<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 29, 1995
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
Utah 0-9341 87-0345941
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5300 South 360 West, Suite 310 Salt Lake City, Utah 84123
- ------------------------------ -------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 264-1060
---------------
Does Not Apply
(Former name or former address, if changed since last report)
<PAGE>
ITEM 2. Acquisition of Civil Service Employees Life Insurance Company
On December 29, 1995, Security National Financial Corporation (the "Company"),
through its wholly-owned subsidiary, Capital Investors Life Insurance Company,
completed the purchase of all of the outstanding shares of Common Stock (the
"Shares") of Civil Service Employees Life Insurance Company, a California
corporation, ("CSE Life") from Civil Service Employees Insurance Company, a
California corporation and, prior to closing of the transaction, the sole
shareholder of CSE Life.
At the time of the transaction, CSE Life was a California domiciled insurance
company with total assets of approximately $16.2 million. CSE Life's assets
include fixed maturity securities, policy loans, receivables and accrued
investment income. CSE Life's total revenues and net income for the period
January 1, 1995 to December 29, 1995 was approximately $1.5 million and
$213,000 respectively.
As consideration for the purchase of the Shares of CSE Life, the Company
provided Civil Service Employees Insurance Company at closing with the
following: (i) $4,137,000 in cash, and (ii) a Promissory Note in the amount
of $1,063,000. Interest on the Note is to be paid on the unpaid principal
balance at the rate equal to 7% per annum. The principal amount is to be
repaid in seven equal annual payments of $151,857.14, beginning on December
29, 1996. Accrued interest is to be paid annually beginning on December 29,
1996. The cash portion of the purchase price for the Shares came from the
Company's internal funds.
Following the completion of the purchase of CSE Life, the Company merged CSE
Life into Capital Investors Life Insurance Company on December 29, 1995. The
Company intends to continue operating Capital Investors Life Insurance
Company as the surviving insurance company, which, as of December 31, 1995,
includes the assets of CSE Life.
ITEM 7. Financial Statements and Exhibits.
<TABLE>
<CAPTION>
<C> <S>
(a) The following financial statements of Civil Service Employees Life
Insurance Company are included herein:
Report of Independent Auditors
Balance Sheet as of December 29, 1995
Statement of Income for the period January 1, 1995 to December 29,
1995
Statement of Shareholder's Equity for the period January 1, 1995 to
December 29, 1995
Statement of Cash Flows for the period January 1, 1995 to December
29, 1995
Notes to Financial Statements
(b) The following pro forma statements of Security National Financial
Corporation are included herein:
Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1995 (unaudited)
Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1995 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(c) Exhibits
1. Stock Purchase Agreement among Capital Investors Life Insurance
Company, Security National Financial Corporation, CSE Life and
Civil Service Employees Insurance Company.*
2. Promissory Note between Security National Financial Corporation, as
maker, and Civil Service Employees Insurance Company, as payee.*
3. Articles of Merger of CSE Life into Capital Investors Life Insurance
Company.*
4. Agreement and Plan of Merger of CSE Life into Capital Investors Life
Insurance Company.*
* Incorporated by reference from Report on Form 8-K, as filed on
January 16, 1996.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY NATIONAL FINANCIAL CORPORATION
(Registrant)
Date: March 13, 1996 By: Scott M. Quist
First Vice President, General Counsel
and Treasurer
<PAGE>
Report of Independent Auditors
Board of Directors
Civil Service Employees Life Insurance Company
We have audited the accompanying balance sheet of Civil Service Employees Life
Insurance Company ("CSE Life") as of December 29, 1995, and the related
statements of income, shareholder's equity, and cash flows for the period
January 1, 1995 to December 29, 1995. These financial statements are the
responsibility of CSE Life's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Civil Service Employees
Life Insurance Company at December 29, 1995, and the results of its
operations and its cash flows for the period January 1, 1995 to December
29, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Salt Lake City, Utah
February 23, 1996
<PAGE>
<TABLE>
<CAPTION>
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
BALANCE SHEET
December 29, 1995
<S> <C>
ASSETS
Investments
Fixed maturity securities held-to-maturity,
at amortized cost (fair value $14,152,134) $13,814,807
Policy loans 372,118
