2 0 1 9
A N N U A L
R E P O R T
T E A M W O R K
D I R E C T O R S
I N V E S T M E N T
G R O U P
table of
contents 01
Letter to Shareholders
04
Management’s Discussion & Analysis
07
Results of Operations
35
Balance Sheet
36
Statement of Operations
37
Shareholders’ Equity
38
Cash Flows
39
Shareholders
44
Organizational Structure
45
Board of Directors
46
Corporate Officers
47
Our Visionaries
F E L L O W S H A R E H O L D E R S
It’s been said that “life’s disappointments generally come from unfulfilled expectations.” Sometimes, we set our expectations/goals unrealistically high, and when we don’t hit all of them, we’re disappointed – even though significant achievements are made. Well, 2019 was one of those years. Make no mistake, 2019 was a very good year for our company! However, it did not match the success we had in 2018, but still, significant achievements occurred that should set the stage for tremendous future growth. Here is what I’m talking about: DIG’s assets increased by 5.92% to more than $160 million. Our stockholders’ equity (book value of DIG) grew 6.91% and passed $153 million. DIG paid dividends to shareholders of more than $1.71 million. DIG repurchased $2.09 million of its own stock. DIG sold $1.16 million of its common stock that had been held as treasury stock. With dividends included, DIG’s overall return on equity was 9.98%.
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DIRECTORS INVESTMENT GROUP, INC.
In addition: Funeral Directors Life and life insurance subsidiaries increased preneed funeral sales by 13% to $279.51 million. Parkway Advisors exploded in 2019. Our registered investment advisor business achieved the following milestones:
produced a return on investment for DIG of 70% and
grew total assets under management to more than $3 billion.
DIG acquired 100% of Passare, setting the stage for a unified and concerted future. We implemented a “common technology platform” across all entities under the DIG umbrella, ensuring that all the technology employed in the DIG subsidiaries would work together. We also implemented a “common operations concept,” ensuring that our staff would have the same training, culture, and oversight no matter what subsidiary they worked for. I love to share news like this! As I said, 2019 was a very good year! So, let’s take a closer look at the success of DIG’s primary subsidiaries.
Funeral Directors Life Even though FDLIC did not have its best year financially in 2019, we achieved some significant wins! I have noted a few of the highlights below: Experienced continued growth and momentum of our Wolfelt Initiative as demonstrated by an increased demand for workshops, funeral director CE, and participation in our training from a wide range of individuals in the funeral profession. Received an upgrade in outlook from AM Best, going from a negative outlook to a stable outlook within 12 months. Created an extensive Enterprise Risk Management (ERM) plan. Improved CLAIMCHECK® revenue by more than 33% over 2018. Launched FDTV to promote thought-leading ideas and education to the funeral profession through a video series.
Achieved outstanding success with our new informational webinar series for funeral professionals. Created Funeral Directors Life Insurance Company of Louisiana in response to requests from our Louisiana funeral home clients in order to address insurance licensing issues in the state. Created a cybersecurity division through the establishment of the Information Security Department in response to the development of our ERM program. Established a Security Awareness program. Reached a record number of Select Producers (full-time employed sales team) with a total of 57. Achieved a new monthly sales record in October with $28.7 million in sales. Merged the Lead Generation and Social Media Management teams to provide a seamless experience for our funeral home customers. Grew Social Media Management revenue by 72%. Continued to see the benefits of the DIG Wellness Center through lower health insurance claims, leading to reduced health insurance premiums. Continued to see momentum in our trust conversion business with more than $14.4 million converted from trust accounts to FDLIC insurance and annuity products. Recognized by Texas Monthly magazine as one of the Best Places to Work in Texas and by Fortune magazine as one of the Best Workplaces in Financial Services & Insurance in the United States for the third year in a row.
Parkway Advisors 2019 was an outstanding year for Parkway – by far the best year in the company’s history. The successes we achieved were significant: 2019 represented 11 consecutive years of increasing both revenue and net income. During these 11 years, Parkway has added over $11 million in value to DIG! During the year, eight new insurance companies signed agreements for asset management, representing the greatest number of new clients in a single year since our inception! National insurance associations/conferences and advocacy groups are reaching out to Parkway and requesting our group presentations on a regular basis.
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Potential clients in the “pipeline” are at an all-time high due to referrals from clients, actuaries, and auditors. 2020 is shaping up to be a very good year!
Fortunately, the losses that have occurred in Passare have led to tax savings, which have more than compensated for DIG’s ongoing investment in Passare.
In addition, total revenue for 2019 was $3.98 million and net income exceeded $1.87 million. We also distributed $1.8 million to DIG during the year.
Conclusion
Parkway continues to shine and to outperform our expectations. It will be exciting to watch as this subsidiary continues to prosper.
Passare As a reminder, DIG acquired 100% of Passare in 2019. This company provides a software as a service (SaaS) platform to funeral homes. Passare’s cloud-based service offers interconnected modules to help funeral homes improve efficiency and enhance communications and collaboration internally with their staff members and with the families they serve. Passare has grown rapidly, and we gained 100% control of the company in order to focus on fortifying the foundation. We adopted the DIG operating model of structure, people, process, training, and technology to establish a “common” approach to move forward. This common approach has provided Passare with more stability and more direction.
While 2019 was not the best year financially for DIG, it was a year full of successes. With the continued blessing of God, we are preparing ourselves for more growth and greater success in the future. As we continue to look ahead, we are convinced that these next few years will be critical in defining the future for DIG and our subsidiaries. As the market for our products and services continues to grow, the opportunities before us are tremendous. We look forward to continuing to share our story of success with you. We thank you, our fellow shareowners, for your support. There is no greater responsibility than earning and keeping your trust and confidence. Rest assured, we will continue to work tirelessly to keep our commitments and protect and grow the value of your investment in DIG. With sincere gratitude and blessings,
For 2019, Passare had the following accomplishments: Restructured the entire company to align with DIG. Implemented 125 new funeral home organizations across the nation on the Passare platform. Developed a plan to work with the Funeral Directors Life (now a sister company) sales management team to set the foundation to grow sales. Created a Product Marketing team and a Product Design team. Formed the Client Services team to make the process easier for funeral homes to fully adopt Passare’s platform. Brought 100% of Product Development in-house. Created integrations with several other partnering software companies. As a result, Passare has become “the platform to integrate with” in the funeral profession. 2019 was a year of transition for Passare. We did not accomplish the financial results we wanted, but the company is now positioned to have a very promising 2020 and beyond.
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DIRECTORS INVESTMENT GROUP, INC.
Kris Seale Chairman of the Board President and Chief Executive Officer
M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S
Executive Overview Directors Investment Group, Inc. (DIG), a Nevada corporation, is the parent company for a diverse group of companies with a focus on two strategic industries – life insurance and financial services. The combined financial statements of Directors Investment Group, Inc. include all accounts of DIG and its subsidiaries (the Company) accounted for on a Generally Accepted Accounting Principles basis with the exception of the insurance subsidiaries that are accounted for on a Statutory Accounting Principles basis. The subsidiaries include Directors Capital Ventures, Inc. (DCVI), Directors Holding Corporation (DHC), Directors Air Corporation (DAC), Parkway Advisors Group, Inc. (PAGI), and Parkway Advisors Holdings, Inc. (PAHI), and Funeral Agency, Inc. (FAI). Additionally, the limited partnerships owned by the subsidiaries are included in the combined statement. The limited partnerships are Directors Real Estate Management LP (DREMLP), Parkway Advisors LP (PALP), and Directors Agency LP (DALP). In April of 2015, DIG acquired 87% majority ownership in Passare, Inc. (Passare) in exchange for outstanding debt. During the second half of 2019, DIG acquired the remaining shares of Passare in exchange for cash or equivalent value in treasury shares. Effective December 31, 2019, Passare was merged into DIG and as a legal entity ceased to exist. Going forward, Passare will continue to be reported separately but as a division of DIG. The insurance company subsidiaries include Funeral Directors Life Insurance Company (FDLIC), Kentucky Funeral Directors Life Insurance Company (KFDLIC), and Funeral Directors Life of Louisiana (FDLA). FDLA was created in June of 2019 in response to the requests of Louisiana funeral home clients in order to address insurance licensing issues in the state. The value of the insurance company subsidiaries is recorded on the books of the Company at book value in accordance with the methods set forth by the National Association of Insurance Commissioners (NAIC). The sections that follow provide information about the important aspects of our operations and investments, both at the combined and subsidiary levels, and include discussion of our results of operations. The accounting periods for all of the entities end on December 31.
