Funeral industry wants to know: Why are fewer people dying?

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The funeral industry is usually seen as a defensive sector, a safe haven for investors during a recession. Indeed, in their most recent quarter, the four publicly traded deathcare companies all posted increased revenue per funeral. Of course, people continue to die in a recession but funerals are usually paid from the proceeds of estates, or from insurance policies, so they tend not to be trimmed back even when times are hard.

Yet overall revenue at all those companies declined during that time. The reason? A much lower mortality rate. In general, mortality rate has been on a decline. In 2006, there were 810 deaths per 100,000 population, much less than the roughly 860 deaths in 1999, only seven years before. And with lower death rates, the number of funerals performed at the deathcare companies has been on a decline as well (comparatively).

Interestingly, in the first quarter of 2009 the drop in death rates accelerated sharply.

So far, the evidence has been more anecdotal in so far that it comes from companies and not from a government source such as the CDC, but all companies witnessed the drop:

  • StoneMore Partners LP (STON) said: "During the first quarter of 2009, the overall death rate dropped as compared to the first quarter of 2008."
  • Carriage Services (CSV) said "the number of contracts declined 9.9 percent."
  • Stewart Enterprises (STEI) said it experienced "a decline in funeral events . . ."
  • Keystone North American (KNA), a Canadian company, said: "This decrease (in revenue) is attributable to an approximate 8.0 percent quarter over quarter decline in total mortality for the Company . . ."
  • Service Corporation International (SCI), the largest in the business, was especially intrigued by this: "Comparable funeral services performed decreased 11.2 percent. We believe the decline in deaths in our markets is consistent with trends experienced by other funeral service providers and industry vendors and was due in part to a relatively mild influenza season compared to the first quarter of 2008 . . ." SCI CEO Tom Ryan said in the conference call they have never experienced anything like it.
Can a milder flu season really be the reason for a lower mortality rate?

Medical advancements, which help reduce the deaths from from the big killers – heart disease, cancer and stroke -- could be another reason. Indeed, just yesterday a new report showed a decline in the cancer death rate in California. Or another report from the American Cancer Society showed that for the third year in a row, there is a decline in estimated cancer deaths. Mortality from heart disease, however, appears to be plummeting even faster.

Then there is the dip in births in pre baby boomers years -- the late 1920s and early 1930s -- the ones who would likely be dying now.

SCI actually plans to commission independent research to try to find out what's going on, spokeswoman Lisa Marshall told the Globe and Mail. I guess an explanation from Ray Kurzweil, who already said he doesn't intend to die, that many others decided to join him won't satisfy the deathcare provider.

Jest aside, everyone agrees that there have always been fluctuations in the industry. As if to demonstrate exactly that, it's quite possible the H1N1 flu virus would prevent any more milder flu seasons from happening. Already evidence suggests that projections completely missed the mark and the flu is far worse than expected.

The really interesting question here, though, is whether these reasons are the only thing at play here. If SCI ever commissions that research and publishes it, I'd sure like to find out what they found.

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