DIG Annual Report 2022

“Remember this: Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously. Each of you should give what you have decided in your heart to give, not reluctantly or under compulsion, for God loves a cheerful giver. And God is able to bless you abundantly, so that in all things at all times, having all that you need, you will abound in every good work.”

Fellow shareholders

KRIS SEALE President & Chief Executive Officer

Don’t you love the Apostle Paul? The guy never minces words – he gets straight to the point and speaks truth! In 2 Corinthians 9:6-8, his point is this: Put down as many seeds as you can, and it will reap what you have put into it. Paul is saying that we should throw seeds of faith wherever we are –and if we do, we will reap abundantly. Success is at hand!

Every time I read this passage from 2 Corinthians, I can’t help but think of my father. Throughout my life and until his death in 2005, my dad modeled generosity for me. When I was younger, I really didn’t understand why he was so giving. In fact,

at times, I thought he was far too generous, to the point of being careless. As I have “matured,” I have learned that it is impossible to be too generous; as the saying goes, “You can’t outgive God!” My dad understood this completely!

Here are some traits of people who have a generosity mentality. They:

• Have a positive mindset – Each day, a giver wakes up thanking God for the gifts He has given and prays for opportunities to positively impact others. Throughout their day, they are gracious, they smile, they are friendly, they have a joy about them, and they always see the glass as half full.

• Do not expect an ROI – When a giver gives, they do not expect a return on investment (ROI). They allow the Holy Spirit to guide their generosity, and they always err on the side of giving – when in doubt, they give! They

- THE APOSTLE PAUL (2 CORINTHIANS 9:6-8)

understand that harm is never done when they are generous.

• Never have a bad day – Givers consistently have the “helper’s high” – when they help others, it makes them feel energized and excited about life. One of the primary reasons they consistently give is because it helps them to feel really good. Someone once asked me, “If you give so that you feel better about yourself, isn’t that selfish?” My response was, “I wish more people in our world would be that selfish! What would our world be like?”

• Treat others with respect – Respect and honor are also something that givers freely give. The second part of Romans 13:7 says to give “respect to whom respect is owed, honor to whom honor is owed.” In fact, generous people are “thankers” – they freely tell people thank you – because they value and appreciate even the smallest things people do for them.

• Love others where they are – A person’s position does not matter to givers. They simply want to help. They are defined by humility, a genuine humility, not a fake humility. Givers truly care about the welfare of others, and they simply want to help anyone who crosses their path.

• Give people every opportunity to succeed –My dad would always tell me, “Son, as a leader, you need to give everyone an opportunity to succeed, and when you have given them every chance, give them one more.” For a leader, there are no truer words! Generous people have an abundance mentality – they want everyone to succeed because they know there is enough for all of us.

• Never seek recognition, not even a thank you – Generous people are interested in helping

others. They are not interested in being recognized. In fact, they shy away from any recognition. In Matthew 6:3, Jesus says, “But when you give to the needy, do not let your left hand know what your right hand is doing.” True givers take this verse seriously!

Thankfully, God has surrounded me with givers! I am blessed to work with a generous Board of Directors and management team. They give and give until they cannot give anymore. They represent all of the traits of generosity I just discussed, and I’m honored to work with them day in and day out to create the most generous and giving company I know of.

Because of their generosity, we have been blessed. We are living in the abundance that God promised to those who give generously: “And God is able to bless you abundantly, so that in all things at all times, having all that you need, you will abound in every good work.”

Let’s take a look at 2022, and allow me to show you how, through the efforts of our people and their spirit of generosity, we achieved stellar results:

DIRECTORS INVESTMENT GROUP (DIG) CULTURE

• We launched our dig.family website and portal as a means of keeping our team informed and motivated.

• We created our Corporate Culture department to better communicate our culture to new employees and to our customers.

• We introduced “DIG Day” as a way for management to show appreciation to our team members.

• DIG was recognized with awards in Texas and nationally for our workplace culture; additionally, we received the inaugural Big

Country Best Workplace award from the Abilene Chamber of Commerce.

PERFORMANCE

• DIG paid a record $2.15 million in dividends to shareholders compared to $2.12 million in 2021.

• Our Modified Book Value increased from $80.36 to $86.94 or 8.19%!

• For 2022, net income was $12.56 million!

DIRECTORS FOUNDATION (DIG'S NON-PROFIT AFFILIATE)

• Directors Foundation coordinated the building of 4 homes for needy families: 2 in Costa Rica and 2 in Cabo, Mexico.

• We raised $8,981 through the “Giving Tree” campaign over the Christmas holiday, a new record for this project.

• We continued to be the lead catalyst for the Abilene Youth Sports Authority, by making the first major gift for Phase 2 of the youth sports complex project. This project consists of 10 soccer/football fields along with a 2-story “clubhouse” building to support these outdoor sports.

FUNERAL DIRECTORS LIFE (FDL) SALES

• Sales grew more than $77 million in 2022 over 2021, a 20% increase!

• Marketing partner sales were up 64%!

• Select Producers had a record year in 2022 with $71 million sales, up 11.6% over 2021.

• FDL entered the following new markets in 2022: New Hampshire, Massachusetts, New Jersey, and Vermont, with products now filed for expansion into Virginia.

• Revenue for Social Media Management, Arrangement Guide, Circle of Friends +, Audio/ Visual Solutions, and other digital revenue grew by $1 million.

MARKETING

• The Marketing Department was successfully restructured in 2022.