-----------
14,186,925
Cash 1,779,228
Accrued investment income 207,420
Other assets 20,379
-----------
$16,193,952
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Future life and annuity benefits $11,776,046
Accounts payable 40,956
Other liabilities 37,444
-----------
11,854,446
-----------
Commitments and Contingencies
SHAREHOLDER'S EQUITY
Common Stock, $100 par value:
Authorized - 100,000 shares
Issued and outstanding - 11,500 shares 1,150,000
Additional paid-in capital 1,150,000
Retained earnings 2,039,506
-----------
4,339,506
-----------
$16,193,952
===========
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
STATEMENT OF INCOME
FOR THE PERIOD JANUARY 1, 1995 TO DECEMBER 29, 1995
<S> <C>
REVENUES
Insurance premiums and other considerations $ 364,515
Net investment income 1,008,760
Realized gains on investments 87,194
Other 41,156
----------
1,501,625
----------
BENEFITS AND EXPENSES
Policy benefits and claims 783,451
Underwriting, acquisition, and
insurance expenses 505,264
-----------
1,288,715
-----------
NET INCOME $ 212,910
===========
NET INCOME PER SHARE $18.51
======
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
STATEMENT OF SHAREHOLDER'S EQUITY
Common Stock Additional Total
Shares Paid-In Retained Shareholder's
Issued Amount Capital Earnings Equity
------- ------- -------- --------- -------------
<S> <C> <C> <C> <C> <C>
Balance at
January 1,
1995 11,500 $1,150,000 $1,150,000 $1,826,596 $4,126,596
Net income 212,910 212,910
------- ---------- ---------- ---------- ----------
Balance at
December 29,
1995 11,500 $1,150,000 $1,150,000 $2,039,506 $4,339,506
======== ========== ========== ========== ==========
See notes to financial statements.
</TABLE>
<PAGE>
CIVIL SERVICE EMPLOYEES LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 1995 TO DECEMBER 29, 1995
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
<S> <C>
Net income $212,910
Adjustments to reconcile net income
to net cash provided by operating activities:
Future life and annuity benefits 571,017
Gain on calls and amortization of
investments (10,773)
Change in accrued investment income
and other assets 39,450
Change in accounts payable and other liabilities (37,392)
---------
Net cash provided by operating activities 775,212
---------
INVESTING ACTIVITIES
Purchases of investments (2,504,549)
Investments called or sold at maturity 3,905,409
Net change in policy loans (23,793)
-----------
Net cash provided by investing activities 1,377,067
-----------
FINANCING ACTIVITIES
Annuity receipts 675,922
Annuity withdrawals (1,867,126)
-----------
Net cash used in financing activities (1,191,204)
-----------
Net increase in cash 961,075
Cash at January 1, 1995 818,153
----------
Cash at December 29, 1995 $1,779,228
==========
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING POLICIES
Nature of Business: Civil Service Employees Life Insurance Company
("CSE Life") was acquired by Security National Financial Corporation on
December 29, 1995, from Civil Service Employees Insurance Company.
Following the completion of the purchase of CSE Life, Security National
Financial Corporation merged CSE Life into Capital Investors Life Insurance
Company ("Capital Investors"), a wholly-owned subsidiary of Security
National Financial Corporation on December 29, 1995. Prior to that date,
CSE Life's primary business was the marketing, underwriting and servicing
of life insurance products in the State of California.
The preparation of financial statements of CSE Life requires management to
make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known, which could
impact the amounts reported and disclosed herein.
Basis of Presentation: The accompanying financial statements have been
prepared in accordance with generally accepted accounting principles (GAAP)
which differ from statutory accounting practices prescribed or permitted by
regulatory authorities.
Investments: Fixed maturity securities are reported at cost, adjusted for
amortization of premium or discount and other-than-temporary market value
declines. The amortized cost of such investments differs from their market
values; however, management has the ability and intent to hold these
investments to maturity. Policy loans are reported at the aggregate unpaid
principal balances. Realized gains and losses on sales of investments are
recognized in net income on the specific identification basis.
Recognition of Revenues: Premiums for traditional life insurance products,
which include those products with fixed and guaranteed premiums and benefits
and consist principally of term life insurance policies, are recognized as
revenues when due. Revenues for interest-sensitive policies and for
investment products, consisting of deferred annuities, consist of policy
charges for the cost of insurance, policy administration charges, and
surrender charges assessed against policyholder account balances during the
period.