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Earnings Per Share Basic earnings per share (EPS) is calculated by dividing net income by the average number of common shares issued and outstanding for the current and previous years. Diluted earnings per share is calculated by dividing net income by the average number of common shares issued and outstanding plus stock options issued and outstanding for the current and previous years. For the purpose of these calculations, shares issued and outstanding do not include treasury shares purchased by the Company. For 2019, the average number of common shares issued and outstanding, basic and diluted, was 2,523,455 and 2,733,116, respectively. For 2018, the average number of common shares issued and outstanding, basic and diluted, was 2,520,837 and 2,720,865, respectively. The exercise of 16,782 common stock options by employees and directors and the net purchase of 15,451 treasury shares by the Company are reflected in the change in average common shares outstanding. Basic EPS was $4.62 and diluted EPS was $4.27 for 2019. For 2018, basic and diluted EPS was $5.19 and $4.80 respectively. Decreased earnings for FDLIC and Passare were largely responsible for the decrease in earnings per share.
income tax expense for the combined group for 2019 earnings; however, the Company did receive a refund of $8.1 thousand related to alternative minimum tax paid for 2017’s tax return. Operating losses at Passare continue to offset any taxable income of DIG and its other non-insurance subsidiaries. With significant tax loss carryforwards, DIG expects to pay minimal federal income taxes for 2020 and possibly 2021. The absence of federal income tax liabilities will provide cash flow needed to support the continued growth of Passare. The insurance subsidiaries FDLIC, KFDLIC, and FDLA file a separate consolidated U.S. income tax return. The method of allocation between the companies is based upon separate return calculations with current credit for net losses. Intercompany tax balances are settled annually after the federal income tax return is completed and filed. DALP and FDLIC are also subject to filing state income tax returns for various states in which they are licensed to conduct business. Due to the Tax Cuts and Jobs Act passed in 2017, the corporate federal income tax rate for DIG and the insurance subsidiaries was 21%.
Liquidity and Cash Flows Computation of Share Value DIG’s Share Value was $68.14 for 2019 and $62.57 for 2018 based on the modified book value calculation. This was an 8.9% increase over 2018. For 2019 and 2018, Share Value is calculated using the modified book value approach that was approved by the shareholders at the April 1996 annual shareholders’ meeting. The calculation is the 1996 book value method plus an additional amount added for the value of FDLIC’s insurance business and interest maintenance reserve (IMR). For 2019, the equity component was $153,231,480 and the value of FDLIC’s business and IMR was $18,763,859. Total actual shares issued and outstanding at the end of 2019 were 2,524,120. For 2018, the equity component was $143,332,167 and the value of FDLIC’s business and IMR was $14,522,354. Total actual shares issued and outstanding at the end of 2018 were 2,522,789.
Income Taxes Directors Investment Group, Inc. and its non-insurance subsidiaries file a consolidated U.S. income tax return. All taxes are booked and paid at the DIG level. There was no federal
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DIRECTORS INVESTMENT GROUP, INC.
Management has set forth strategic objectives to help ensure that we keep a focus toward growing our core business and increasing shareholder value and that we are in a position to take advantage of opportunities when they arise. Those objectives include internal investment in our business (e.g. capital expenditures), share repurchases, shareholder dividends, debt reduction and management, and acquisitions of businesses that will complement our core operations. The Company believes that cash generated from operations, together with the Company’s existing credit lines and other financial resources, will adequately finance the Company’s planned 2020 cash requirements.
Summary of Cash Activities Principal sources of cash were commissions earned at DALP and FAI, investment advisory fees earned at PALP, principal and interest payments received on business loans, and proceeds for issuance of common stock options. Our primary uses of cash were for funding the operating costs of Passare, funding additional business loans to funeral homes, reduction of debt, repurchase of stock, and payment of shareholder dividends. Net decrease in cash for 2019 was $598.0 thousand.
Investing Activities Business loans outstanding at year-end 2019 were $25.1 million, of which $6.1 million were related to funeral home financing. DIG also provided a line of credit to fund the operations of Passare. Total loans earned interest at an average rate of 10.37%. In 2019, DIG extended new loans in the amount of $6.8 million and collected principal payments in the amount of $3.3 million and interest payments of $398.1 thousand. Net cash advances to Passare were $2.975 million. In 2016, DIG initiated a short-term investment strategy with Parkway Advisors as a means to earn investment income on excess cash accumulated from the transfer of business loans to FDLIC, commission income at DALP and/or FAI level, or proceeds from the sale of treasury stocks. Investments are laddered to throw off approximately $500,000 in cash at the end of each month. Throughout 2019, DIG invested excess cash in short-term investments. Total interest collected on short-term investments was $25.7 thousand. At year-end 2019, DIG held $1.5 million in short-term investments.
The Board of Directors approved the payment of quarterly dividends averaging $0.17 per share during 2019 for a total of $1.7 million. DIG paid $1.9 million in dividends in 2018, which included an extraordinary dividend of $0.25 per share in the fourth quarter.
Shareholder List & Beneficial Ownership The table on page 39 sets forth certain information as of March 1, 2020, with respect to each person who owns the Company’s Common Stock, each director of the Company, and all directors and officers of the Company as a group. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to the shares of Common Stock shown. Each Common share is entitled to one vote per share. The Company does have authorized Preferred Stock; however, none of the Preferred Stock was issued or outstanding as of December 31, 2019.
Financing Activities DIG’s combined debt was comprised solely of borrowings from FDLIC. These loans originated in 2007 and were used to facilitate the funding of the funeral home financing program mentioned above in investing activities. These loans were renegotiated and extended in April of 2017. The loans pay interest at the rate of 9.25% and mature in April 2022. DIG paid FDLIC $404.7 thousand in principal and $431.1 thousand in interest in 2019. At year-end 2019, outstanding borrowings on the loans from FDLIC were $4.4 million. DIG currently has an agreement with First Financial Bank of Abilene for a $10 million line of credit. There were no outstanding borrowings on the line of credit at year-end 2019. During 2019, the Company offered options on 251,217 shares of common stock at a price range of $46.36 to $68.83. Options on 16,782 shares were exercised at an option price of $46.36 to $62.57, providing $873.5 thousand in cash resources. 23,180 shares at a price range of $46.36 to $51.00 were not exercised and forfeited, leaving 211,255 shares exercisable in 2020, 2021, 2022, 2023, and 2024 at a price of $48.04 to $68.83. During the year, DIG also repurchased 33,096 shares of common stock for $2.1 million. In July of 2010, the Board of Directors approved the annual sale of a limited number of treasury shares. In 2018, DIG sold 13,740 shares of treasury stock for $818.9 thousand, and in 2019, DIG sold or exchanged 17,645 shares for $1.2 million.
DIRECTORS INVESTMENT GROUP, INC.
6
results of
operations 08
Funeral Directors Life Insurance Company
11
Kentucky Funeral Directors Life Insurance Company
13
Funeral Directors Life Insurance Company of Louisiana
15
Parkway Advisors, LP
17
Parkway Advisors Group, Inc.
19
Parkway Advisors Holdings, Inc.
21
Directors Real Estate Management, LP
23
Directors Agency, LP
25
Directors Capital Ventures, Inc.
27
Directors Holding Corporation
29
Directors Air Corporation
31
Funeral Agency, Inc.
33
Passare, Inc.
F U N E R A L D I R E C T O R S L I F E I N S U R A N C E C O M PA N Y FDLIC is the primary investment and income source for DIG. FDLIC is in the business of funding prepaid funerals with life insurance and annuities. A simplified financial statement is included herein. In 2019, FDLIC’s assets grew to $1.512 billion, up $102.6 million or 7.28% over 2018 assets of $1.410 billion. Invested assets are the largest component of assets for an insurance company. FDLIC’s investments were $1.477 billion for 2019, an increase of 7.24% over 2018 investments of $1.378 billion. The primary investment held by FDLIC was bonds - government, agency, and corporate - representing 85.0% of invested assets or $1.256 billion. There was $1 million in preferred stocks at year-end 2019. FDLIC’s total common stock portfolio was $12.5 million, representing .84% of invested assets and comprised of a $6.25 million investment in KFDLIC, a $4.5 million investment in FDLA, and $1.7 million invested in the Monteagle Select Value Fund, a mutual fund that invests only in Biblically responsible entities. Investment in real estate represented 1.54% of invested assets or $22.7 million of which $12.0 million was the Home Office building. The $6.1 million year-over-year increase was due largely to the addition of 35,000 square feet to the Company’s Home Office. During 2019, FDLIC’s mortgage loan portfolio increased by $16.4 million for the financing of funeral home locations. The mortgage loan portfolio represented 12.07% of invested assets as opposed to 11.76% in 2018. Other invested assets consist of loans to parent that were issued in the first quarter of 2007, which comprised .30% of invested assets. Principal reduction on these loans was $404.7 thousand for the year. Cash and short-term investments represented .18% of invested assets at $2.6 million. Premiums deferred and uncollected were $7.0 million, while investment income due and accrued was $16.3 million. Other assets of $11.5 million included $4.0 million in deferred tax
assets, $4.2 million in insurance assignment receivables, $1.99 million in electronic data processing and office equipment related to the expansion of the Home Office, and $780.0 thousand in federal income taxes recoverable. The remainder of other assets was composed of receivables from affiliates and amounts for guaranty fund assessments held as assets. FDLIC’s primary liability is its reserves for policyholders. For 2019, reserves were $1.348 billion, an increase of 7.35% over reserves of $1.255 billion in 2018. Premiums received in advance comprised $3.7 million of the claims and premiums liabilities account. Asset Valuation Reserve (AVR) increased $2.59 million or 24.9% compared to the $1.08 million increase from year-end 2017 to year-end 2018. The significant yearover-year increase was due entirely to changes to the reserve calculation factors issued by the NAIC in December of 2019. This account represents a loss reserve mandated by the NAIC to offset potential defaults of any of the company’s invested assets. The Interest Maintenance Reserve increased $2.28 million from year-end 2018 for net realized capital gains of $2.451 million less amortization of $171.5 thousand. Statutory reporting requirements mandate that gains from the sale of bonds with a future maturity date must be held as a liability and amortized into income over the remaining life of disposed bonds. Dividends to policyholders, representing amounts to be credited to policyholder policies for the upcoming year, decreased by $200 thousand. Other liabilities of FDLIC included amounts due to affiliates, general expenses payable, commissions to agents payable, premium taxes and fees, and other miscellaneous liabilities. Total Capital and Surplus increased $4.2 million for 2019 as compared to the increase of $13.7 million in 2018. The increase in 2019 consisted of net income of $14.274 million, a $1.083 million increase in deferred income tax adjustment,
DIRECTORS INVESTMENT GROUP, INC.