• The 2022 National Funeral Directors Association (NFDA) Convention for FDL was the most successful national convention ever.

CULTURE

• FDL conducted a successful incentive trip to Los Cabos, Mexico, which included building two new homes for deserving families in the Los Cabos area.

ACCOUNTING/FINANCE/ACTUARY

• FDL acquired American Life & Annuity Company in order to establish a greater Arkansas sales presence.

• Directors Business Solutions (DBS) had record revenue and net income. Net income exceeded budget by 16% with a margin of 36%, against a budget of 35%.

LEARNING & DEVELOPMENT (L&D)

• L&D fully initiated a plan to help mortuary schools improve.

• We also enhanced and expanded the Virtual Wolfelt Experience and WeCare training.

DEVELOPMENT

• We implemented 7 new RPA (Robotic Processing Automation) processes that fully automate the setup of funeral homes/agents and cancelling contracts.

• We created the preneed version of the Passare Planning Center, getting one step closer to Common Platform!

• We launched a document scanner for DIGicon that allows funeral home clients to scan documents using the FDL mobile app to upload them.

• We fully integrated Sepio Guard travel protection into the On the Go protection plans through DIGicon.

OPERATIONS

• FDL increased the Customer Ambassador team by 4 employees, for a total of 9, in order to serve our funeral homes, sales managers, and agents at the next level.

INFORMATION SECURITY

• We improved programs around Third-Party Risk Management (TPRM), Cybersecurity Incident Response (CIRP), and Secure Development LifeCycle (SDLC).

• We instituted Multi-Factor Authentication (MFA) across all platforms, decreasing insurance premiums.

PARKWAY

• We contracted with the most new insurance clients in a single year at 12.

• We received the largest one-time payment ever for a consulting job ($300,000).

• We developed a new venture to facilitate direct mortgage loan participations for our clients.

PASSARE

• We achieved net income 8 months in a row!

• We added Premium Services revenue of $815,000 in 2022.

• We processed $40 million in credit card transactions through Passare.

• Passare customers now have the ability to use their software to convert a funded preneed funeral plan in Funeral Directors Life seamlessly to an at-need funeral contract when a death occurs.

CONCLUSION

For months after my dad’s death, I received emails, phone calls, and messages from dozens of people whom he had helped during his lifetime. They told me stories of his generosity and his kindness.

I was blown away – I had no idea that he had helped so many people! His generosity inspired me and motivated me to become more like him. I think that John Wesley said it best,

"Do all the good you can, By all the means you can, In all the ways you can, In all the places you can, At all the times you can, To all the people you can, As long as ever you can."

It's really simple. Generosity wins every time!

I must “give honor where honor is due” (Romans 13:7). Our management team is incredible! Through their dedication, their care for our people, their trust in my leadership, and frankly, their generosity, our company continues to flourish! We are blessed with strong leadership, and my heart overflows with gratitude and love for them.

We thank you, fellow shareholders, 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,

KRIS SEALE Chairman of the Board President and Chief Executive Officer

management’s discussion and analysis

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.

As of December 31, 2022, the subsidiaries of DIG include Directors Capital Ventures, Inc. (DCVI), Directors Holding Corporation (DHC), Parkway Advisors Group, Inc. (PAGI), 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 Parkway Advisors LP (PALP) and Directors Agency LP (DALP). Effective January 1, 2020, Passare, Inc. was merged into DIG and, as a legal entity, ceased to exist. Passare operations continue to be reported separately, but as a division of DIG. The insurance company subsidiaries include Funeral Directors Life Insurance Company (FDL), Kentucky Funeral Directors Life Insurance Company (KFDLIC), Funeral Directors Life of Louisiana (FDLA), and American Life and Annuity Company (ALAC). On September 15, 2022, FDL purchased 100% of FPA Inc. (FPA), an Arkansas corporation. FPA is the parent company of ALAC, a preneed life insurance company domiciled in the state of Arkansas.

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 includes discussion of our results of operations. The accounting periods for all of the entities end on December 31.

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 2022, the average number of common shares issued and outstanding, basic and diluted, was 2,557,451 and 2,786,796, respectively. For 2021, the average number of common shares issued and outstanding, basic and diluted, was 2,549,253 and 2,814,901, respectively. The exercise of 19,541 common stock options by employees and directors and the net purchase of 21,044 treasury shares by the Company are reflected in the change in average common shares outstanding.

Basic EPS was $4.91 and diluted EPS was $4.51 for 2022. For 2021, basic and diluted EPS was $6.80 and $6.27, respectively. Decreased earnings were largely responsible for the year-over-year decrease

in earnings per share. In 2021, DIG companies recorded $3.5 million in forgiveness of Paycheck Protection Program loans received in 2020.

COMPUTATION OF SHARE VALUE

DIG’s Share Value was $86.94 for 2022 and $80.36 for 2021, based on the modified bookvalue calculation. This was an 8.19% increase over 2021.

For 2022 and 2021, 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 FDL's insurance business and interest maintenance reserve (IMR). For 2022, the equity component was $187,337,230 and the value of FDL’s business and IMR was $34,941,228. Total actual shares issued and outstanding at the end of 2022 were 2,556,699. For 2021, the equity component was $177,404,169 and the value of FDL’s business and IMR was $28,171,013. Total actual shares issued and outstanding at the end of 2021 were 2,558,202.

