and projections, about the Company’s
projected financial results and its future plans and strategies. However, actual results and needs of the Company may vary materially
from forward-looking statements and projections made from time to time by the Company on the basis of management’s then-current
expectations. The business in which the Company is engaged involves changing and competitive markets, which may involve a high degree
of risk, and there can be no assurance that forward-looking statements and projections will prove accurate.

Factors
that may cause the Company’s actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted
in such forward looking statements include among others, the following possibilities: (i) heightened competition, including the intensification
of price competition, the entry of new competitors, and the introduction of new products by new and existing competitors; (ii) adverse
state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital
and reserve requirements, benefit mandates and tax treatment of insurance products; (iii) fluctuations in interest rates causing a reduction
of investment income or increase in interest expense and in the market value of interest rate sensitive investment; (iv) failure to obtain
new customers, retain existing customers or reductions in policies in force by existing customers; (v) higher service, administrative,
or general expenses due to the need for additional advertising, marketing, administrative or management information systems expenditures;
(vi) loss or retirement of key executives or employees; (vii) increases in medical costs; (viii) changes in the Company’s liquidity
due to changes in asset and liability matching; (ix) restrictions on insurance underwriting based on genetic testing and other criteria;
(x) adverse changes in the ratings obtained by independent rating agencies; (xi) failure to maintain adequate reinsurance; (xii) possible
claims relating to sales practices for insurance products and claim denials; (xiii) adverse trends in mortality and morbidity; (xiv)
deterioration of real estate markets; and (xv) lawsuits in the ordinary course of business.

Off-Balance
Sheet Agreements

The
Company has entered into commitments to fund construction and land development loans and has also provided financing for land acquisition
and development. As of December 31, 2021, the Company’s commitments were approximately $329,903,000 for these loans, of which $179,673,000
had been funded. The Company advances funds once the work has been completed and an inspection is made. The maximum loan commitment ranges
between 50% and 80% of appraised value. The Company receives fees and interest for these loans and the interest rate is generally fixed
5.50% to 8.00% per annum. Maturities generally range between six and eighteen months.

Contractual
Obligations

In
the ordinary course of the Company’s operations, the Company enters into certain contractual obligations. Such obligations include
operating leases for office space, agreements with respect to borrowed funds and future policy benefits. See Notes 7, 22, 24 of the Notes
to Consolidated Financial Statements for more information about these obligations.

Casualty
Insurance Program

In
conjunction with the Company’s casualty insurance program, limited equity interests are held in a captive insurance entity. This
program permits the Company to self-insure a portion of losses, to gain access to a wide array of safety-related services, to pool insurance
risks and resources in order to obtain more competitive pricing for administration and reinsurance and to limit its risk of loss in any
particular year. The maximum exposure to loss related to the Company’s involvement with this entity is limited to approximately
$443,758, which is collateralized under a standby letter of credit issued on the insurance entity’s behalf. See Note 10, “Reinsurance,
Commitments and Contingencies,” for additional discussion of commitments associated with the insurance program. The Company does
not expect any material losses to result from the issuance of the standby letter of credit because claims are not expected to exceed
premiums paid.