Future Life and Annuity Benefits: The liability for future life benefits is
based on assumed future investment yields, mortality rates and withdrawal
rates giving effect to possible risk of adverse deviation. Investment yield
assumptions are graded and range from 4 1/2% to 10%. Benefits include the
amount of policy claims incurred during the period.
The liability for future annuity benefits consists of accumulated policy values
before applicable surrender charges. Benefits include amounts incurred in
the period in excess of the related liability for future benefits and
interest credited to policy account values. Interest for annuity products
has been credited at rates which ranged from 2 1/2% to 6 1/8%.
Income Taxes: Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date.
<PAGE>
Reinsurance: Amounts recoverable from reinsurers for future life and annuity
benefits are estimated in a manner consistent with the related liabilities
associated with the reinsured policies.
Income per Share of Common Stock: Income per share of common stock is based
on the weighted average number of shares of common stock outstanding of 11,500.
Cash: Cash includes cash on hand and demand deposits.
NOTE 2 - INVESTMENTS
Major categories of investment income are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Fixed maturity securities $ 985,189
Policy loans 17,225
Other 46,254
-----------
1,048,668
Investment expenses 39,908
-----------
Net investment income $ 1,008,760
===========
</TABLE>
Proceeds from sale of fixed maturity securities totaled $3,905,409. Gross
gains and losses realized on such sales were $151,164 and $63,970,
respectively.
At December 29, 1995, CSE Life did not have any unrated or less-than-investment
grade debt securities, and no investment in any person or its affiliates
exceeded 10% of shareholder's equity.
CSE Life is required to maintain funds on deposit with various regulatory
authorities to comply with applicable state insurance regulations. Fixed
maturity securities totaling $1,632,780 at December 29, 1995, were on
deposit with the State Insurance Department of California to comply with
those requirements.
The amortized cost and estimated fair value of fixed maturity securities at
December 29, 1995 are summarized below. The fair values for fixed maturity
securities are based on quoted market prices.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Corporate bonds $ 3,662,166 $ 56,483 $ (195) $ 3,718,454
U.S. government
obligations
not backed by
loans 7,618,961 320,619 (39,580) 7,900,000
Mortgage-backed
securities 2,533,680 -- -- 2,533,680
------------ --------- --------- ------------
$ 13,814,807 $ 377,102 $ (39,775) $ 14,152,134
============ ========= ========= ============
</TABLE>
<PAGE>
The amortized cost and fair values of fixed maturity securities at December
29, 1995, by contractual maturity, are shown below. Actual maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ----------
<C> <C> <C>
1996 $ 507,061 $ 507,061
1997 - 2000 5,623,566 5,748,893
2006 and after 5,150,500 5,362,500
----------- -----------
11,281,127 11,618,454
Mortgage-backed securities 2,533,680 2,533,680
----------- -----------
$13,814,807 $14,152,134
=========== ===========
</TABLE>
NOTE 3 - TRANSACTIONS WITH AFFILIATES
CSE Life and its former affiliate, Civil Service Employees Insurance Company,
shared common officers, directors, employees, and facilities. CSE Life
reimbursed Civil Service Employees Insurance Company for all direct expenses
incurred, as well as the allocated expenses for the shared employees and
facilities. CSE Life also paid a fixed quarterly management fee. The
expenses allocated to CSE Life are managements' best estimate of the costs
that would have been incurred if CSE Life had operated as an unaffiliated
entity. Underwriting, acquisition, and insurance expenses in the
accompanying statement of income primarily represent amounts paid to Civil
Service Employees Insurance Company under these arrangements.
NOTE 4 - FEDERAL INCOME TAXES
Federal income tax expense consists of the following components:
<TABLE>
<CAPTION>
<S> <C>
Current $ 0
Deferred 0
---
Total $ 0
===
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is:
<TABLE>
<CAPTION>
<S> <C>
Tax at U.S. statutory rates $ 72,000
Benefit of net operating loss (72,000)
--------
Federal tax expense $ 0
========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets at December 29, 1995, are presented below. There
are no significant deferred tax liabilities at December 29, 1995.