INCOME TAXES

Directors Investment Group, Inc. and its noninsurance subsidiaries file a consolidated U.S. income tax return. All taxes are booked and paid at the DIG level. In 2021, the Company paid $778.1 thousand in federal income tax. For 2022, DIG recorded $815.5 thousand in federal income tax. Additional net operating loss carryforwards of $4.4 million can be used once Passare’s net income exceeds the operating expenses of DIG. These remaining carryforwards expire in 2034.

The insurance subsidiaries - FDL, 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.

ALAC will file a separate tax return but will be eligible for consolidation with the other insurance subsidiaries five years from date of acquisition.

DALP and FDL are also subject to filing state income tax returns for various states in which they are licensed to conduct business.

The corporate federal income tax rate for DIG and the insurance subsidiaries was 21%.

LIQUIDITY AND CASH FLOWS

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 financial resources, will adequately finance the Company’s planned 2023 cash requirements

SUMMARY OF CASH ACTIVITIES

Principal sources of cash were commissions earned at DALP and FAI, investment advisory and consulting fees earned at PALP, subscription and activations fees earned at Passare, principal and interest payments received on business loans, and proceeds for issuance of common stock options. Our primary uses of cash were for operational expenses, reduction of debt, repurchase of stock, and payment of shareholder dividends. Net increase in cash for 2022 was $1.5 million.

INVESTING ACTIVITIES

Business loans outstanding at year-end 2022 were $1.3 million compared to $2.3 million at the end of 2021. DIG received principal payments of $995.4 thousand. Remaining loans to funeral home customers earned interest at an average rate of 7.95%. No substantial new loans were extended in 2022. DIG collected interest payments of $141.5 thousand.

In 2016, DIG initiated a short-term investment strategy with Parkway Advisors as a means to earn investment income on excess cash accumulated from net operating earnings, repayment of business loans, or proceeds from the sale of treasury stock. Previously, investments were short term in nature and laddered to throw off approximately $500,000 in cash at the end of each month. In order to achieve a higher return, in mid-2021 DIG revised its investment plan to invest approximately 40% in short-laddered bonds, and the remainder was invested with a growth and income focus. Total interest collected on investments was $163.1 thousand. At year-end 2022, total invested funds were $9.4 million.

FINANCING ACTIVITIES

DIG’s debt was comprised of borrowings from FDL. These loans originated in 2007 and were used to facilitate the funding of the funeral home financing program mentioned above in investing activities. The loans pay interest at the rate of 8.75% and mature in April 2027. DIG paid FDL $546.7 thousand in principal and $289.8 thousand in interest in 2022. At year-end 2022, outstanding borrowings on the loans from FDL were $3.0 million.

During 2022, the Company offered options on 281,304 shares of common stock at a price range of $57.05 to $88.40. Options on 19,541 shares were

exercised at a price range of $57.05 to $80.36, providing $1.2 million in cash resources. 23,818 shares at a price of $57.05 were not exercised and forfeited, leaving 237,945 shares exercisable in 2023, 2024, 2025, 2026, and 2027 at a price range of $58.03 to $88.40. During the year, DIG also repurchased 42,089 shares of common stock for $3.5 million. In July 2010, the Board of Directors approved the annual sale of a limited number of treasury shares. In 2021, DIG sold 21,811 shares of treasury stock for $1.7 million, and in 2022, DIG sold 21,045 shares for $1.8 million.

The Board of Directors approved the payment of quarterly dividends averaging $0.21 per share during 2022 for a total of $2.15 million. DIG paid $2.1 million in dividends in 2021.

SHAREHOLDER LIST & BENEFICIAL OWNERSHIP

The table beginning on page 41 sets forth certain information as of March 1, 2023, 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, 2022.

FDL is the primary investment and income source for DIG. FDL is in the business of funding prepaid funerals with life insurance and annuities. A simplified financial statement is included herein.

In 2022, FDL’s assets grew to $1.9 billion, up $179.3 million or 10.43% over 2021 assets of $1.72 billion. Invested assets are the largest component of assets for an insurance company. FDL’s investments were $1.87 billion for 2022, an increase of 10.42% over 2021 investments of $1.69 billion. The primary investment held by FDL was bonds - government, agency, and corporate - representing 83.99% of invested assets or $1.6 billion. FDL’s total common stock portfolio was $25.1 million, comprised of $19.7 million for investments in KFDLIC, FDLA, and FPA, as well as $5.4 million invested in the Monteagle Select Value Fund managed by PALP. On September 15, 2022, FDL purchased 100% of FPA, Inc., an Arkansas corporation, for $7.4 million. FPA, Inc.’s only asset is its ownership in ALAC, a preneed life insurance company domiciled in the state of Arkansas. Investment in real estate includes $15.1 million for the Home Office building. During 2022, FDL’s mortgage loan portfolio increased by $35.7 million for the financing of funeral home locations for a total of $241.7 million. Other invested assets consist of loans to parent of $3.0 million, surplus debentures of $3.3 million, and cash and short-term investments of $8.5 million.

Other assets exceeded 2021 by approximately $3.0 million compared to the $7.0 million decrease between 2020 and 2021. Effective January 1, 2021,

FDL elected to change its method of calculating life reserves in accordance with and as prescribed by SSAP3 and SSAP51R, resulting in a decrease in premiums deferred and uncollected. The impact of the election was a decrease in total assets of $7.5 million, a decrease in total liabilities of $8.1 million with an offsetting increase to surplus of $637.1 thousand.