8
and unrealized gains of $393.2 thousand offset by an AVR increase of $2.589 million and an $8.951 million increase in non-admitted assets. Non-admitted assets are assets, that, for statutory accounting purposes, the NAIC does not allow insurance companies to include in their financial statements. The majority of non-admitted assets is related to the Company’s purchase of an aircraft in November of 2019. With over 70% of the Company’s business produced in states outside of Texas, the purchase of the aircraft was essential to the continued expansion of new business sales. The aircraft was fully deductible for tax purposes, resulting in federal income tax savings of $1.7 million. The non-admitted asset will be reversed over the next ten years as the aircraft is depreciated for statutory purposes. The revision to the AVR calculation negatively impacted the Company’s capital and surplus by approximately $800.0 thousand. The ratio of Capital and Surplus to Total Assets was 8.9% at year-end 2019 compared to 9.2% at year-end 2018. Revenues for FDLIC were primarily premium collections and investment income. When compared to the previous year, 2019 revenues increased 10.14% or $30.4 million to $330.7 million compared to $300.2 million for 2018. New business sales production for 2019 was $273.6 million, approximately 98% of budget and 12.63% or $30.7 million higher than 2018 production. Net investment income increased $4.6 million during 2019 compared to the $4.9 million increase from yearend 2017 to year-end 2018. The average yield on new bond purchases in 2019 decreased approximately 29 basis points from 2018, while the yield on the total bond portfolio dropped from 4.99% at year-end 2018 to 4.86% at year-end 2019 due to calls and maturities of higher yielding securities and continued alignment of cash flows. The average yield on new mortgage loans increased 41 basis points year over year, averaging 6.07% - approximately 200 basis points higher than bond yields. Net, new dollars invested for 2019 were $99.8 million compared to $89.1 million for 2018. Policyholder benefits increased 9.92% to $257.1 million for 2019 from 2018 benefits of $233.9 million. Death and annuity benefits paid during the year exceeded 2018 by $4.76 million but were $7 million less than expected. Monthly claims expense averaged $13.6 million in 2019 compared to $13.2 million in 2018. With the increase in new business sales, the increase in aggregate reserves from year to year was up $18.2 million or 24.5%. Commissions were up approximately $3.9 million or 18.1% for the increase in sales during the year. General insurance expenses exceeded 2018 by $5.203 million or 24.7% compared to a $2.034 million or 8.8% decrease from 2017 to 2018. Significant areas of increased spending were related to 9
DIRECTORS INVESTMENT GROUP, INC.
sales, marketing and technology. The Company accelerated approximately $1 million of 2018 proposed expenses into 2017 in an effort to reduce federal income tax expense under the higher tax rate in 2017 and limited salary increases and general spending in 2018 to improve future earnings. Operating income was $18.2 million before dividends to policyholders’ expense of $1.4 million. This compares to $20.7 million of operating income for 2018 for a decrease of 12.3%. Policyholder dividends were down by $188.6 thousand. Federal income taxes incurred were $2.5 million compared to $4.8 million in 2018 due to increased tax deductions from the purchase of the aircraft in November of 2019. FDLIC realized net capital gains of $82.6 thousand, resulting in net income for the year of $14.3 million compared to $14.2 million in 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets $ 1,477,477.2
$ 1,377,723.8
Premiums & Investment Income Receivable
23,360.0
22,723.6
Other Assets
11,497.7
9,308.0
$ 1,512,334.9
$ 1,409,755.4
$ 1,347,590.7 4,897.5 12,982.4 3,826.2 3,762.2 1,000.0 4,056.7
$ 1,255,314.2 4,556.4 10,393.7 3,473.9 1,482.2 1,200.0 3,326.8
1,378,115.7
1,279,747.2
134,219.2
130,008.2
$ 1,512,334.9
$ 1,409,755.4
Investments
Total Assets Liabilities and Capital & Surplus
Reserves Claims & Premiums Liabilities Asset Valuation Reserve Commissions to Agents Interest Maintenance Reserve Dividends to Policyholders Other Liabilities
Total Liabilities Capital & Surplus Total Liabilities and Capital & Surplus
STATEMENT OF OPERATIONS
Twelve Months Ended December 31,
(Dollars in thousands) Premiums, Investment Income & Other
2019 $
330,660.4
2018 $
300,229.4
257,142.3
233,927.5
General & Administrative Expenses
55,358.6
45,605.8
Operating Income
18,159.5
20,696.1
Dividends to Policyholders
1,445.6
1,634.2
Earnings Before Federal Income Tax Federal Income Tax Provision
16,713.9 2,521.7
19,061.9 4,815.6
Net Gain Before Realized Capital Gains (Losses) Net Realized Capital Gains (Losses)
14,192.2 82.6
14,246.3 (13.7
Policyholder Benefits
Net Income
$
14,274.8
$
14,232.6
DIRECTORS INVESTMENT GROUP, INC.
10
K E N T U C K Y F U N E R A L D I R E C T O R S L I F E I N S U R A N C E C O M PA N Y KFDLIC, a wholly owned stock life insurance company of FDLIC, was incorporated in the state of Kentucky in 2001. KFDLIC is in the business of funding prepaid funerals with life insurance and annuities, similar to FDLIC. Total assets for 2019 were $24.1 million, up 4.04% from 2018 assets of $23.2 million. The increase in assets was attributed to the increase in invested assets – a result of new business sales for the year. For 2019, the investments account for KFDLIC was $23.7 million. The majority of this account was government and corporate bonds, representing 100.0% of investments. Premiums due and deferred and investment income due and accrued were $60.7 thousand and $303.0 thousand, respectively. Other assets consisted entirely of $75.0 thousand in deferred tax assets. Liabilities for KFDLIC ended the year at $17.9 million. Reserves for life policies were $17.5 million or 97.95% of the company’s liabilities – an increase of $597.7 thousand over 2018. Claims liabilities and premiums received in advance were $8.9 thousand and $37.5 thousand, respectively, for 2019. Asset valuation reserve (AVR) was $138.5 thousand compared to $112.4 thousand at the end of 2018. KFDLIC’s allocated portion of federal income taxes paid by FDLIC was $67.3 thousand. Commissions to agents were $54.7 thousand. Other liabilities included general expenses payable, taxes, licenses and fees payable, and other miscellaneous payables, representing $60.2 thousand. For 2019, the capital and surplus of KFDLIC increased $268.7 thousand. The increase consisted of net income of $309.6 thousand offset by a $26.1 thousand increase in AVR and a decrease in deferred income tax of $13.9 thousand resulting in an ending balance of $6.254 million. The capital and surplus of KFDLIC represented the value of the common stock investment that FDLIC holds for KFDLIC. 11
DIRECTORS INVESTMENT GROUP, INC.
Revenues for KFDLIC were $3.5 million – down $387.3 thousand from 2018 – and were composed primarily of premiums and investment income received. 2019 preneed sales production was $2.5 million, down 15.5% from 2018 production, and approximately 70% of expected sales. Premium income was $2.5 million while investment income was $1.1 million. Virtually all of the Company’s expenses are variable based upon new business production. Policyholder benefits were $2.7 million. Death claims were $2.1 million – approximately $373.0 thousand higher than 2018 – while reserves increased $597.7 million for new business production compared to $1.209 million in 2018. Commission expenses decreased $33.3 thousand for the year-over-year decrease in new business production. General insurance expenses were down $65.2 thousand due to a decrease in salaries and benefits and sales-related expenses. Operating income for the year was $383.6 thousand compared to $443.3 thousand in 2018. Federal income tax was estimated at $73.4 thousand after the allocation of consolidated tax deductions shared amongst the insurance affiliates. There was negligible net realized capital losses in 2019 compared to $19.9 thousand of capital losses in 2018. Net income for 2019 was $309.6 thousand compared to $289.3 thousand for 2018.
