Security National Financial's Q3 Earnings Decline: A Closer Look at Strategic Progress Amid Profit Pressures

Security National Financial Corporation (SNFC) reported a 34% year-over-year decline in after-tax earnings for Q3 2025, falling to $7.8 million from $11.8 million in the same period of 2024. This sharp drop, coupled with a 30% year-to-date decline in nine-month earnings, has raised concerns about the company's near-term profitability. However, a closer examination of SNFC's strategic initiatives and long-term positioning reveals a more nuanced picture. While short-term profit pressures persist, the company is making measurable progress in operational efficiency, segment-specific recovery, and adapting to evolving accounting standards-factors that could underpin its resilience in the years ahead.

Operational Efficiency and Cost Discipline

SNFC's management has prioritized cost control, a critical lever in stabilizing margins. Personnel costs, a key expense category, rose by only 6% year-to-date through September 2025, compared to a 10% increase in June 2025. This moderation reflects improved talent management and sales productivity, particularly in the Life Insurance segment, where leadership upgrades are expected to drive higher premium sales. The company's Return on Equity (ROE) for the nine months ended September 30, 2025, stood at 7.9%, annualizing to 10.5%-a marked improvement from 8.5% in June. This suggests that cost efficiencies are beginning to offset some of the drag from declining revenues.

Segment-Specific Recovery and Strategic Rebalancing

The Mortgage segment, which had endured years of underperformance, returned to profitability in Q3 2025. This turnaround, though modest, signals the potential for sustained recovery as housing markets stabilize. Meanwhile, the Cemeteries/Mortuaries segment reported modest EBIT improvements, driven by stabilized preneed cemetery land sales. These gains, however, are overshadowed by the Life Insurance segment's struggles, where deferred acquisition costs (DAC), current expected credit losses (CECL), and lower unrealized gains on common stock dragged earnings.

A pivotal strategic shift lies in SNFC's adoption of the Long-Duration Targeted Improvements (LDTI) accounting standards, set to take effect in Q4 2025. These changes will reclassify reserves and DAC and introduce a new Deferred Profit Liability metric. While the transition will distort short-term financial reporting, management has emphasized that it reflects alignment with industry standards rather than operational missteps. Investors should view this as a necessary step to enhance transparency and long-term comparability.

Long-Term Value Creation: Real Estate and Talent-Driven Growth

SNFC's long-term strategy hinges on two pillars: real estate-based investments and talent-driven operational improvements. While real estate activities currently drag on income, management anticipates they will become accretive over time as market dynamics shift. This aligns with broader trends in the insurance sector, where real estate portfolios are increasingly valued for their long-term capital appreciation potential.

The company's focus on upgrading sales and executive talent in the Life Insurance segment is equally critical. President Scott Quist has underscored the importance of these hires in driving premium growth, a goal that, though unmet in Q3, remains central to SNFC's five-year plan. The success of this strategy will depend on the integration of new leadership and the ability to convert improved talent into higher sales volumes.

Risks and Opportunities

SNFC's path forward is not without risks. The Life Insurance segment's reliance on DAC and CECL provisions makes it vulnerable to market volatility and credit cycles. Additionally, the LDTI transition could temporarily obscure the company's financial health, complicating investor assessments. However, the company's improved ROE and disciplined cost management provide a buffer against these headwinds.

Looking ahead, SNFC's strategic focus on operational efficiency, segment-specific recovery, and accounting standardization positions it to navigate near-term challenges while laying the groundwork for long-term value creation. Investors should monitor the November 14, 2025, earnings call for further insights into segment performance and the LDTI implementation timeline according to company guidance.

Conclusion

Security National Financial's Q3 earnings decline is a symptom of broader industry pressures and transitional accounting changes, not a reflection of long-term viability. By prioritizing cost discipline, segment-specific recovery, and strategic adaptation, SNFC is building a foundation for sustainable growth. While short-term volatility persists, the company's focus on operational quality and long-term resilience suggests that its strategic progress may ultimately outweigh current profit pressures.