FDL’s primary liability is its reserves for policyholders. For 2022, reserves were $1.7 billion, an increase of 11.16% over reserves of $1.5 billion in 2021. Asset valuation reserve (AVR) increased $1.9 million or 12.35% compared to a $2.9 million increase from year-end 2020 to year-end 2021. The $17.1 million in this account represents a loss reserve mandated by the NAIC to offset potential defaults of any of the company’s invested assets. Claims liabilities and premium received in advance were $1.1 million and $6.0 million, respectively, for a total of $7.1 million. The interest maintenance reserve of $8.1 million decreased by $2.2 million from year-end 2021 for net realized capital losses of $2.2 million and amortization of $332.3 thousand. Statutory reporting requirements mandate that gains or losses 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. Commissions due to agents exceeded 2021 by $802.0 thousand. Dividends to policyholders remained at $1.0 million. Borrowed funds of $776.2 thousand represent a grant from the Development Corporation of Abilene that was based upon the Company’s expansion of the

Home Office and its commitment to create 70 new jobs over a 5-year period. Other liabilities of FDL included amounts due to affiliates, general expenses payable, premium taxes and fees, and other miscellaneous liabilities for a total of $4.9 million.

Total Capital and Surplus increased $10.3 million for 2022 as compared to the increase of $14.5 million in 2021. The increase in 2022 consisted of net income of $12.0 million, a $343.6 thousand increase in net deferred income tax, unrealized gains of $65.2 thousand, offset by a $1.9 million increase in asset valuation reserve, and a $241.6 thousand increase in non-admitted assets. The ratio of Capital and Surplus to Total Assets was 8.72% at year-end 2022 compared to 9.03% at year-end 2021.

Revenues for FDL were primarily premium collections and investment income totaling $493.2 million. When compared to the previous year, 2022 revenues increased 18.35% or $76.4 million. New business issued for 2022 was approximately 19.9% higher than 2021 production and 108.3% of expected. Net investment income reflects a $7.7 million increase due to increased investment yields and additional funds for investment.

Policyholder benefits increased significantly due to the increase in new business sales. Death and annuity benefits paid during the year exceeded 2021 by $12.4 million and were $2.9 million above expected. Monthly claims expense averaged $17.3 million in 2022 compared to $16.3 million in 2021.

With the year-over-year increase in new business sales, aggregate reserves from year to year was up $43.1 million or 34.1%. General insurance expenses exceeded 2021 by $21.8 million and included commissions paid to agents of $57.1 million, general operating expenses of $37.4 million, and taxes licenses and fees of $5.0 million.

Net gain from operations was $14.5 million compared to $15.5 million for 2021. Policyholder dividends were consistent between years. Federal income taxes incurred were $3.3 million compared to $3.9 million in 2021, due to decreased taxable income. FDL realized net capital gains of $2.0 million compared to capital gains of $4.7 million in 2021. Realized gains for 2021 included $2.6 million related to forgiveness of a Paycheck Protection Program loan. For 2022, the company posted net income of $12.0 million compared to $14.9 million 2021.

BALANCE SHEET

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KENTUCKY FUNERAL DIRECTORS LIFE INSURANCE COMPANY

KFDLIC, a wholly owned stock life insurance company of FDL, 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 FDL.

As a result of increased new business for the year, the total assets of KFDLIC increased $2.1 million or 8.28% during 2022 compared to $1.3 million or 5.35% during 2021. For 2022, the investments account for KFDLIC was $27.6 million. Government and corporate bonds represented 98.36% of investments with cash and short-term investments representing the balance. Other assets consisted of investment income due and accrued of $335.0 thousand, a net deferred tax asset of $98.4 thousand, and federal income tax recoverable of $28.9 thousand.

Liabilities for KFDLIC ended the year at $21.3 million. Reserves for life policies were $20.8 million or 97.81% of the company’s liabilities. Claims liabilities and premiums received in advance were $10.0 thousand and $94.1 thousand, respectively, for 2022. Asset valuation reserve (AVR) was $120.0 thousand compared to $73.7 thousand at the end of 2021. Interest maintenance reserve was $110.3 thousand compared to $130.1 thousand for 2021. Other liabilities also included general expenses payable, taxes, commission to agents, licenses and fees payable, and other miscellaneous payables, representing $131.2 thousand.

For 2022, the capital and surplus of KFDLIC increased $145.2 thousand. The increase consisted

of net income of $196.5 thousand plus deferred income tax of $25.1 thousand, offset by a $30.0 thousand increase in non-admitted assets and a $46.3 thousand increase in asset valuation reserve, resulting in an ending balance of $6.8 million. The capital and surplus of KFDLIC represented the value of the common stock investment that FDL holds for KFDLIC.

Revenues for KFDLIC were $5.5 million, approximately $888.1 thousand higher than 2021, and were composed primarily of premiums and investment income received. 2022 preneed sales production was $4.7 million, up from 2021 production of $4.0 million, and approximately 129.8% of expected sales. Premium income was $4.4 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 $4.1 million. Death claims were $2.2 million – consistent with 2021 –while reserves increased $726.5 thousand compared to a $1.1 million increase from 2020 to 2021. General insurance expenses were up $200.2 thousand due to a $114.8 thousand increase in commissions paid to agents as well as a $31.0 thousand increase in administrative service fees paid to FDL.

Operating income for the year was $281.0 thousand compared to $272.8 thousand in 2021. Federal income tax was estimated at $84.5 thousand after the allocation of consolidated tax deductions shared amongst the insurance affiliates. Net income was $196.5 thousand compared to $172.6 thousand for 2021.

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. 2022 was FDLA’s third full year of operation.

