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): December 29, 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
Does Not Apply
(Former name or former address, if changed since last report)
ITEM 2.01. Completion of Acquisition of Memorial Insurance Company of America.
On December 29, 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,
completed a stock purchase transaction 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 transaction, the shareholders of Memorial
Insurance Company received $13,500,000 in consideration for all of the
outstanding common shares of Memorial Insurance Company, with each shareholder
having received a pro rata share of the total amount of the purchase
consideration based upon the number of shares such shareholder owns.
The shareholders received a total of $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 transaction is to be
treated, for federal and state tax purposes, as a part sale, part redemption of
the Memorial Insurance Company stock. At the closing of the transaction, the
shareholders of Memorial Insurance Company sold all of their shares of Memorial
Insurance Company stock to Southern Security Life Insurance Company, such shares
representing all of the issued and outstanding stock of Memorial Insurance
Company. As a result, Memorial Insurance Company became 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 transaction, as set forth in the Stock Purchase
Agreement dated September 23, 2005 among Security National Life Insurance
Company, Southern Security Life Insurance Company, and Memorial Insurance
Company, 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
obligations to complete the transaction were contingent upon approval of the
transaction by the Arkansas Insurance Department. A hearing was held on December
9, 2005 with the Commissioner of the Arkansas Insurance Department to consider
the request to approve the transaction, and the Commissioner issued an order
dated December 21, 2005 approving the transaction.
At the closing of the transaction, Security National Life Insurance Company
and Memorial Insurance Company entered into a reinsurance agreement to reinsure
the majority of the in force business of Memorial Insurance Company to Security
National Life Insurance Company, as reinsurer, to the extent permitted by the
Arkansas Insurance Department. The assets and liabilities to be reinsured under
the reinsurance agreement will be deposited into a trust account, in which
Zion's First National Bank has agreed to act as trustee. Under the terms of the
reinsurance agreement, in the event of the insolvency of Security National Life
Insurance Company, Zions First National Bank will hold the assets and
liabilities in trust for purposes of the administration of the assets and
liabilities with respect to such insolvency.
As a result of the execution of the reinsurance agreement, certain
insurance business and operations of Memorial Insurance Company will be
transferred to Security National Life Insurance Company, including all policies
in force as of the effective date thereof, except for certain policies to be
retained by Memorial Insurance Company. Any future insurance business by
Memorial Insurance Company will be covered by this reinsurance agreement. All of
the business and operations of Memorial Insurance Company are to be transferred
to Security National Life Insurance Company under the terms of the reinsurance
agreement, except for capital and surplus of approximately $1,000,000. Thus,
approximately $30,091,000 in assets and liabilities will be transferred from
Memorial Insurance Company to Security National Life Insurance Company pursuant
to the reinsurance agreement.
At the closing of the stock purchase transaction, Memorial Insurance
Company issued a $30,091,000 note to Security National Life Insurance Company
payable, together with accrued interest, within 30 days from the date of
issuance. The note is to be repaid in cash or in assets to be transferred to
Security National Life Insurance Company. The note is secured by the assets
owned by Memorial Insurance Company. In addition, Southern Security Life
Insurance Company contributed $2,200,000 to Memorial Insurance Company at
closing in consideration for the surplus note. It is anticipated that Memorial
Insurance Company will repay the surplus note in early 2006 using the proceeds
from the sale of the investments in common stock that Memorial Insurance Company
currently holds in its investment portfolio.
ITEM 9.01. Financial Statements and Exhibits
(a) It is impracticable for the Company to provide audited financial
statements of Memorial Insurance Company at the time this report is
required to be filed. The Company intends to file the required audited
financial statement as soon as practicable but not later than 71 days
after this report must be filed.
(b) The Company intends to file the required pro forma financial
information as soon as practicable but not later than 71 days after
this report must be filed.
(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.*
10.2 Reinsurance Agreement between Security National Life Insurance
Company and Memorial Insurance Company of America.
10.3 Trust Agreement between Security National Life Insurance Company
and Memorial Insurance Company of America.
10.4 Promissory Note between Memorial Insurance Company as Maker and
Security National Life Insurance Company as Payee.
10.5 Security Agreement between Memorial Insurance Company as Debtor
and Security National Life Insurance Company as Secured Party.
10.6 Surplus Contribution Note between Memorial Insurance Company of
America as Maker and Southern Security Life Insurance Company as
Payee.
10.7 Guaranty Agreement by Security National Life Insurance Company
and Southern Security Life Insurance Company as Guarantors.
10.8 Administrative Services Agreement between Security National Life
Insurance Company and Memorial Insurance Company of America.
* Incorporated by reference from Report on Form 8-K, as filed on September
27, 2005.
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: January 4, 2006
By: /s/ Scott M. Quist
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Scott M. Quist
President and Chief Operating Officer