Morgan Stanley, a global financial services firm that provides a wide range of products and services, including investment banking, wealth management, consumer banking, and brokerage services, recently made this comment in an article, “Life insurance companies have rapidly evolved into influential players in the credit markets.  Their growing footprint is not merely a function of asset growth but reflects a strategic evolution in asset allocation strategy, driven by shifts in their product offering, regulatory frameworks, and the rise of alternative asset management.”

 

And while that comment was made with the traditional life and annuity companies in mind it probably holds true for those insurance companies in the Preneed sphere of insurance as well.  Lately, I’ve probably seen more information about preneed insurance companies’ lending businesses in industry trade journals and direct marketing than I have about those companies’ preneed insurance offerings.

 

Here’s a couple of pages from well-known preneed companies on their ability to help one finance their funeral home operations:

 

• Funeral Directors Life Lending Page
• Homesteaders Life Lending Page

 

Here are some more comments from the article on insurers getting more and more into the credit business:

 

“The rise in interest rates by the Federal Reserve from near-zero levels to over 5% between 2022 and 2024 also helped life insurers, who could now offer significantly higher crediting rates on fixed annuities. This makes them attractive to retirees and the cohort approaching retirement and seeking tax-deferred growth and predictable retirement income.”

“We think that these flows could persist given demographic trends,”

“On the back of these flows, U.S. life insurance companies have seen their general account assets under management expand by $1+ trillion since 2021, and this growth has outpaced the expansion of traditional credit markets.”

“Life insurers are also among the largest holders of public corporate bonds, with a ~30% share of the outstanding U.S. public corporate credit market.”

“While rate volatility could affect future annuity flows, life insurers are now key intermediaries in credit markets—reshaping capital flows, risk pricing, and financial intermediation.”

 

Funeral Director Daily take:  In the funeral home and cremation lending business, as in other businesses,  there is something to be said for “knowing your client”.  And even today not all banks, especially in rural communities, totally understand the funeral home business which is one reason the door has been opened  for these preneed companies to lend out insurance premiums received for funeral home based loans.

 

Most banks want “asset backed” loans and funeral homes don’t always hold the “assets” that many banks see as desirable.  Many funeral homes produce more cash-flow, and have financial needs on the basis of that cash-flow, than asset-based lending institutions are comfortable with.

 

That is one great reason to look for “industry knowledge” when seeking a loan to buy or expand a funeral home.  These preneed companies “Do” understand your business.  When I used financing to expand, build, or buy during my funeral home ownership career I used local banks — but it did take a while to educate my bankers on how my business works. . . . . Getting financing from these preneed companies eliminates that step for local funeral home owners.

 

My First knowledge of Insurance company lending  —  Back in 1991 I started a company in the sports travel and event business.  Part of what that company did was arrange for foreign competition-based trips for United States collegiate teams over the summer months.  I can remember in 1992 on one of those very first trips for a basketball team where one of the referees at a game in Osnabruck, West Germany (prior to the Berling Wall coming down), invited my wife and I to his home after a game.

 

His family had a beautiful home and he made the comment that they had received their mortgage loan from the insurance company which insured the home.  I thought that was highly unusual and he commented to me that insurance companies, and not banks, were the primary mortgage holders in West Germany.

 

Maybe, with the somewhat recent addition of insurance company-based lending,  the U.S.A. is just a little behind the times in some of those situations.  It’s not so far out of the realm of thinking that someday home mortgages could be financed by property insurer’s in America, too. . . . . and, automobiles being financed by auto insurers such as Liberty Mutual.

 

Warren Buffet has made no secret that his Berkshire Hathaway investments in insurance, such as Geico, try to make as much profit on the “float” time-period of investment of premium dollars coming it to the company before those same dollars are paid out in claims.  If insurance companies find safe, reliable, and higher yielding returns in the lending business rather than simple investing you will see more of this insurance-based lending happen.

 

More news from the world of Death Care:

• Funeral Director is the latest trendy job opp; meet the first-time funeral directors changing how Ireland says good-bye.  Inkl (may need to register to site to access)  (Great Britain)
• Coleman’s Funeral Service tries to overcome industry challenges in helping families unprepared.  The Philadelphia Tribune (PA)
• In Japan, embalming becomes more common practice as relative desire final opportunity to see loved ones.  Japan Times (Japan)
• Coffins made of mushrooms sprout among eco-friendly burial options.  The Toronto Sun (Canada)
• Improvements to cemeteries in St. Albans District now underway.  St. Albans City and District Council (Great Britain)

 

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