BALANCE SHEET
December 31, 2019
(Dollars in thousands)
2018
Assets
Investments
Premiums & Investment Income Receivable
Other Assets
Total Assets
$
23,677.4
$
22,736.3
363.7
356.9
75.0
85.9
$
24,116.1
$
23,179.1
$
17,495.0
$
16,897.3
Liabilities and Capital & Surplus
Reserves
46.3
72.2
Asset Valuation Reserve
138.5
112.4
Other Liabilities
182.2
111.8
17,862.0
17,193.7
6,254.1
5,985.4
Claims & Premiums Liabilities
Total Liabilities Capital & Surplus Total Liabilities and Capital & Surplus
STATEMENT OF OPERATIONS
$
$
23,179.1
Twelve Months Ended December 31,
(Dollars in thousands) Premiums, Investment Income & Other
24,116.1
2019 $
Policyholder Benefits
2018
3,592.1
$
3,979.4
2,660.8
2,889.9
General & Administrative Expenses
547.7
646.2
383.6
443.3
73.4
134.1
310.2
309.2
(0.6
(19.9
Operating Income
Federal Income Tax Provision Net Gain Before Realized Capital Losses Net Realized Capital Losses Net Income
$
309.6
$
289.3
DIRECTORS INVESTMENT GROUP, INC.
12
F U N E R A L D I R E C T O R S L I F E I N S U R A N C E C O M PA N Y O F L O U I S I A N A Funeral Directors Life Insurance Company of Louisiana (FDLA) was incorporated June 6, 2019. On June 25, 2019, FDLA issued Funeral Directors Life Insurance Company 100% (100,000 shares) of its outstanding stock in exchange for $4.5 million in cash. FDLA commenced business on August 1, 2019, and was created in response to unfavorable regulation in Louisiana related to agent licensing requirements for foreign corporations only. FDLA ended 2019 with $6.59 million in total assets. As of December 31, 2019, 97.63% of FDLA’s total assets were invested assets. The majority of this account was government and corporate bonds, representing 75.2% of the investments. The remaining investments were cash and short-term investments. Other assets consisted of investment income due and accrued of $49.6 thousand, premiums due and deferred of $70.3 thousand, and net deferred tax asset $35.9 thousand. Liabilities for FDLA ended the year at $2.1 million. Reserves for life policies were $1.76 million or 84.91% of the company’s liabilities. Premiums received in advance were $28.7 thousand. Asset valuation reserve (AVR) was $9.0 thousand. Taxes, licenses, and fees were $130.0 thousand. FDLA’s allocated portion of federal income taxes paid by FDLIC was $65.1 thousand. Commissions to agents were $56.7 thousand. Other liabilities included general expenses payable and other miscellaneous payables, representing $22.4 thousand. The company was capitalized with $100,000 of common capital stock and $4,400,000 of gross paid in and contributed surplus. For 2019, the capital and surplus of FDLA ended the year at $4.5 million. Beyond the initial capitalization of FDLA, surplus increased by $23.1 thousand and consisted of net loss of $2.5 thousand plus deferred income tax of $51.9 thousand offset by
13
DIRECTORS INVESTMENT GROUP, INC.
$17.3 thousand in non-admitted assets and $9.0 thousand in ARV. Revenues for FDLA were $2.67 million. Premium income was $2.607 million for five months ended December 31, 2019, and investment income was $59.1 thousand. The majority of FDLA’s new business was Individual Life. Virtually all the Company’s expenses are variable based upon the level of new business production. For 2019, death claims were $170.5 thousand of total policy benefits while aggregate reserves for life policies increased by $1.76 million. Commission expenses were $321.6 thousand. General Insurance Expenses were $150.6 thousand and consisted largely of administrative service fees paid to Funeral Directors Life Insurance Company and sales related expense. Insurance taxes, license, and fees were $130.0 thousand. Gain from operations of $62.6 thousand was offset by federal income taxes of $65.1 thousand. Taxable income for FDLA was $309.9 thousand after adjustments for deferred acquisition expenses and tax reserves. Net income reflects a loss of $2.5 thousand for 2019.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
Assets
$
Investments
Premiums & Investment Income Receivable
Other Assets
Total Assets
6,434.2 120.0 36.4
$
6,590.6
$
1,755.6
Liabilities and Capital & Surplus
Reserves
28.7
Claims & Premiums Liabilities
9.0
Asset Valuation Reserve
274.2
Other Liabilities
Total Liabilities
2,067.5
Capital & Surplus
4,523.1
Total Liabilities and Capital & Surplus
STATEMENT OF OPERATIONS
$
Twelve Months Ended December 31,
(Dollars in thousands) Premiums, Investment Income & Other
2019 $
677.2
General & Administrative Expenses Operating Income
62.6 65.1
Federal Income Tax Provision
Net Income
2,665.9 1,926.1
Policyholder Benefits
6,590.6
$
(2.5
DIRECTORS INVESTMENT GROUP, INC.
14
PA R K WAY A D V I S O R S , L P PALP is a Delaware limited partnership that was created on March 22, 2001, and is owned 1% by PAGI and 99% by PAHI, both wholly owned subsidiaries of DIG. PALP is an investment advisory firm in the business of providing discretionary investment advisory, consulting, and investment accounting services to insurance companies. Total assets for 2019 were $744.8 thousand compared to $666.9 thousand for 2018. Cash ended the year at $437.6 thousand after partner distributions of $1.8 million. Receivables were $164.4 thousand and represent fees due from advisory clients as well as amounts due from affiliates. Investments in EDP equipment and software were $20.3 thousand. Other assets of $122.5 thousand consisted of prepaid expenses. Liabilities consisted of general payables and payroll liabilities. Total partners’ capital ended the year at $734.0 thousand after net income for the year of $1.875 million less partner withdrawals of $1.8 million. The partner withdrawals represented distribution of earnings, and ultimately, a return to DIG in excess of 70%.
15
DIRECTORS INVESTMENT GROUP, INC.
Revenues for 2019 were $3.98 million, exceeding 2018 revenues by $629.2 thousand, and were comprised of advisory service and consulting fees. Assets under management were approximately $3.4 billion at year-end 2018 compared to $2.3 billion at year-end 2018. Assets of consulting and investment reporting clients were $4.3 billion. During the year, Parkway added six new insurance clients to asset management and two new clients to consulting. Operating expenses were $2.1 million, of which salaries and benefits comprised $1.3 million. Other operating expenses were general in nature. Net income for 2019 was $1.875 million compared to $1.448 million for 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Trade Receivables
$
437.6
$
447.5
164.4
105.8
Investments
20.3
30.1
Other Assets
122.5
83.5
Total Assets
$
744.8
$
666.9
$
10.8
$
7.5
Liabilities & Capital Accounts
Payables and Other Liabilities
Total Liabilities Capital Accounts Total Liabilities & Capital Accounts
STATEMENT OF OPERATIONS
$
7.5
734.0
659.4
744.8
$
666.9
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
10.8
2019 $
2018
3,976.7
$
3,347.5
Expenses
2,103.5
1,906.2
1,873.2
1,441.3
1.3
6.5
Operating Income
Other Income
Net Income
$
1,874.5
$
1,447.8
DIRECTORS INVESTMENT GROUP, INC.
16
PA R K WAY A D V I S O R S G R O U P, I N C . PAGI is the sole general partner for the limited partnership, PALP. PAGI is a Nevada corporation created on March 23, 2001. PAGI ended the year with assets of $11.1 thousand. PAGI owns a one-percent interest of the limited partnership that represents $7.3 thousand of its assets. Cash and accounts receivable comprised the remaining assets. Liabilities of $24.5 thousand represent amounts due to PALP. Total capital ended the year at negative $13.4 thousand after dividends to DIG in the amount of $18.0 thousand.
17
DIRECTORS INVESTMENT GROUP, INC.
There were no revenues for 2019. PAGI had limited expenses for its corporate existence, such as registration fees, telephone charges, and corporate residency expense, resulting in an operating loss of $2.8 thousand. For 2019, PAGI recorded income of $18.7 thousand from its 1% ownership of the limited partnership investment in PALP. Net income for PAGI was $15.9 thousand compared to $11.7 thousand for 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Receivables and Prepaids
2.9
2.9
Investment in Partnership
7.3
6.6
Total Assets
$
0.9
$
0.9
$
11.1
$
10.4
$
24.5
$
21.7
Liabilities & Equity
Payables and Other Liabilities
Total Liabilities Total Equity Total Liabilities & Equity
STATEMENT OF OPERATIONS
$
21.7
(13.4
(11.3
11.1
$
10.4
Twelve Months Ended December 31,
(Dollars in thousands) Operating Expenses
24.5
2019 $
2018 2.8
$
2.8
Operating Loss
(2.8
(2.8
Equity in Earnings of Partnership
18.7
14.5
Net Income
$
15.9
$
11.7
DIRECTORS INVESTMENT GROUP, INC.
18
PA R K WAY A D V I S O R S H O L D I N G S , I N C . PAHI is the sole limited partner for the limited partnership, PALP. PAHI is a Nevada corporation created on March 23, 2001. PAHI ended the year with assets of $730.9 thousand. PAHI owns a 99% interest of the limited partnership that represents $726.6 thousand of its assets. Cash comprised the remaining assets. Liabilities of $21.1 thousand represent amounts due to PALP. Total capital ended the year at $709.8 thousand after dividends paid to DIG in the amount of $1.782 million.
