SNFC - Security National Financial Corporation

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Shareholders

My Fellow Shareholders:

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George Quist

Founder
Chief Executive Officer
Chairman of the Board

I am pleased to report to you on the affairs of the Company for the year ended December 31, 2008 and invite you to attend the annual stockholders meeting to be held on July 10, 2009 in Salt Lake City, Utah.

In many respects, 2008 continued the significant financial market turmoil that began in 2007. It is probably fair to say that during 2008 the turmoil spread from the subprime mortgage markets, where it had its origins, to the broader markets. In our fixed income investment portfolios we recognized more than $2.3 million in losses from names such as Ford, General Motors, and Lehman Brothers. We wrote off or reserved almost $13,300,000 for our mortgage operations. The good news is that our company performed at a level sufficient to recognize those fixed income and mortgage related losses and still remain profitable. Overall our earnings before taxes decreased 77% to $731,000, but, significantly, we still had earnings.

There were several trends that continued in 2008 that significantly impacted our businesses. Interest rates, for one, continued their downward pressure. While this trend in general benefits our mortgage segment, it reduces investment income, thereby harming our life segment. We continue to see higher than expected credit related losses across our business lines. Monitoring and improving the credit quality of both our originated loans and our investment portfolios remains a primary concern. On a positive note regarding our mortgage business, while foreclosures have increased, once we are able to obtain possession of the subject property we are able to rent it at rates that allow profitable operations. By contrast, when a fixed income security defaults, our recovery is usually very limited.

Despite the turmoil, 2008 marked a year of significant positive accomplishment for our company. Our asset base grew nearly 6% to $442 million; total revenue increased 5% to $220 million; in December, we accomplished the purchase of a new life insurance company, Southern Security Life Insurance Company of Louisville, Mississippi. We continued significant cost reduction efforts company-wide and believe we will accomplish nearly $2,000,000 in annualized cost savings through the first half of 2009. This is on top of the significant cost savings and efficiency measures implemented in our mortgage segment in 2007 and 2008. We believe these cost measures will pay significant dividends in the future.

Thank you for your confidence in our Company. While we continue in our efforts to both grow and increase profitability, our primary objective is to improve profitability.

Annual Reports