FDLA ended 2022 with $22.7 million in assets compared to $16.8 million at the end of 2021. As of December 31, 2022, 97.85% of FDLA's total assets were invested assets. The majority of this account was government and corporate bonds, representing 96.69% of invested assets. The remaining investments were cash and short-term investments.

Other assets consisted of investment income due and accrued of $203.0 thousand, a net deferred tax asset of $214.2 thousand, and federal income tax recoverable of $66.0 thousand.

Liabilities for FDLA ended the year at $17.5 million. Reserves for life policies were $16.6 million compared to $10.8 million at year-end 2021, representing 94.57% of the company’s liabilities. Claims liabilities and premiums received in advance were $10.0 thousand and $413.8 thousand, respectively, for 2022. Commission to agents were $158.4 thousand while taxes, licenses, and fees were $85.8 thousand. Asset valuation reserve (AVR) was $88.4 thousand. Other liabilities also included general expenses payable, premium suspense, and

other miscellaneous payables, representing $194.6 thousand.

The company was capitalized with $100.0 thousand of common capital stock and $4.4 million of gross paid in and contributed surplus. For 2022, the capital and surplus of FDLA increased $21.2 thousand. The increase consisted of net income of $64.3 thousand plus deferred income tax of $5.5 thousand, offset by a $9.8 thousand increase in nonadmitted assets, and a $38.8 thousand increase in asset valuation reserve.

Revenues for FDLA were $10.6 million. Premium income was $10.0 million while investment income was $611.9 thousand. New business sales were $11.6 million compared to $11.1 million for 2021 and were 105.6% of projected. Virtually all the company’s expenses are variable based upon the level of new business production. For 2022, death claims increased by $617.3 thousand or 30.6% over 2021 while aggregate reserves for life policies compared to 2021 increased by $876.1 thousand. General insurance expenses were $2.1 million and consisted largely of $1.0 million in commissions to agents, $140.7 thousand in taxes licenses and fees, and $871.8 thousand of administrative service fees paid to FDL.

Gain from operations of $96.1 thousand was offset by federal income taxes of $31.8 thousand. Taxable income for FDLA was $225.7 thousand after adjustments for deferred acquisition expenses and tax reserves. Net income reflects a gain of $64.3 thousand compared to $524.7 thousand in 2021.

FUNERAL DIRECTORS LIFE INSURANCE COMPANY OF LOUISIANA

American Life and Annuity Company (ALAC) is an Arkansas-domiciled preneed insurance company and wholly owned subsidiary of FPA, Inc. FPA’s only asset is its investment in ALAC. ALAC was originally incorporated on October 1, 1920, but was purchased by FPA on July 3, 1989. ALAC joined DIG’s holding company system on September 15, 2022, through FDL’s acquisition of FPA.

The total assets of ALAC increased $280.3 thousand during 2022 for a total of $54.1 million compared to $53.9 million at year-end 2021.

As of December 31, 2022, invested assets were $53.3 million, representing 98.56% of ALAC's total assets. The majority of this account was government and corporate bonds, representing 95.71% of investments. The remaining investments consisted of common stock, policy loans, cash, and short-term investments.

Other assets consisted of investment income due and accrued of $464.9 thousand, deferred and uncollected premiums of $158.7 thousand, and a net deferred tax asset of $143.6 thousand.

On December 31, 2022, ALAC’s total liabilities were $50.1 million. Reserves for life policies were $49.6 million or 98.86% of liabilities. Claims liabilities and premiums received in advance were $25.0 thousand and $2.3 thousand, respectively, for 2022. Asset valuation reserve (AVR) was $374.0 thousand compared to $521.3 thousand at the end of 2021. Commissions to agents were $62.7 thousand. Other liabilities included general expenses payable, taxes, federal income tax payable, and other miscellaneous payables, representing $93.9 thousand.

The company was originally capitalized with $100.0 thousand of common capital stock and $337.0 thousand of gross paid in and contributed surplus. For 2022, the capital and surplus of ALAC increased $538.6 thousand. The increase consisted of net income of $539.0 thousand plus a $147.3 thousand decrease in asset valuation reserve, a $75.8 thousand decrease in non-admitted assets, and a $10.3 thousand increase for aggregate write-ins, offset by unrealized losses on securities of $221.7 thousand and a decrease in deferred income tax of $11.7 thousand.

Premium income was $3.3 million compared to $4.7 million for 2021. 2022 preneed sales production discontinued upon acquisition as ALAC customers were transitioned to FDL. Net investment income was $2.1 million - up approximately $223.3 thousand for increased investment yields in the second half of the year. For 2022, death and annuity benefits were up from the previous year by 10.0% while aggregate reserves for life policies decreased by $696.8 thousand compared to the $1.1 million increase between 2020 and 2021. General insurance expenses were down approximately $195.6 thousand for a decrease in commissions and administrative expenses. Upon acquisition, the local Home Office was sold, and all operations were moved to Abilene, Texas. In the fourth quarter of 2022, ALAC paid administrative service fees to FDL related to the administration of in force business and financial reporting.

Gain from operations was $327.3 thousand. Federal income tax expense reflected a year-over-year decrease of $17.2 thousand, based upon reduced taxable income. The sale of the previous Home Office location in Arkansas resulted in a net capital gain of $266.9 thousand. Net income for 2022 was $539.0 thousand compared to $47.7 thousand for 2021.

AMERICAN LIFE AND ANNUITY COMPANY

DIRECTORS AGENCY, LP

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 FDL’s insurance products. At year-end 2022, DALP employed 69 sales professionals, called Select Producers, across the United States to support FDL’s active sales program.