19
DIRECTORS INVESTMENT GROUP, INC.
PAHI had expenses for its corporate existence, such as registration fees, telephone charges, and corporate residency expense. Total operating expenses for 2019 were $2.4 thousand. For 2019, PAHI recorded income of $1.856 million from its 99% ownership of the limited partnership investment in PALP. Net income for PAHI was $1.85 million compared to $1.43 million for 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investment in Partnership
Total Assets
$
4.3
$
4.3 652.8
726.6 $
730.9
$
657.1
$
21.1
$
18.7
Liabilities & Equity
Payables and Other Liabilities
Total Liabilities Total Equity Total Liabilities & Equity
STATEMENT OF OPERATIONS
$
$
Operating Loss
Net Income
709.8
638.4
730.9
$
2019
Equity in Earnings of Partnership
18.7
657.1
Twelve Months Ended December 31,
(Dollars in thousands) Operating Expenses
21.1
$
2018 2.4
$
2.4
(2.4
(2.4
1,855.8
1,433.4
1,853.4
$
1,431.0
DIRECTORS INVESTMENT GROUP, INC.
20
D I R E C T O R S R E A L E S TA T E M A N A G E M E N T, L P DREMLP is a partnership owned 1% by DCVI and 99% by DHC, both wholly owned subsidiaries of DIG. DREMLP’s business activity consists primarily of acquisition, management, and sale of real estate. DREMLP also maintains a fleet of business vehicles for its affiliates. For 2019, total assets of DREMLP were $464.2 thousand. The primary asset was investment in real estate of $330.3 thousand. Investments also include a fleet of vehicles totaling $108.2 thousand that are leased to affiliates. The increase in investments is due to the purchase of an additional vehicle that was leased to FDLIC. Payables and other liabilities consisted of property taxes. The partnership capital accounts ended the year at $447.7 thousand after net loss of $7.1 thousand plus partner contributions of $60.0 thousand.
21
DIRECTORS INVESTMENT GROUP, INC.
The revenues of $49.5 thousand for 2019 represent lease income on business vehicles provided to DREMLP’s affiliates. Operating expenses were $56.6 thousand, consisting primarily of property taxes and depreciation. Other expenses were general in nature. Partnership loss for 2019 was $7.1 thousand compared to income of $37.3 thousand in 2018 as DREMLP recorded no capital gains in 2019.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments
438.5
358.2
Other Assets
0.1
1.8
Total Assets
$
25.6
$
51.5
$
464.2
$
411.5
$
16.5
$
16.8
Liabilities & Capital Accounts
Payables and Other Liabilities
Total Liabilities Capital Accounts Total Liabilities & Capital Accounts
STATEMENT OF OPERATIONS
$
16.8
447.7
394.7
464.2
$
411.5
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
16.5
2019 $
2018 49.5
$
50.8
Expenses
56.6
56.8
(7.1
(6.0
-
43.3
Operating Loss
Capital Gain on Sale of Property
Net Income (Loss)
$
(7.1
$
37.3
DIRECTORS INVESTMENT GROUP, INC.
22
DIRECTORS AGENCY, LP DALP is a Delaware limited partnership formed February 1, 2002, and owned 1% by DCVI and 99% by DHC, both wholly owned subsidiaries of DIG. DALP provides strategic sales and marketing support for the sale of FDLIC’s insurance products. At year-end 2019, DALP employed 57 sales professionals across the United States to support FDLIC’s active sales program. For 2019, total assets were $622.4 thousand compared to $758.9 thousand at year-end 2018. The net year-over-year decrease of $136.5 thousand was due largely to an increase in EDP equipment, offset by a decrease in cash. Liabilities consisted largely of amounts due to affiliates as well as other general and payroll-related payables. Capital accounts ended the year at $496.2 thousand after partner distributions of $1.4 million.
23
DIRECTORS INVESTMENT GROUP, INC.
Revenues consisted of commissions earned from FDLIC and FAI and were $5.5 million compared to $4.5 million in 2018. The year-over-year increase is related to increased overrides from FDLIC and the expansion of the Select Producer program. Overrides from FDLIC increased by $256.1 thousand, and commission income from the active sales program was $4.3 million compared to $3.6 million in 2018. Expenses in 2019 consisted primarily of salaries and benefits for insurance agents hired to actively sell preneed. Employment-related expenses totaled $3.5 million. The remaining expenses were mainly related to training, recruiting, and lead generation. Net income for 2019 was $1.3 million compared to $1.1 million in 2018 due entirely to additional commission overrides from FDLIC.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments
62.8
21.2
Other Assets
76.4
63.6
Total Assets
$
483.2
$
674.1
$
622.4
$
758.9
$
126.2
$
234.0
Liabilities & Capital Accounts
Payables and Other Liabilities
Total Liabilities
126.2
234.0
Capital Accounts
496.2
524.9
Total Liabilities & Capital Accounts
STATEMENT OF OPERATIONS
$
2019 $
Expenses
Net Income
$
758.9
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
622.4
5,482.4
2018 $
4,143.8 $
1,338.6
4,468.4 3,416.1
$
1,052.3
DIRECTORS INVESTMENT GROUP, INC.
24
D I R E C T O R S C A P I TA L V E N T U R E S , I N C . DCVI is the general partner for the limited partnership investments in DREMLP and DALP and is the operating entity for the DIG Wellness Center - a company-provided health and wellness facility for employees of DIG affiliates that opened in February of 2013. DCVI owns a one-percent interest in the limited partnerships that represents $27.3 thousand of its assets. Other assets include cash and prepaid expenses. DCVI ended the year with assets of $33.5 thousand – consistent with 2018. Equity ended the year at $25.80 thousand. During 2019, DCVI declared and paid dividends to DIG in the amount of $13.6 thousand and received contributions of $78.6 thousand. The contributions from DIG provided operating cash flow for the wellness facility. Revenues consist of reimbursements from Blue Cross Blue Shield (BCBS) for services provided to DIG’s employees as well as monthly service fees from FDLIC. In June of 2014, DCVI entered into a service agreement with FDLIC to oversee the Company’s
25
DIRECTORS INVESTMENT GROUP, INC.
wellness program and to maintain the fitness and locker room facilities owned by FDLIC. During the year, DCVI received $96.0 thousand in service fees from FDLIC and $52.8 thousand in reimbursements from BCBS and employees. DCVI had $228.3 thousand in expenses for operating the DIG Wellness Clinic as well as corporate existence expenses, such as registration fees and corporate residency expense. The DIG Wellness Center employs a nurse practitioner and a fitness director. DCVI’s equity in earnings was derived from its one-percent ownership of the limited partnership investments. Partnership income in the amount of $13.3 thousand was reported for 2019 versus $10.9 thousand reported in 2018. DCVI reported a net loss of $66.2 thousand compared to a loss of $59.2 thousand in 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments in Partnerships
Other Assets
Total Assets
$
3.9
$
3.4
27.3
27.0
2.3
4.3
$
33.5
$
34.7
$
7.7
$
7.7
Liabilities
Other Payables
Total Liabilities Equity Total Liabilities & Equity
STATEMENT OF OPERATIONS
$
7.7
25.8
27.0
33.5
$
34.7
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
7.7
2019 $
2018 148.8
$
153.7
Expenses
228.3
223.8
Operating Loss
(79.5
(70.1
Equity in Earnings of Partnerships
13.3
10.9
Net Loss
$
(66.2
$
(59.2
DIRECTORS INVESTMENT GROUP, INC.
26
DIRECTORS HOLDING CORPORATION DHC ended 2019 with assets of $144.3 million compared to 2018 assets of $132.0 million, a 9.38% increase. The primary increase in DHC’s assets was in its investments. DHC’s Investment in Subsidiary - FDLIC increased $12.4 million to $142.3 million. DHC’s investment in DAC increased $55.8 thousand. As of December 31, 2019, DHC owned a 99% limited partner’s interest in both DREMLP and DALP. DHC’s investment in DREMLP increased by $52.4 thousand, and after contributions of $45.5 thousand were paid, and investment in DALP decreased $28.3 thousand after distributions from DALP of $1.35 million. Total investments in subsidiaries and partnerships for DHC increased $12.4 million due entirely to the increase in FDLIC. DHC’s equity increased 9.38% to $144.3 million. During 2019, DHC declared and paid dividends to DIG in the amount of $1.35 million.
27
DIRECTORS INVESTMENT GROUP, INC.
DHC’s operating expenses consisted primarily of corporate residency costs. DHC derived its earnings from equity increases in its subsidiary investments and partnership interest increases in its partnership investments. DHC’s earnings from its investments were $13.66 million in 2019 as compared to $14.57 million in 2018 due to decreased earnings from FDLIC. Net income for DHC was $13.66 million for 2019.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments in Subsidiaries & Partnerships
$
5.0
$
144,259.3
0.7 131,896.5
Total Assets
$
144,264.3
$
131,897.2
Total Equity
$
144,264.3
$
131,897.2
STATEMENT OF OPERATIONS
Twelve Months Ended December 31,
(Dollars in thousands) Operating Expenses
2019 $
Operating Loss
Equity in Earnings of Subsidiaries & Partnerships
Net Income
$
2018 0.7
$
1.5
(0.7
(1.5
13,657.1
14,568.9
13,656.4
$
14,567.4
DIRECTORS INVESTMENT GROUP, INC.