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Difference between book and
tax bases of:
Life policies and contracts $ 44,000
Deferred policy acquisition costs 46,000
Net operating loss 259,000
---------
Total deferred tax assets 349,000
Valuation allowance (349,000)
---------
Net deferred tax asset $ 0
=========
</TABLE>
<PAGE>
A portion of CSE Life's income earned prior to 1984 was not subject to current
taxation but was accumulated, for tax purposes, in a "policyholders' surplus
account." Under provisions of the Tax Reform Act of 1984, the policyholders'
surplus account was frozen at its December 31, 1983 balance. That amount is
not taxable unless it exceeds certain limitations under the Internal Revenue
Code. At December 29, 1995, the balance in the policyholders' surplus account
was $246,971. CSE Life does not intend to take actions nor does it expect any
events to occur that would cause tax to be payable on this amount;
therefore, no income tax provision has been made for those purposes.
However, if such taxes were assessed, the amount would be approximately
$85,000.
CSE Life has net operating loss carryforwards for tax purposes of approximately
$760,000. Such losses will begin to expire if unused by 2001. The
acquisition of CSE Life by Security National Financial Corporation creates
an "ownership change" under Section 382 of the Internal Revenue Code ("IRC").
Utilization of the net operating losses may be subject to substantial annual
limitations due to the "change in ownership" provisions of the IRC.
Additionally, all of the net operating loss carryforwards described above
originated in a separate return limitation year and may only offset CSE
Life's taxable income.
NOTE 5 -- REINSURANCE
CSE Life is involved in a variety of reinsurance arrangements, whereby it has
ceded a portion of its exposure for life policies. Ceded insurance is treated
as a risk and liability of the assuming companies. The portion of risks
exceeding CSE Life's retention limit is reinsured with other insurers.
Reinsured risks would give rise to liability to CSE Life only in the event
that the reinsuring company might be unable to meet its obligations under the
reinsurance agreement in force, as CSE Life remains ultimately liable for
such obligations. For the period January 1, 1995 to December 29, 1995,
reinsurance premiums and recoveries totaled approximately $180,000 and
$125,000, respectively.
NOTE 6 - SHAREHOLDER'S EQUITY
Generally, the net assets of CSE Life available for transfer to Security
National Financial Corporation are limited to the amounts that CSE Life's
net assets, as determined in accordance with statutory accounting practices,
exceed minimum statutory capital requirements; however, payments of such
amounts as dividends may be subject to approval by regulatory authorities. As
a result of such restrictions, CSE Life generally may not pay a dividend
without prior approval of the regulatory authorities.
NOTE 7 - STATUTORY NET INCOME, CAPITAL AND SURPLUS
Shareholder's equity and net income, as reported to the California Department
of Insurance in accordance with its prescribed or permitted statutory
accounting practices, for CSE Life as of December 31, 1995, are summarized
as follows:
<TABLE>
<CAPTION>
<S> <C>
Shareholder's equity: $4,293,594
Net income: $ 276,947
The California Insurance Department imposes minimum risk-based capital
requirements on insurance enterprises that were developed by the National
Association of Insurance Commissioners ("NAIC"). The formulas for
determining the amount of risk-based capital ("RBC") specify various
weighted factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Based on calculations using
the appropriate NAIC formula, CSE Life exceeded the RBC requirements at
December 31, 1995.
<PAGE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
In the normal course of business, CSE Life is involved in various pending or
threatened proceedings, which involve routine litigation relating to
insurance risk underwritten by CSE Life and other contractual matters.
Management of CSE Life does not believe any of the pending or threatened
proceedings will have a material effect on CSE Life's financial statements or
results of operations.
NOTE 9 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of investments in fixed maturity securities along with methods
used to estimate such values are disclosed in Note 2. The following methods
and assumptions were used by CSE Life in estimating the "fair value"
disclosures related to other significant financial instruments:
Cash: The carrying amounts reported in the accompanying balance sheets for
these financial instruments approximate their fair values.
Policy Loans: The fair values are estimated using interest rates currently
being offered for similar loans to borrowers with similar credit ratings.
The carrying amounts reported in the accompanying balance sheets for these
financial instruments approximate their fair values.
Deferred Annuities: The fair values for CSE Life's liabilities for deferred
annuity contracts are estimated based on the contracts' cash surrender
values. At December 29, 1995, the fair and reported value of deferred
annuities are $9,070,731 and $9,348,557, respectively.
