Security National Financial Corporation: Navigating Challenges, Positioning for ROE Recovery

Security National Financial Corporation (SNFC) has long been a case study in balancing resilience with reinvention. As of Q2 2025, the company faces a 10% year-over-year decline in after-tax earnings and a 26% drop in first-half profits, driven largely by its mortgage segment's $1.67 million loss. Yet, buried beneath these numbers lies a story of strategic recalibration—a deliberate shift toward long-term value creation that could position SNFC for a Return on Equity (ROE) rebound.

The ROE Dilemma: A Temporary Setback, Not a Structural Failure

SNFC's ROE of 8% for H1 2025 trails its 10-year average of 13.3%, but this gap is not a reflection of poor management. Rather, it underscores the weight of external headwinds. The mortgage segment, which accounts for roughly one-third of SNFC's revenue and equity, has been a drag due to rising commission costs and a homogeneous market. President Scott Quist, however, frames this as a temporary drag: “If the mortgage segment were breakeven, ROE would jump 2 percentage points. With rate hikes in life insurance and improved cemetery sales, we're confident in a path to 10%+ ROE.”

The math is compelling. A breakeven mortgage segment would add $1.67 million in annualized earnings, directly boosting ROE. Meanwhile, life insurance's 1.5 percentage point tailwind from higher premium rates—driven by improved margins on new policies—could further close the gap. These are not speculative hopes; they are embedded in SNFC's capital allocation and operational discipline.

Strategic Capital Deployment: Land Holdings and Talent as Growth Levers

SNFC's $50 million investment in residential land holdings, though reducing current income by $2 million, is a masterstroke of long-term thinking. This move mirrors the company's historical playbook: sacrificing short-term gains for future scalability. The land portfolio, if managed effectively, could yield higher returns as housing demand stabilizes—a bet that pays off when interest rates normalize and mortgage activity rebounds.

Equally critical is SNFC's focus on talent. The company has reorganized 40% of its executive sales management across all segments, a move that signals a commitment to operational excellence. In the mortgage segment, where competition is fierce, this reorganization is paired with aggressive recruitment—despite the upfront cost of commission expenses. The early results are promising: while Q2 results were weaker than expected, management notes “comparable loan production metrics to peers,” suggesting the new teams are on track to deliver.

Operational Resilience: Life and Death Care Segments as Stabilizers

While the mortgage segment dominates headlines, SNFC's life insurance and cemetery/mortuary divisions are quietly building resilience. The life insurance segment saw a $1 million profit increase in Q2 2025, driven by higher investment income from builder relationship investments. This segment's rate hikes—despite flat premium revenue growth—have already added 1.5 percentage points to ROE, with more upside as new policies mature.

The cemetery/mortuary segment, meanwhile, is adapting to a 50% cremation market. While this shift reduces revenue per service, SNFC is addressing it through sales training and preneed land sales. Management's acknowledgment of “early signs of improvement” in Q2 2025 suggests these efforts are taking root.

The Investment Case: A Misunderstood Opportunity

SNFC's current earnings declines mask a stronger, more resilient business model. The company's book value per share has risen to $14.35 from $13.76 in 2024, and its balance sheet remains robust. The key question for investors is whether the market is discounting these strategic moves.

The data queries above would reveal a ROE trajectory that, while currently depressed, has historically rebounded after similar downturns. For instance, during the 2007–2010 mortgage crisis, SNFC's ROE dipped but recovered as it realigned its mortgage strategy. Today's playbook—talent investments, land holdings, and rate hikes—is a repeat of that playbook, with modern tools and a more diversified revenue base.

Conclusion: Positioning for a ROE Rebound

Security National Financial Corporation is not a company in decline—it is a company in transition. The current ROE of 8% is a temporary drag, not a permanent condition. By investing in talent, capitalizing on life insurance rate hikes, and deploying capital into land holdings, SNFC is building a foundation for a ROE rebound. For long-term investors, this is an opportunity to buy into a business that is not just surviving but strategically positioning itself to thrive.

The market may not yet see the full picture, but for those who look beyond the headlines, SNFC offers a compelling case of disciplined reinvention in a troubled market.