28
DIRECTORS AIR CORPORATION DAC is a wholly owned subsidiary of DHC. It began operations January 1, 1996, providing DIG and its subsidiaries with a standby corporate aircraft for use in marketing and corporate air travel. DAC ended 2019 with total assets of $1.05 million, consistent with 2018. Investment in aircraft was $933.0 thousand and represented the net undepreciated value of the 2001 Cessna Citation Bravo (Bravo). Other assets consisted of cash and prepaid expenses. DAC’s liabilities consisted of general payables in the amount of $4.2 thousand. DAC ended the year with equity of $1.05 million. Revenues for DAC were comprised of retainer fees paid by FDLIC. Revenues were $900.0 thousand for 2019 vs. $650.0 thousand for 2018. The retainer fee charged was primarily an expense cost recovery rate based on estimated hourly usage and the related operating costs of the aircraft. The $150.0
29
DIRECTORS INVESTMENT GROUP, INC.
thousand increase in retainer fees was due to the increased cost of maintaining an eighteen-year-old aircraft. In November of 2019, FDLIC directly purchased a newer aircraft and the Bravo was hangered for the remainder of the year. DAC intends to pursue the sale of the Bravo in early 2020. Expenses were $846.0 thousand, consisting of salaries and benefits and airplane operating costs. Net income for 2019 was $55.8 thousand compared to a net loss of $201.0 thousand for 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments
933.0
944.4
Other Assets
28.2
27.7
Total Assets
$
94.4
$
81.4
$
1,055.6
$
1,053.5
$
4.2
$
57.9
Liabilities & Equity
Payables and Other Liabilities
Total Liabilities Equity Total Liabilities & Equity
STATEMENT OF OPERATIONS
$
$
Net Income (Loss)
1,051.4
995.6
1,055.6
$
2019
1,053.5
2018 901.8
$
846.0
Expenses
57.9
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
4.2
$
55.8
650.0 851.0
$
(201.0
DIRECTORS INVESTMENT GROUP, INC.
30
FUNERAL AGENCY, INC. FAI is a marketer and seller of prepaid funerals and various insurance products on behalf of FDLIC in the states of Texas and Colorado. FAI is a licensed insurance agency and holds a prepaid funeral permit issued by the Texas Department of Banking and the Colorado Department of Insurance. A Texas corporation organized on June 18, 1982, FAI was acquired by DIG on January 1, 2006. FAI ended the year with assets of $1.196 million, consisting mostly of cash, claims receivable from FDLIC, and goodwill. Liabilities of $2.194 million consisted largely of agent credit balances and suspense items. Equity ended the year at negative $997.8 thousand.
31
DIRECTORS INVESTMENT GROUP, INC.
Through an agency agreement with FDLIC, FAI received commission income on premiums collected by FDLIC on preneed funeral business written in Texas. Revenues for 2019 were $2.1 million – consistent with 2018. FAI contributed approximately 29% of FDLIC’s preneed sales volume during 2019. Expenses consisted mostly of salaries and benefits of sales managers employed by the Company and sales-related incentive programs. Net income for 2019 was $17.4 thousand compared to a net income of $31.6 thousand in 2018.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Receivables and Prepaids
129.2
297.6
Other Assets
503.0
516.2
Total Assets
$
563.7
$
524.4
$
1,195.9
$
1,338.2
$
2,193.7
$
2,353.5
Liabilities & Equity
Payables and Other Liabilities
Total Liabilities
2,193.7
2,353.5
(997.8
(1,015.3
Equity Total Liabilities & Equity
STATEMENT OF OPERATIONS
$
2019 $
Operating Expenses
Operating Loss
Other Income
Net Income
$
1,338.2
Twelve Months Ended December 31,
(Dollars in thousands) Revenue
1,195.9
$
2018
2,106.4
$
2,087.5
2,129.8
2,094.1
(23.4
(6.6
40.8 . 17.4
38.2 $
31.6
DIRECTORS INVESTMENT GROUP, INC.
32
PA S S A R E , I N C . A Delaware corporation created November 26, 2012, Passare, Inc. is a software as a service company providing an online administrative platform specifically designed for funeral homes. DIG initially invested in Passare in 2013 and also provided an operating line of credit to sustain Passare’s operations. In April of 2015, DIG negotiated an exchange of all outstanding debt with Passare in return for additional shares of stock, resulting in majority ownership. During the last half of 2019, DIG transferred cash or stock in exchange for all but 2% of the minority interests of Passare. In order to obtain 100% ownership, effective December 31, 2019, Passare was merged into DIG and as a legal entity ceased to exist. Gaining 100% control of Passare paved the way to substantial expense reduction and sharing of resources between Passare and other DIG affiliates in the future. Passare ended 2018 with $106.7 thousand in assets, consisting largely of cash and accounts receivable. Liabilities were $19.6 million, consisting largely of an operating line of credit payable to DIG in the amount of $14.125 million and related interest payable of $4.825 million. Other liabilities included accounts payable of $136.7 thousand and deferred revenue of $526.7 thousand.
33
DIRECTORS INVESTMENT GROUP, INC.
During 2019, Passare increased revenues by 21.05%, ending the year with approximately 550 customers, representing a year-end base of 127,000 subscription calls. Passare continued to improve features to the software in line with the Company’s vision to “make Passare the system through which a funeral home can run its entire business.” Revenues were $1.6 million compared to $1.3 million in 2018. Total expenses in 2019 were $4.6 million compared to $3.9 million in 2018. The increase in expenses was due entirely to the increase in contract labor expenses. Labor-related expenses account for approximately 90% of total operating expenses with the majority of those expenses dedicated to further development of the software. Operating losses increased by $397.0 thousand from 2018 due entirely to the increase in the cost of contracted software developers as the Company focused on identifying and resolving gaps in the product. Net losses were $5.0 million compared to net losses of $4.1 million for 2018 and included $1.9 million of interest expense to DIG. For 2019, taxable losses at Passare eliminated all taxable gains from DIG and the other noninsurance subsidiaries. The resulting absence of federal income tax liabilities provided the cash flow needed to fund Passare’s operating expenses for the year.
BALANCE SHEET
December 31,
(Dollars in thousands)
2019
2018
Assets
Cash
Investments
16.3
20.9
Other Assets
48.0
68.2
Total Assets
$
42.4
$
98.6
$
106.7
$
187.7
$
663.4
$
682.8
Liabilities & Capital Accounts
Payables and Other Liabilities
Notes and Interest Payable
Total Liabilities Equity Total Liabilities & Capital Accounts
STATEMENT OF OPERATIONS
$
Operating Loss
Net Loss
14,726.4
(19,507.2
(14,538.7
106.7
$
2019
Miscellaneous Income Interest Expense
19,613.9
187.7
Twelve Months Ended December 31,
Expenses
14,043.6
$
(Dollars in thousands) Revenue
18,950.5
$
1,571.3
2018 $
1,298.1
4,609.9
3,939.7
(3,038.6
(2,641.6
2.1 (1,931.9
0.8 (1,431.7
(4,968.4
$
(4,072.5
DIRECTORS INVESTMENT GROUP, INC.
34
BALANCE SHEET
Year Ended 2019
Year Ended 2018
ASSETS CASH TRADE RECEIVABLES INVESTMENTS - Short Term INVESTMENTS - Long Term Investment in Community Bank of Snyder Investment in Passare, Inc. Investment in Subsidiary - FDLIC Investment in Land Investment in Furn. & Fixt. - NET Investment in Airplane - NET Investment in Autos - NET Investment in Other Notes Receivable OTHER ASSETS - Net
$
TOTAL ASSETS
$
160,516,437
$
151,543,567
$
325,643 176,405 427,887 1,916,981 4,438,041 7,284,957
$
594,889 137,642 630,191 2,005,996 4,842,682 8,211,400
2,229,323 164,386 1,531,009
$
688,278 (14,028,181 142,291,224 330,302 20,744 931,751 108,240 64,414 25,065,921 1,119,026
2,827,313 105,848 3,071,146 688,278 (9,324,213 130,008,197 330,302 31,463 942,589 27,903 24,248 21,602,472 1,208,021
LIABILITIES AND STOCKHOLDERS’ EQUITY LIABILITIES Intercompany Payables General Expense Payable Dividends Payable Miscellaneous Liabilities Notes Payable TOTAL LIABILITIES STOCKHOLDERS’ EQUITY Common Stock (2,837,769 and 2,820,987 shares, Additional Paid-In Capital Treasury Stock (313,649 and 298,198 shares respectively) Retained Earnings TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
35
DIRECTORS INVESTMENT GROUP, INC.