The fair values for CSE Life's insurance contracts other than annuity contracts
are not required to be disclosed. However, the fair values of liabilities
under all insurance contracts are taken into consideration in CSE Life's
overall management of interest rate risk, such that CSE Life's exposure to
changing interest rates is minimized through the matching of investment
maturities with amounts due under insurance contracts.
<PAGE>
ITEM 7(b) - PRO FORMA FINANCIAL INFORMATION
On December 29, 1995, Security National Financial Corporation (the "Company"),
through its wholly-owned subsidiary, Capital Investors Life Insurance
Company, completed the purchase of all of the outstanding shares of Common
Stock (the "Shares") of Civil Service Employees Life Insurance Company, a
California corporation, ("CSE Life") from Civil Service Employees Insurance
Company, a California corporation and, prior to closing of the transaction,
the sole shareholder of CSE Life.
At the time of the transaction, CSE Life was a California domiciled insurance
company with total assets of approximately $16.2 million. CSE Life's assets
include fixed maturity securities, policy loans, receivables and accrued
investment income. CSE Life's total revenues and net income for the period
January 1, 1995 to December 31, 1995, was approximately $1.5 million and
$213,000, respectively.
As consideration for the purchase of the Shares of CSE Life, the Company
provided Civil Service Employees Insurance Company at closing with the
following: (i) $4,137,000 in cash, and (ii) a Promissory Note in the amount
of $1,063,000. Interest on the Note is to be paid on the unpaid principal
balance at the rate equal to 7% per annum. The principal amount is to be
repaid in seven equal annual payments of $151,857.14, beginning on December
29, 1996. Accrued interest is to be paid annually beginning on December 29,
1996. The cash portion of the purchase price for the Shares came from the
Company's internal funds.
Following the completion of the purchase of CSE Life, the Company merged CSE
Life into Capital Investors Life Insurance Company on December 29, 1995.
The Company intends to continue operating Capital Investors Life Insurance
Company as the surviving insurance company, which as of December 31, 1995,
includes the assets of CSE Life.
The accompanying unaudited pro forma condensed consolidated financial
statements give effect to the acquisition of CSE Life by the Company. The
adjustments to the pro forma condensed consolidated balance sheet are as of
the acquisition date of December 29, 1995, while the adjustments to the pro
forma condensed consolidated statements of income assume that the
acquisition was consummated on January 1, 1995. The pro forma adjustments and
the assumptions on which they are based are described in the accompanying
notes to pro forma condensed consolidated financial statements.
The pro forma information for the Company is taken from the Company's 1995
financial records. The pro forma information for CSE Life is obtained from
the financial statements presented elsewhere in this Form 8-K filing.
The pro forma condensed consolidated financial statements are presented
for illustrative purposes only.
The pro forma condensed consolidated financial statements are not necessarily
indicative of the results that actually would have occurred if the
acquisition had been in effect as of and for the period presented or that
may be achieved in periods subsequent to the acquisition.
<PAGE>
Security National Financial Corporation
Pro Forma Condensed Consolidated Balance Sheet
December 31,1995
(In Thousands)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Security Civil Service
National Employees
Financial Life Pro Forma Pro Forma
Corporation Insurance Adjustments Consolidated
----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Fixed maturities
at amortized cost $ 37,188 $ 13,815 $ 337 (b) $ 51,340
Equity securities at
market 4,556 4,556
Mortgage loans 10,435 10,435
Other invested assets 11,125 372 11,497
---------- ---------- -------- -----------
Total investments 63,304 14,187 337 77,828
Restricted assets 2,987 2,987
Cash 10,068 1,779 (4,137) (a) 7,710
Receivables, net 24,177 24,177
Land and improvements 7,568 7,568
Deferred acquisition
costs and cost
of insurance
acquired 7,845 673 (c) 8,518
Property, plant and
equipment, net 6,432 1 6,433
Other assets 2,765 227 2,992
---------- ---------- --------- ----------
Total assets $ 125,146 $ 16,194 $ (3,127) $ 138,213
========== ========== ========= ==========
Policyholder
obligations $ 65,092 $ 11,776 $ $ 76,868