For 2022, total assets were $2.6 million compared to $1.6 million at year-end 2021. The net year-overyear increase was due largely to an increase in cash.

Liabilities decreased to $226.1 thousand for the timing of intercompany settlements and included amounts due to affiliates as well as general and payroll-related payables. Capital accounts ended the year at $2.4 million after partner distributions of $1.1 million.

Revenues consisted largely of commissions earned from FDL and FAI and were $9.9 million compared to $9.4 million in 2021. It’s important to point out that 2021 revenues included $544.4 thousand in forgiveness of the Paycheck Protection Program loan received in 2020. Commission income from the active sales program was $8.4 million compared to $7.7 million in 2021. Expenses in 2022 consisted primarily of salaries and benefits for insurance agents hired to actively sell preneed. Employment-related expenses totaled $6.5 million. The remaining expenses were mainly related to training, recruiting, and lead generation. Net income for 2022 was $2.4 million –approximately $340.6 thousand below 2021.

DIRECTORS HOLDING CORPORATION

Directors Holding Corporation (DHC) ended 2022 with assets of $173.6 million compared to 2021 assets of $162.8 million. The primary increase in DHC’s assets was in its investments. DHC’s Investment in Subsidiary - FDL increased $9.5 million to $171.2 million. As of December 31, 2022, DHC owned a 99% limited partner’s interest in DALP. DHC’s investment in DALP increased $1.2 million after distributions from DALP of $1.1 million. Total investments in subsidiaries and partnerships for DHC increased $10.7 million.

DHC’s equity increased 6.58% to $173.6 million. During 2022, DHC declared and paid dividends to DIG in the amount of $1.1 million and received $5.0 thousand in contributions from DIG.

DHC’s operating expenses consisted primarily of corporate residency costs. DHC derived its earnings from equity increases in FDL and partnership interest increases in DALP. DHC’s earnings from its investments were $11.8 million in 2022 as compared to $16.4 million in 2021, resulting in net income of $11.8 million.

DIRECTORS CAPITAL VENTURES, INC.

Directors Capital Ventures, Inc. (DCVI) is the general partner for the limited partnership investment in 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 2013. DCVI owns a 1% interest in DALP that represents $24.2 thousand of its assets. Other assets include computer equipment and prepaid expenses. DCVI ended the year with assets of $30.7 thousand compared to $16.3 thousand in 2021.

Liabilities of $11.9 thousand are related to general accounts payable and amounts due to affiliates. Equity ended the year at $18.8 thousand. During 2022, DCVI paid dividends to DIG in the amount of $11.2 thousand and received contributions of $61.1 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 FDL. During the year, DCVI received $150.0 thousand in service fees from FDL and $73.6 thousand in reimbursements from BCBS and employees. DCVI had $280.1 thousand in expenses for operating the DIG Wellness Center 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 1% ownership in DALP. Partnership income in the amount of $23.6 thousand was reported for 2022. DCVI recorded a net loss of $32.9 thousand in 2022 compared to a net gain of $18.23 thousand for 2021. In 2021, DCVI also reported a $30.1 thousand gain for forgiveness of the Paycheck Protection Program loan received in 2020.

Parkway Advisors, LP (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 2022 were $1.1 million. Cash ended the year at $821.2 thousand after partner distributions of $2.5 million. Receivables were $168.6 thousand and represent fees due from advisory clients as well as amounts due from affiliates. Investments in EDP equipment and software were $74.8 thousand. Other assets of $55.7 thousand consisted of prepaid expenses.

Liabilities consisted of general payables and payroll liabilities. Total partners’ capital ended the year at $1.1 million after net income for the year of $2.5 million less partner withdrawals of $2.5 million.

Revenues for 2022 were $5.3 million, exceeding 2021 revenues by $511.6 thousand, and were comprised of advisory service and consulting fees. Assets under management were approximately $3.2 billion at year-end 2022. Assets of consulting and investment reporting clients were $6.3 billion. During the year, Parkway added 12 new insurance clients to asset management and three clients for consulting services. Operating expenses were $2.8 million, largely comprised of salaries and benefits. Other operating expenses were general in nature. Net income for 2022 was $2.5 million compared to $2.4 million for 2021.

PARKWAY ADVISORS, LP

PARKWAY ADVISORS GROUP, INC.

Parkway Advisors Group, Inc. (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 $14.9 thousand. PAGI owns a 1% interest of the limited partnership that represents $11.1 thousand of its assets. Cash and accounts receivable comprised the remaining assets. Liabilities of $33.0 thousand represent amounts due to PALP. Total capital ended the year at negative $18.1 thousand after dividends to DIG in the amount of $25.0 thousand.

PAGI had limited expenses for its corporate existence, such as registration fees, telephone charges, and corporate residency expense, resulting in an operating loss of $3.0 thousand.

For 2022, PAGI recorded partnership earnings of $25.2 thousand from its 1% ownership of the limited partnership investment in PALP. Net income for PAGI was $22.2 thousand.

Parkway Advisors Holdings, Inc. (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 $1.1 million. PAHI owns a 99% interest of the limited partnership that comprised the majority of its assets with a small amount of cash for remaining assets. Liabilities of $28.0 thousand represent amounts due to PALP. Total capital ended the year at $1.1 million after dividends paid to DIG in the amount of $2.475 million.

PAHI had expenses for its corporate existence, such as registration fees, telephone charges, and corporate residency expense. Total operating expenses were $2.4 thousand.