28,210 17,805,402 (4,892,821 130,391,376 143,332,167
28,378 18,678,775 (5,820,128 140,344,455 153,231,480
respectively @ $.01 Par)
$
160,516,437
$
151,543,567
STATEMENT OF OPERATIONS
Year Ended 2019 NET INCOME OF SUBSIDIARIES AND PARTNERSHIPS Net Income - Parkway Advisors, LP Net Loss - Parkway Advisors Group, Inc. Net Loss - Parkway Advisors Holdings, Inc. Net Income - Directors Agency, LP Net Income (Loss) - Directors Real Estate Management, LP Net Loss - Directors Capital Ventures, Inc. Net Loss - Directors Holding Corporation Net Income (Loss) - Directors Air Corporation Net Income - Funeral Agency, Inc. Total Net Income of Subsidiaries and Partnerships OPERATING EXPENSES- Directors Investment Group, Inc. Legal and Accounting Fees Travel, Meals and Entertainment Directors Fees Insurance Expense Other Operating Expenses Total Operating Expenses - Directors Investment Group, Inc. COMBINED INCOME BEFORE OTHER INCOME/EXPENSE OTHER INCOME Equity in Earnings of Funeral Directors Life Insurance Company GAAP Adjustment for Statutory Accounting Equity in Earnings of Passare, Inc. Interest Income - Business Loans Interest Income - Investments OTHER EXPENSE Interest Expense to FDLIC Capital Loss on Disposal of Assets INCOME BEFORE INCOME TAXES FEDERAL INCOME TAX EXPENSE (CREDIT) NET INCOME
Year Ended 2018
$ 1,874,564 (2,756 (2,436 1,338,570 (7,011 (79,461 (700 55,804 17,410 3,193,984
58.69% -0.09% -0.08% 41.91% -0.22% -2.49% -0.02% 1.75% 0.55% 100.00%
$ 1,447,839 (2,795 (2,426 1,052,323 37,330 (70,125 (1,450 (200,960 31,598 2,291,334
63.19% -0.12% -0.11% 45.93% 1.63% -3.06% -0.06% -8.77% 1.38% 100.00%
31,324 80,735 246,200 28,900 71,531 458,690
0.98% 2.53% 7.71% 0.90% 2.24% 14.36%
21,582 104,040 230,700 28,894 19,816 405,032
0.94% 4.54% 10.07% 1.26% 0.86% 17.68%
2,735,294
85.64%
1,886,302
82.32%
4,211,040 8,071,987 (4,968,489 2,384,097 44,089
131.84% 252.72% -155.56% 74.64% 1.38%
13,691,144 (4,072,532 1,999,171 47,511
597.52% 0.00% -177.74% 87.25% 2.07%
427,959 396,364
13.40% 12.41%
463,146 -
20.21% 0.00%
11,653,695
364.86%
13,088,450
571.22%
(8,142
-0.25%
17,127
0.75%
$ 11,661,837
365.12%
$13,071,323
570.47%
DIRECTORS INVESTMENT GROUP, INC.
36
SHAREHOLDERS’ EQUITY
COMMON STOCK
Ending Balance, December 31, 2018 Common Stock Issued Through Exercise of Stock Options
Number of Shares
Amount
Number of Shares
2,820,987
$28,210
298,198
16,782
168
Amount
$(4,892,821
Additional Paid-in Capital
$17,805,402
Retained Earnings
Total
$130,391,376
$143,332,167
873,373
873,541
Common Stock Purchased by the Company
33,096
(2,087,255
(2,087,255
Treasury Stock Sold by the Company
(17,645
1,159,949
1,159,949
Dividends on Common Stock, $.68 per share
(1,708,758
(1,708,758
Net Income
11,661,837
11,661,837
$140,344,455
$153,231,480
Ending Balance, December 31, 2019
37
TREASURY STOCK
2,837,769
DIRECTORS INVESTMENT GROUP, INC.
$28,378
313,649
$(5,820,127
$18,678,775
CASH FLOWS
Year Ended 2019 Cash flows from operating activities: Net income
$
Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization Change in current assets and liabilities: Decrease in receivables and other assets Increase (decrease) in payables Net cash provided by operating activities
11,661,837)
Year Ended 2018
$
13,071,323
215,669)
148,470
30,456) (521,802) 11,386,160)
1,930,851 561,193 15,711,837
1,540,137) (12,283,026) 4,703,968) (3,463,449) (112,620) (201,996) (9,816,986)
(609,105) (13,691,144) 4,072,531) (2,787,063) -) (119,992) (13,134,773)
Cash flows from financing activities: Payments of long-term debt Proceeds from issuance of common stock Proceeds from sale of treasury stock Repurchases of common stock Common stock dividends Net cash used in financing activity
(404,641) 873,541) 1,159,949) (2,087,256) (1,708,757) (2,167,164)
(369,238) 495,917) 818,904) (1,198,466) (1,916,126) (2,169,009)
Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period
$
(597,990) 2,827,313) 2,229,323)
$
505,134) 2,322,179) 2,827,313)
Supplemental disclosure of cash flow information: Cash paid during the period for: Interest Taxes
$ $
431,078) (8,142)
$ $
466,481) 17,127)
Cash flows from investing activities: (Increase) decrease in short-term investments Increase in investment in affiliate - FDLIC Decrease in investment in investments - Passare, Inc. Increase in notes receivable Net decrease in investment in airplane Net increase in furniture & fixtures, autos and equipment Net cash used in investing activity
DIRECTORS INVESTMENT GROUP, INC.
38
SHAREHOLDERS
SHAREHOLDERS OF RECORD AS OF MARCH 1, 2020 The Seale Family L. P., Kris Seale General Ptr Jeff Harper Elizabeth Gay Schulze B. Kris Seale B. Kris Seale as Trustee for the Dylan Moore Trust Amy Paquette Robert Elliott Hamil Trust Angela Jo Hamil Willis Trust TT Welch Investments, LLC Phillip Welch Mike Lemons Pam Welch Ray Harper Rudy Jack Cypert Robert E. Hamil Amy Paquette as Trustee for the Paquette Children’s Trust William L. McReavy The Allan and Gail Adams Revocable Trust Bob and Carolynn White Forward Investment LTD, Forward Mgt. Inc. General Ptr Lois Dodds Mark S. France Leslie Branon Montz Darrell W. Rains Thomas W. Branon Pat Baxter Bobby B Connell T Duane Connell Melvin R. Storm Family Partners, L.P., Mary Lou Storm General Ptr Teresa Carol Davis Branon Patricia Angeley Jay J. Kelly W. Brown Claybar Self-Directed IRA Susan P Branon Washburn McReavy Funeral Chapels, Inc Stuart Ford Legacy Funeral Holdings, LLC Michael L. Soper Angela Hamil-Willis Mark Cypert 401k FBO Sam J Chase
39
DIRECTORS INVESTMENT GROUP, INC.
Director/Officer DO D DO
D
D D
D D D D D
Total Common 375,457 215,913 160,794 157,461 136,665 127,479 115,826 115,825 84,987 75,035 64,688 61,221 61,136 61,092 51,505 51,273 46,884 42,227 39,200 30,816 30,165 23,000 22,073 19,902 18,995 18,000 16,690 16,690 16,469 15,640 15,623 13,895 10,625 10,600 9,383 9,365 8,749 8,675 8,427 7,563 6,027
Common % 14.908% 8.573% 6.385% 6.252% 5.427% 5.062% 4.599% 4.599% 3.375% 2.979% 2.569% 2.431% 2.428% 2.426% 2.045% 2.036% 1.862% 1.677% 1.557% 1.224% 1.198% 0.913% 0.876% 0.790% 0.754% 0.715% 0.663% 0.663% 0.654% 0.621% 0.620% 0.552% 0.422% 0.421% 0.373% 0.372% 0.347% 0.344% 0.335% 0.300% 0.239%
SHAREHOLDERS OF RECORD AS OF MARCH 1, 2020
Director/Officer
Robby & Deana Morris Betty S. Alvey Judy K. Storm Bowers Sidney C Grant, Self Directed IRA Sid Grant Patrick C Patton Thomas M. Vertin Jerry Willingham Terry Groban Kasi Welch Baker E. Ray Templeton Ann M. Swanson Taylor Greene Reagan Ramsower Cliff Pollack Mark Owen John W. & Grace Eirkson W.B Claybar B. Kris Seale Childrens’ Trust Drew Seale 401k FBO Linda Chase Gerald D. Runnels Royce Rampy Roy Carroway, Jr. Amanda Farrow Zachary O. Schulze Ray Thompson Tim Hoff Jenifer Hoff John Harrington Gloria Skinner Mark Willingham First Financial Trust & Asset Management Co.,N.A. FBO Jeannette Waddell McQueen Terri Bannister First Financial Trust & Asset Management Co.,N.A. FBO David Lee McQueen Elizabeth Harper Schulze Edwards Gregg A Havlak Nadene Smith Victor E Schulze Addison Templeton Stephen R. Storm Pat Zalusky Jeff W. Stewart Mark Childs Paul Lovelace Warren Family Trust - Larry Warren Lori Owen Shaun Gaffney Foresight Family Funeral Homes, LLC Leon Stone Charles M Walls
D
O D
O
O
O O
Total Common 6,000 5,775 5,506 5,095 5,000 5,000 5,000 4,809 4,000 4,000 3,500 3,320 3,000 3,000 2,850 2,800 2,300 2,290 2,152 2,151 2,100 2,000 1,850 1,787 1,625 1,610 1,566 1,500 1,500 1,467 1,430 1,405 1,310 1,300 1,274 1,220 1,200 1,161 1,130 1,100 1,000 1,000 1,000 950 907 900 900 825 767 700 700
Common % 0.238% 0.229% 0.219% 0.202% 0.199% 0.199% 0.199% 0.191% 0.159% 0.159% 0.139% 0.132% 0.119% 0.119% 0.113% 0.111% 0.091% 0.091% 0.085% 0.085% 0.083% 0.079% 0.073% 0.071% 0.065% 0.064% 0.062% 0.060% 0.060% 0.058% 0.057% 0.056% 0.052% 0.052% 0.051% 0.048% 0.048% 0.046% 0.045% 0.044% 0.040% 0.040% 0.040% 0.038% 0.036% 0.036% 0.036% 0.033% 0.030% 0.028% 0.028%
DIRECTORS INVESTMENT GROUP, INC.
