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Mix it up — providing a unique set of businesses, structure

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Most people love the convenience of one-stop shopping. But Security National Financial Corp. has taken that concept to an unexpected conclusion.

The Salt Lake-based company will sell you life insurance to put your mind at ease about the future, and it offers mortgage products so you can have a nice house to live in now.

That's probably not unusual. You would expect a company to spread its risk by diversifying the financial services it offers.

But you might not expect the company that will sell you peace of mind and a mortgage to also be concerned about your final resting place.

In the early 1970s, company founder and current chairman and chief executive George R. Quist made a short-term loan of $180,000 to the owner of Memorial Estates mortuary.

Quist didn't know anything about the mortuary business — selling life insurance was his forte — but the mortuary owner didn't have anywhere else to turn and needed the money to pay his taxes.

Then the unexpected happened. The mortuary owner suffered an aneurysm and was debilitated. Without him, Memorial Estates was in trouble.

Quist didn't want to foreclose on the company, so he made an offer to buy it.

"Our intent then was to sell it," Quist said.

But plans soon changed.

"We offered it for sale to everybody in Utah, Colorado, Wyoming," said Scott M. Quist, George's son and Security National's current president. "We got no nibbles. . . . So, we decided to keep it."

The rest is corporate history.

Security National Financial today is a publicly held corporation that is finding success through its unique mix of business segments: mortgage banking, life insurance and cemeteries and mortuaries. The company's revenue hit $116 million for the nine months ended Sept. 30, 2003, representing an 85 percent increase from the first nine months of 2002. Pre-tax earnings from operations for the 2003 nine-month period increased 181 percent when compared to 2002, to hit $9.4 million.

Not bad for a company George Quist started in 1965 in Utah as Security National Life Insurance Co. At the time, Scott Quist said, the company had $543,000 in capital, and it had to maintain $500,000 in capital and surplus to abide by state insurance regulations.

"You're competing with the world's largest financial institutions, and you have 43,000 bucks," George Quist said.

Getting started

The company needed to grow to survive, so George Quist started what has become a decades-long tradition of acquisitions, looking first to Arizona, with its lower capital limits.

But those purchases didn't just happen. To this day, the Quists said, they remain active in industry associations, so they know the people whose companies they may someday buy.

"(Mergers) have to come through a relationship best established prior to the merger," George Quist said. "That's why we've had 30-some mergers."

Those acquisitions have helped the company grow to the point that it now sells life insurance, annuity products and accident and health insurance in 35 states.

But while insurance has been the company's lifeblood, a personal experience helped George Quist see how that business and the mortuary and cemetery operations could work together.

He was in the middle of a big company sales meeting when he was called out to take a telephone call.

The doctor on the other end of the line said he had some bad news. Both of George Quist's parents had died in a car accident.

It was then that George Quist realized he had worked with families on more than 500 death claims, but he had no idea what to do.

"For the next three days, I found out what it was to arrange a funeral," he said. "After that experience, I thought there's got to be a better way."

That's when Security National developed its pre-need plans for funeral, cemetery and cremation services, hoping to help people deal with a difficult situation. The company now operates 14 mortuaries in Utah and Arizona and six cemeteries in Utah and California.

And according to Fred Leslie, its plans work.

Leslie said a Security National employee convinced his mother and father to buy burial plots and pre-need funeral plans years before they died.

"Then when (my father) passed away . . . everything was all set out," Leslie said. "Everything was all done. All the decisions had been made."

Mortuary employees helped Leslie's family through those difficult two or three days, he said, and the result was an experience that was much less stressful than it could have been.

"The biggest thing was we thought it was so nice that (Security National) had walked my dad through and had all those decisions made beforehand," Leslie said. "That was probably the nicest thing that could have happened."

Those are the kinds of customer reactions Scott Quist loves to hear.

"We stress the good that we do when we sell (our products)," he said. "That gives you a sense of satisfaction."

Growing with people

But focusing on people is also good business, he said, as the growth of Security National's mortgage operations has shown.

Scott Quist said that, in 1993, the company was looking for a way to replace the money its life insurance business was losing due to declining interest rates.

So they hired J. Lynn Beckstead Jr., now president of Security National Mortgage Co. He bought a government surplus desk and took up offices in a hallway to start the new business, which originates and refinances mortgage loans.

As with the life insurance and mortuary businesses, the mortgage business has since taken off, now featuring 18 offices in Utah, California, Arizona, Texas, Colorado, Nevada and Florida.

Beckstead and the Quists said that growth has happened because the company opens branch offices based on people, rather than geography.

Linda Richardson, a 24-year veteran of the mortgage business, is an example of that. She had been working for a company in California that went belly-up, and she was looking for a new opportunity. That's when she and a partner heard about Security National.

"We were very leery about starting from scratch with an out-of-state company, so we made a couple trips to Salt Lake," Richardson said. "We found out (the company) also owned cemeteries. We went back home and said, 'OK, I'm not sure about this.'

"But it was such a family atmosphere, and we felt so good about the company, that we said OK. . . . We both started from scratch at our kitchen tables, then hired people and started branches five years ago. We've grown ever since then."

She said Security National gives its employees plenty of authority to run their parts of the business, but the corporate officers remain supportive.

"The feeling I could say about Security National is it is such a feeling of family, like I have never had with any other company," Richardson said. "Not only does Scott Quist know my name, but my husband's name. It makes you feel like you've found a home."

All in the family

That, too, is no surprise. Even though Security National went public in 1987, trading on Nasdaq, half of its stock remains under family control.

And other family members besides George and Scott Quist are involved in running the company. Scott's older brother Robert is the company's secretary, his younger brother Rodger is controller for the cemeteries and mortuaries, his sister Christie Overbaugh is in charge of underwriting and administration at the Orlando, Fla., office, and her son Jason Overbaugh works with construction lending.

"In a family company, you have to be careful, because . . . that 'survival of the fittest' kind of thing can be bypassed," Scott Quist said. "On the other hand, I think you find greater loyalty among your family members. So if the expectation is built with family members that they have to perform at a higher level than an outside person does, . . . it works."

That's where the public ownership comes in, he said.

"To me, it serves to keep the bad part of a family business in check, because you do have a reporting requirement, you do have outside shareholders, you do have a duty to those people to do the best job you can."

Part of that duty for Security National means continuing to grow, both by supporting existing operations and looking for more acquisitions.

In its last major deal, Security National paid about $10 million for Gulf National Life Insurance in Mississippi in January 2003. The Quist philosophy is to wait awhile after an acquisition to see if the purchased company performs, and if it does, to look for another possible purchase.

"So we're starting to nose around now for the next one," Scott Quist said.

Whether that comes this year or further in the future, he said, he expects the company to continue to enjoy the advantages it receives from its unique mix of businesses. And it will continue to be a big player in its industries while maintaining a small-company feel.

"A small company has to be a niche company," George Quist said. "We can't be all things to all people at all times. . . . You have to focus on what you do, and then do what you're focused on."

E-MAIL: gkratz@desnews.com