Bank loans payable 22,866 22,866
Notes and contracts
payable 3,200 1,063 (a) 4,263
Estimated future costs
of pre-need sales 6,066 6,066
Other liabilities 5,901 78 150 (a) 6,129
--------- ---------- --------- -----------
Total liabilities 103,125 11,854 1,213 116,192
--------- ---------- --------- -----------
Common stock 8,185 1,150 (1,150) (d) 8,185
Paid in capital 7,342 1,150 (1,150) (d) 7,342
Unrealized appreciation
on investments 485 485
Retained earnings 7,648 2,040 (2,040) (d) 7,648
Treasury stock at cost (1,639) (1,639)
-------- --------- -------- ----------
Total stockholders'
equity 22,021 4,340 (4,340) 22,021
-------- --------- -------- ----------
Total liabilities
and stockholders'
equity $ 125,146 $ 16,194 $ (3,127) $ 138,213
========== ========== ========== ==========
See notes to pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
Security National Financial Corporation
Pro Forma Condensed Consolidated Statement of Income
For the Twelve Months Ended December 31, 1995
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Security Civil Service
National Employees
Financial Life Pro Forma Pro Forma
Corporation Insurance Adjustments Consolidated
----------- ------------- ----------- ------------
<S> <C>
Revenue:
Premiums $ 5,853 $ 365 $ $ 6,218
Investment income 6,680 1,009 (290) (g) 7,365
(34) (f)
Realized gains 332 87 419
Mortuary and
cemetery income 8,238 8,238
Other 5,015 41 5,056
--------- -------- ------- --------
Total revenue 26,118 1,502 (324) 27,296
--------- -------- ------- --------
Benefits and Expenses
Death and policy
benefits 4,355 225 4,580
Increase in reserve
for future policy
benefits 1,814 559 2,373
Amortization of DPAC 1,180 67 (i) 1,247
General and
administrative
expenses 12,988 505 (400) (h) 13,093
Interest Expense 1,208 74 (e) 1,282
Cost of mortuary and
cemetery lots and
services 2,314 2,314
--------- --------- -------- --------
Total benefits
and expenses 23,859 1,289 (259) 24,889
--------- -------- -------- -------
Earnings before income
tax expense 2,259 213 (65) 2,407
Income tax expense 619 619
Minority interest 20 20
--------- --------- --------- ---------
Net earnings $ 1,660 $ 213 $ (65) $ 1,808
========= ========= ======== =========
Earnings per share $0.45 $0.49
===== =====
Average number of
shares outstanding 3,686 3,686
========= =========
See notes to pro forma condensed consolidated financial statements
</TABLE>
<PAGE>
Security National Financial Corporation
Notes to Pro Forma Condensed
Consolidated Financial Statements
(Unaudited)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for pro forma financial information and with the
instructions to Form 8-K and Article 11 of Regulation S-X. The acquisition
will be accounted for as a purchase by the Company. The pro forma
adjustments presented are estimates as of the periods presented and do not
necessarily reflect the actual amounts that will be booked on the actual
purchase date and subsequent periods. In the opinion of management all
significant adjustments required for an appropriate pro forma presentation
have been included.
Note 2. PRO FORMA ADJUSTMENTS
The following pro forma adjustments are made to the unaudited consolidated
condensed balance sheet as of the date of December 29, 1995 (effective
December 31, 1995). Reference letters correspond to those on the statement.
a. To reflect cash paid and the note payable to the Civil Service Employees
Insurance Company and accrued acquisition expenses.
b. To adjust assets of CSE Life to market value as of the date of
acquisition.
c. To establish a new asset representing the present value of future profits
on the insurance contracts acquired.
d. To eliminate CSE Life's historical equity.
The following pro forma adjustments are made to the unaudited condensed
consolidated statements of income as if CSE Life's acquisition and related
transactions occurred at the beginning of the periods presented.
Reference letters correspond to those presented on the statements.
e. To reflect the Company's interest expense on the $1,063,000 note payable
to partially finance CSE Life's acquisition.
f. To reflect the amortization of premiums and accretion of discounts on
investments based on purchased values.
g. To reflect investment income lost on the $4,137,000 cash paid by the
Company to finance the acquisition of CSE Life.
h. To reflect decreases in operating expenses due to moving CSE Life's
administrative functions to Salt Lake City, Utah and combining such
activities with the Company.
i. To reflect the amortization of the cost of insurance acquired.