40
SHAREHOLDERS OF RECORD AS OF MARCH 1, 2020 Sam Chase Gary Boulicault Harry C. Drew Sonia DeLeon Amy Biggs Jeffery Stewart (DSD) Larry Anderson Theodore Beck Theron Holladay Kevin Gaffney Angie Dobbs Frank Downing Alvino Sanchez Pamela Ulery Angela Holmes Stephen Etter Bassett Brian K Nichols Craig Loper Steven Dantzler Lisa Davidson Rex Miley Annette Parmelly Suzanne E Patton Kyle Swearingen White Dove Holdings Business Trust David McQueen Sarah Jane Branon Yancey D J Jons Paul Stone Steven Moore Ester Johnson Rodolfo D. Robles, Jr Charles Eric Espinosa Joe Ramos William P. Wimberly Krause Investments, LLC Dawson Rodriguez Proko-Wall and Associates, LLC Albert Jonas Mike Frock Vanessa Callari Zach Sims Frank and Amy Downing Gibraltar Remembrance Services Gloria & Jim Skinner Melanie Carr Patricia J. Wallwork Spring Grove Cemetery and Arboretum GCT, LLC Heather Guitar Chad Hoes
41
DIRECTORS INVESTMENT GROUP, INC.
Director/Officer
O
Total Common 681 600 600 560 550 505 500 500 500 458 450 450 435 430 422 400 400 311 310 300 300 300 300 275 250 217 200 200 200 200 200 200 200 200 200 179 160 157 156 150 150 150 150 149 140 125 125 119 119 117 100
Common % 0.027% 0.024% 0.024% 0.022% 0.022% 0.020% 0.020% 0.020% 0.020% 0.018% 0.018% 0.018% 0.017% 0.017% 0.017% 0.016% 0.016% 0.012% 0.012% 0.012% 0.012% 0.012% 0.012% 0.011% 0.010% 0.009% 0.008% 0.008% 0.008% 0.008% 0.008% 0.008% 0.008% 0.008% 0.008% 0.007% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.006% 0.005% 0.005% 0.005% 0.005% 0.005% 0.004%
SHAREHOLDERS OF RECORD AS OF MARCH 1, 2020
Director/Officer
Kylee Stockard Susan Condry Vicki Dickson Mary Beth Hensley Matthew Waldrip Kelsey Swearingen Marcus Wilson Thomas & Maria Hartsfield Stephen Patrick McKee and Denise McKee Trustees of the McKee Revocable Trust Eric M and Nancy N Siegel Trust under agreement dated February 12, 2019 William T. & Diana R. Turner Trust Jill Lopez William F Krause III Donald F. Swan Mandi Faulks Judy Webb Brennan Arthur Lantzy Kylie Eileen Lantzy Westin Reid Lantzy Lei Ann Lantzy Jayce Parker Lantzy Cooper James Lantzy Delia Villanueva Schoedinger Funeral and Cremation Service Tammy Dermody Kevin M Bean Jay Thomas Iris Williams Deanna Reyes Paul Dercks Kim Halfmann Scott Schaake J. Mark Busch James H. Busch Karen Toms Nelida Clark Doug Diener Alec Hartman Jessica Ahrens Ben Ciani Nicholas Tunheim Denise Chabarria Kelly Johnson Susie Daniel David S. J. Anderson John G. Fidel Charles W. Hammond Steve & Michele Ferree James A. Clair Barry L. Noffze Charles E Young
Total Common 100 100 100 100 100 100 100 100 97 93 93 90 89 83 80 80 80 80 80 80 80 80 76 74 74 74 73 70 70 62 60 60 59 59 57 50 50 50 50 50 50 50 50 49 46 46 46 46 46 46 46
Common % 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.004% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.003% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002% 0.002%
DIRECTORS INVESTMENT GROUP, INC.
42
SHAREHOLDERS OF RECORD AS OF MARCH 1, 2020
Director/Officer
Sunwest Trust, as custodian for Mark Gonzales IRA Daniel R Neal Jessica Minor Melissa Magers Sherri Miller National Advisers Trust FBO Steve P. McKee Simple IRA Acct. #11440002274 Shawna Thomas Jama Lea Wiggins Dawn Garrett Koetta Carrell Kathy Byram Tina Steele Clint Eastman Judy Farmer Julie Hofmann Stacy M Foley Bonafair Capital Partners, LLC Todd Carlson Kyle Timmermann Jeremy Miles Greg Neeley Zack Shahan Laurie Burton Jane Howell Jason Gazaille LeAndra Pruett Rex Johnson Alyssa Alvarez McKee Wallwork + Company, LLC Kim Kent Anissa Minatra Chris Baber Deonna Walker Jessie Martin Joyce Kiser Christy Bechtel Darrell Richardson Jamin Phillips Teresa Mansker Allison Condry Jennifer Richardson Diana Elizondo Carlos Pena Jennifer Flores Grand Total Issued and Outstanding Treasury Stock Held By Company Grand Total Issued and Outstanding and in Treasury All Directors (D) and Officers (O) as a Group
43
DIRECTORS INVESTMENT GROUP, INC.
O
Total Common
46 46 40 40 38 37 35 30 30 30 30 30 30 30 30 30 27 25 25 24 20 20 20 20 20 20 16 15 11 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 2,518,411 319,608 2,838,019 1,241,875 Seale Family Harper Family Hamil Family Other shareholders
Common % 0.002% 0.002% 0.002% 0.002% 0.002% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.001% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 88.738% 11.262% 100.000% 43.759% 33.921% 17.543% 11.578% 36.958%
ORGANIZATIONAL STRUCTURE
DIRECTORS INVESTMENT GROUP, INC.
44
BOARD OF DIRECTORS
ALLAN ADAMS Denton
LESLIE BRANON MONTZ
JACK CYPERT
JERRY EDWARDS
MARK FRANCE
Snyder
Palo Pinto
Austin
Brownwood
45
ROBERT HAMIL
JEFF HARPER
MIKE LEMONS
PAT PATTON
DARRELL RAINS
Abilene
San Angelo
Austin
Sauk Centre, MN
Austin
KRIS SEALE
KASI WELCH BAKER
JAY KELLY
TOMMY WELCH
BOB WHITE
Abilene
Midland
Emeritus Director Odessa
Emeritus Director Big Spring
Emeritus Director Weatherford
DIRECTORS INVESTMENT GROUP, INC.
CORPORATE OFFICERS
KRIS SEALE
TERRI BANNISTER
TODD CARLSON
President & Chief Executive Officer, Chairman of the Board
Executive Vice President & Chief Learning Officer
Executive Vice President & Chief Sales Officer
TERRY GROBAN
PAUL LOVELACE
DWAYNE MCGRAW
Executive Vice President & Chief Financial Officer
Executive Vice President & Chief Corporate Development Officer
Executive Vice President & Chief Actuary
DAWSON RODRIGUEZ
JEFF STEWART
ADDISON TEMPLETON
Executive Vice President & Chief Information Security Officer
Executive Vice President & Chief Marketing Officer
Executive Vice President & Chief Operations Officer DIRECTORS INVESTMENT GROUP, INC.
46
our
visionaries Ernest Welch, Jr..............................................................1925 - 2016 Mike Branon......................................................................1953 - 2015 Billy Ray Harper.............................................................1931 - 2013 Avery Connell..................................................................1922 - 2008 Bill Seale...............................................................................1927 - 2005 Benjamin Burton......................................................... 1930 - 2004 Melvin Storm...................................................................1921 - 2004 Wendell Dodds............................................................... 1938 - 2000 John Hamil..........................................................................1935 - 1998 Haynie Sides....................................................................... 1917 - 1998 Tom Branon........................................................................1929 - 1988
47
DIRECTORS INVESTMENT GROUP, INC.
DIRECTORS INVESTMENT GROUP, INC. 4600 KIETZKE LN. | SUITE N254 RENO, NV 89502 PHONE | 775-329-3311 FAX | 866-848-2498