SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 23, 2005
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
Utah 0-9341 87-0345941
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5300 South 360 West, Salt Lake City, Utah 84123
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 264-1060
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Does Not Apply
(Former name or former address, if changed since last report)
ITEM 1. Registrant's Business and Operation
Execution of Stock Purchase Agreement to Acquire Memorial Insurance Company of
America.
On September 23, 2005, Security National Financial Corporation (the
"Company"), through its subsidiaries, Security National Life Insurance Company,
a Utah domiciled insurance company and wholly owned subsidiary of the Company,
and Southern Security Life Insurance Company, a Florida domiciled insurance
company and wholly owned subsidiary of Security National Life Insurance Company,
entered into a stock purchase agreement (the "Stock Purchase Agreement") with
Memorial Insurance Company of America, an Arkansas domiciled insurance company
("Memorial Insurance Company"), to purchase all of the outstanding shares of
common stock of Memorial Insurance Company. Under the terms of the Stock
Purchase Agreement, the shareholders of Memorial Insurance Company are to
receive $13,500,000 in consideration for all of the outstanding common shares of
Memorial Insurance Company, with each shareholder to receive a pro rata share of
the total amount of the purchase consideration. The shareholders are to receive
a total $13,500,000 for their shares by means of distributions, with Security
National Life Insurance Company and Southern Security Life Insurance Company
simultaneously contributing sufficient capital and surplus to Memorial Insurance
Company to maintain its status as an admitted insurer in good standing in the
state of Arkansas.
The Stock Purchase Agreement also provides that for federal and state tax
purposes, the transaction will be treated as a part sale, part redemption of the
Memorial Insurance Company stock. At the closing of the transaction, the
shareholders of Memorial Insurance Company agree to sell all their shares of
common stock of Memorial Insurance Company to Security National Life Insurance
Company and Southern Security Life Insurance Company, such shares representing
all of the issued and outstanding stock of Memorial Insurance Company, free and
clear of all liens, claims, and encumbrances. Following completion of the
purchase of all the Memorial Insurance Company stock by Security National Life
Insurance Company and Southern Security Life Insurance Company pursuant to the
terms of the Stock Purchase Agreement, Memorial Insurance Company will become a
wholly owned subsidiary of Southern Security Life Insurance Company.
As of December 31, 2004, Memorial Insurance Company had 100,170 policies in
force and 50 agents. For the year ended December 31, 2004, Memorial Insurance
Company had revenues of $4,893,000 and net income of $2,158,000. As of December
31, 2004, the statutory assets and the capital and surplus of Memorial Insurance
Company were $45,048,000 and $12,303,000, respectfully.
Under the terms of the Stock Purchase Agreement, the shareholders agree,
where applicable following the closing of the transaction, to maintain any
existing policies from Memorial Insurance Company that were previously sold
through such shareholders' funeral and mortuary businesses and to avoid
replacing any of such policies with the policies of other insurance companies.
The shareholders further agree to use their reasonable best efforts to support
the business and operations of Memorial Insurance Company, including, where
applicable, to maintain a business relationship with Memorial Insurance Company
to the extent such a business relationship existed prior to such closing.
Moreover, Security National Life Insurance Company and Southern Security
Life Insurance Company agree, pursuant to the terms of the Stock Purchase
Agreement, to maintain the corporate offices of Memorial Insurance Company at
its current location in Blytheville, Arkansas. Furthermore, Security National
Life Insurance Company and Southern Security Life Insurance Company agree to use
their best efforts, following the closing, to assist Memorial Insurance Company
in retaining the sales agents and brokers in its business and operations. The
Company anticipates completing the transaction on or before October 30, 2005.
At the closing of the transaction, Security National Life Insurance
Company, Southern Security Life Insurance Company and Memorial Insurance Company
each agree, pursuant to the terms of the Stock Purchase Agreement, to enter into
a coinsurance agreement to reinsure all of the invested assets and assumed
liabilities of Memorial Insurance Company to Security National Life Insurance
Company, to the extent permitted by the Arkansas Insurance Department, except
for certain policies not included within the reissued policies. The coinsurance
agreement is required to have terms standard in the industry for such
agreements, and is to include a tri-party collateral provision regarding the
assets funding the reserves. The parties to the coinsurance agreement will
consist of Security National Life Insurance Company, Southern Security Life
Insurance Company, Memorial Insurance Company and the Arkansas Insurance
Department.
Upon approval of the coinsurance agreement by the Arkansas and Utah
insurance departments, certain insurance business and operations of Memorial
Insurance Company will be transferred to Security National Life Insurance
Company. Any future insurance business by Memorial Insurance Company will be
covered by this coinsurance agreement. It is anticipated that all of the
business and operations of Memorial Insurance Company will be transferred to
Security National Life Insurance Company under the terms of the coinsurance
agreement, except for capital and surplus of approximately $1,000,000. Thus, it
is estimated that approximately $25,568,000 in assets and liabilities will be
transferred from Memorial Insurance Company to Security National Life Insurance
Company pursuant to the coinsurance agreement.
At the closing of the stock purchase transaction, Security National Life
Insurance Company will contribute $5,600,000 in cash to Memorial Insurance
Company, for which Security National Life Insurance Company will receive a note
secured by the investments in common stock held by Memorial Insurance Company.
In addition, Southern Security Life Insurance Company will contribute $1,812,000
to Memorial Insurance Company in consideration for a surplus note. It is
intended that the $5,600,000 note and the $1,812,000 surplus note will be repaid
to Security National Life Insurance Company and Southern Security Life Insurance
Company, respectively, in early 2006 using the proceeds from the sale of the
investments in common stock of Memorial Insurance Company that will be securing
the note.
The obligations of Security National Life Insurance Company, Southern
Security Life Insurance Company and Memorial Insurance Company to complete the
stock purchase transaction are contingent upon: (i) approval and adoption of the
Stock Purchase Agreement by the Board of Directors of Security National Life
Insurance Company, Southern Security Life Insurance Company, and Memorial
Insurance Company; and (ii) approval of the transaction by any regulatory
authorities having jurisdiction over Security National Life Insurance Company,
Southern Security Life Insurance Company and Memorial Insurance Company,
including the insurance departments of the states of Arkansas, Florida and Utah.
ITEM 9.01. Financial Statements and Exhibits
(c) Exhibits
10.1 Stock Purchase Agreement among Security National Life Insurance
Company, Southern Security Life Insurance Company, Memorial
Insurance Company of America and the shareholders of Memorial
Insurance Company that have executed the Agreement by
Shareholders of Memorial Insurance Company of America to Sell
Shares in Stock Purchase Transaction.
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: September 27, 2005 By: /s/ Scott M. Quist
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Scott M. Quist
President and Chief Operating Officer