For 2022, PAHI recorded partnership earnings of $2.5 million from its 99% ownership of the limited partnership investment in PALP, resulting in net income of $2.5 million.

PARKWAY ADVISORS HOLDINGS, INC.

FUNERAL AGENCY, INC.

Funeral Agency, Inc. (FAI) is a marketer and seller of prepaid funerals and various insurance products on behalf of FDL 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 $2.3 million, consisting mostly of cash, claims receivable from FDL, and goodwill. Liabilities of $3.1 million consisted largely of agent credit balances and suspense items. Equity ended the year at negative $750.0 thousand.

Through an agency agreement with FDL, FAI received commission income on premiums collected by FDL on preneed funeral business written in Texas. Revenues for 2022 were $2.5 million – consistent with 2021. FAI contributed approximately 22.9% of FDL’s preneed sales volume during 2022, producing $106.8 million in new business. Expenses consisted mostly of salaries and benefits of sales managers employed by the company and sales-related incentive programs. Net loss for 2022 was $29.0 thousand compared to net income of $9.7 thousand in 2021.

PASSARE – A DIVISION OF DIG

Originally a Delaware corporation created November 26, 2012, Passare was merged into DIG effective January 1, 2020. Passare 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 2015, DIG negotiated an exchange of all outstanding debt with Passare in return for additional shares of stock, resulting in majority ownership. In 2019, DIG gained 100% ownership in Passare after an exchange of cash or stock for remaining minority interests in Passare. Gaining 100% control of Passare paved the way to substantial expense reduction and sharing of resources between Passare and other DIG affiliates as reflected in the 2022 financial results.

While Passare’s assets and liabilities were combined with DIG’s due to the merger, the operations of Passare are monitored and recorded as a separate division within DIG.

During 2022, Passare increased revenues by 30.99%, or $1.0 million, ending the year with approximately 856 customers. 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.” Passare also expanded on its consulting services, such as premium support and client services. Revenues were $4.3 million compared to $3.3 million in 2021. Total expenses in 2022 were $4.6 million compared to $3.6 million in 2021 – a $967.7 thousand increase. The increase in expenses was due largely to an increase in contract labor expense and salaries and benefits. Labor-related expenses account for approximately 88% of total operating expenses with the majority of those expenses dedicated to further development of the software. Operating losses decreased by $58.4 thousand from 2021. Net loss was $215.0 thousand compared to a gain of $12.4 thousand in 2021 after reporting $288.2 thousand in gain from forgiveness of a Paycheck Protection Program loan received in April 2020.

financials

FINANCIAL SUMMARY

BALANCE SHEET

Assets

Cash

Trade Receivables

Investments - Short Term

Investments- Long Term:

Investment in Subsidiary - FDL

Investment in Land

Investment in Furniture & Fixtures - NET

Investment in Autos - NET

Investment in EDP Equipment - NET

Notes Receivable

Goodwill

Other Assets - Net Total Assets

Liabilities and Stockholders' Equity Liabilities

Intercompany Payables

General Expense Payable

Dividends Payable

Agent Credit Balances

Unearned Income

Miscellaneous Liabilities

Federal Income Taxes Payable

Notes Payable

Stockholders' Equity

Common Stock (2,898,501 and 2,878,960 shares, respectively @ $.01 Par)

Additional Paid-In Capital

Treasury Stock (341,802 and 320,758 shares respectively)

Year Ended 2021

STATEMENT OF OPERATIONS

Year Ended 2022

Year Ended 2021

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 - Directors Air Corporation

Net Income - Funeral

SHAREHOLDERS’ EQUITY

TREASURY STOCK COMMON STOCK

CASH FLOWS

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:

Increase (Decrease) in Receivables and Other Assets

Increase in Payables

Increase in Taxes Payable

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

(Increase) Decrease in Short-Term Investments Increase In Investment in Affiliate - FDL

SHAREHOLDERS OF RECORD AS OF MARCH 1, 2023

The Seale Family L. P., Kris Seale General Ptr

Jeff Harper

Elizabeth Gay Schulze

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

Rudy Jack Cypert

Mike Lemons

Pam Welch

Amy Paquette as Trustee for the Paquette Children's Trust

The Allan and Gail Adams Revocable Trust

Bob and Carolynn White

Robert E. Hamil

Forward Investment LTD, Forward Mgt. Inc. General Ptr

Lois Dodds

K4G L.P.

Kathleen B. McReavy REVOCABLE TRUST

William L. McReavy REVOCABLE TRUST

Mark S. France

Ray Harper

Leslie Branon Montz

Thomas W. Branon

Darrell W. Rains

Pat Baxter

Bobby B. Connell

T. Duane Connell

Teresa Carol Davis Branon

Sidney C. Grant, Self Directed IRA

Georgia Kelly

Legacy Funeral Holdings, Inc.

W. Brown Claybar Self-Directed IRA

Michael L. Soper

Stuart Ford

Robby & Deana Morris

Washburn McReavy Funeral Chapels, Inc

Susan P. Branon

SHAREHOLDERS OF RECORD AS OF MARCH 1, 2023

Mark Cypert

Ann M. Swanson

Addison Templeton

Angela Hamil-Willis

Patricia Angeley

Patrick C. Patton & Suzanne E. Patton, Trustees of Patton Living Trust dated 6-2-2020

401k FBO Sam J Chase

Jerry Willingham

Reagan Ramsower

Kasi Welch-Baker

Mark Owen

Terry Groban

Taylor Greene

Thomas M. Vertin

Betty S. Alvey

Terri Bannister

Royce Rampy

Pressley H. Guitar II

Theron Holladay

Jenifer Hoff

Roy Carroway Jr.

Heather Guitar

Mark & Lori Beale

Cliff Pollack

Drew Seale

John W. & Grace Eirkson

W.B. Claybar

Shannon Ward

John Harrington

Nadene Smith

401k FBO Linda Chase

Gregg A Havlak

Jeff W. Stewart

Gerald D. Runnels

Amanda Farrow

Ray Thompson

Tim Hoff

First Financial Trust & Asset Management Co., N.A. FBO Jeannette Waddell McQueen

First Financial Trust & Asset Management Co., N.A. FBO David Lee McQueen

Zachary O. Schulze

Gloria Skinner

Mark Willingham

Pamela Ulery

Mark Childs

Kyle Swearingen

Elizabeth Harper Schulze Edwards

Pat Zalusky

Lori Owen

Jeffery Stewart

Sonia DeLeon

Harry C. Drew

Kelly McCarty

Victor E. Schulze

Shaun Gaffney

Stephen R. Storm

Paul Lovelace

Warren Family Trust - Larry Warren

Jay Thomas

Angie Dobbs

Amy Biggs

Stephen Etter Bassett

Brian K. Nichols

Foresight Family Funeral Homes, LLC

Kevin Gaffney

Kelsey Swearingen

Charles M. Walls

Alvino Sanchez

Sam Chase

Gary Boulicault

William P. Wimberly

Zach Sims Larry Anderson Theodore Beck

Frank Downing

Angela Holmes

Annette Parmelly Matthew Waldrip

Thomas & Maria Hartsfield

Judy K. Storm Bowers

Melissa Magers Vicki Dickson

Steven Dantzler Lisa Davidson Rex Miley Melanie Carr

Charles Eric Espinosa Kyle Timmermann

David and Toni Nichols

White Dove Holdings Business Trust

SHAREHOLDERS OF RECORD AS OF MARCH 1, 2023

D J Jons

Ester Johnson

Rodolfo D. Robles Jr.

Paul Dercks

Denise Chabarria

Marcus Wilson

Joe Ramos

Joshua Koehler

Kelly Gilgenbach

Barry R. Henderson

Deanna Reyes

Dawson Rodriguez

Haley Cooke

Proko-Wall and Associates, LLC

Albert Jonas

Vanessa Callari

Frank and Amy Downing

Alec Hartman

Jacob Kramar

Suzann Sharp

Kim J. Beckerman

Colin

OF RECORD AS OF MARCH

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

Jyl Lopez

Scott Schaake

William F. Krause III

Mark J. Krause

Donald F. Swan

Brennan Arthur Lantzy

Kylie Eileen Lantzy

Westin Reid Lantzy

Lei Ann Lantzy

Jayce Parker Lantzy

Cooper James Lantzy

Ezmeralda Bueno

Brandon Byerly

Delia Villanueva

Schoedinger Funeral and Cremation Service Tammy Dermody

James A. Clair

Barry L. Noffze

Charles E. Young

Millennium Trust Company, LLC Custodian FBO Mark Gonzales Traditional IRA xxxx91670

Daniel R Neal

Christine M. Jacob Gregg P.

SHAREHOLDERS OF RECORD AS OF MARCH 1, 2023

LeAndra

William (Jeff)

National Advisers Trust FBO Steve P. McKee Simple IRA Acct. #11440002274

BOARD OF DIRECTORS

ALLAN ADAMS Denton

MARK FRANCE Austin ROBERT HAMIL Abilene

JACK CYPERT Snyder

JEFF HARPER San Angelo

JERRY EDWARDS Granbury

KRIS SEALE Abilene KASI WELCH-BAKER Midland

MIKE LEMONS Austin

DARRELL RAINS Austin

DR. REAGAN RAMSOWER Waco

DREW SEALE Abilene

LESLIE BRANON MONTZ Brownwood

PAT PATTON Sauk Centre, MN

BOB WHITE Emeritus Director Weatherford

TOMMY WELCH Emeritus Director Abilene

CORPORATE OFFICERS

KRIS SEALE President & Chief Executive Officer, Chairman of the Board

TERRI BANNISTER Executive Vice President & Chief Learning Officer

TERRY GROBAN Executive Vice President & Chief Financial Officer

TODD CARLSON Executive Vice President & Chief Sales Officer

JEFF STEWART Executive Vice President & Chief Culture Officer

ADDISON TEMPLETON Executive Vice President & Chief Operations Officer

PAUL LOVELACE Executive Vice President & Chief Corporate Development Officer

DWAYNE MCGRAW Executive Vice President & Chief Actuary

DAWSON RODRIGUEZ Executive Vice President & Chief Information Security Officer

DREW SEALE Executive Vice President & Chief Marketing Officer

OUR visionaries

Jay Kelly ......................................................................................

Ernest Welch, Jr. ....................................................................

Mike Branon

Billy Ray Harper

Avery Connell

Bill Seale ......................................................................................

Benjamin Burton....................................................................

Melvin Storm ...........................................................................

Wendell Dodds

John Hamil

Haynie Sides

1932 - 2022

1925 - 2016

1953 - 2015

1931 - 2013

1922 - 2008

1927 - 2005

1930 - 2004

1921 - 2004

1938 - 2000

1935 - 1998

1917 - 1998

Tom Branon...............................................................................1929 - 1988