All right. I think we're going to get started a few minutes early just to get some of the housekeeping out of the way. On behalf of the entire management team here today, I want to welcome you to our Investor Day. I'm Debbie Young, Director of Investor Relations. And we also want to thank those who are going to join us on the webcast.
Before we begin, let me just briefly introduce to you some of the people that you're going to be hearing from today. For those who don't know my background, I've been with the company a little over 30 years, which I know is crazy. I've held a variety of financial roles along the way and I've been in the IR function since 1999. Next, moving on to the executive management team. Many of you already know Tom Ryan, our Chairman and CEO and Eric Tansberger, our CFO.
We also have Mike Webb with us today, President and Chief Operating Officer. These 3 have been in their roles for about 12 to 13 years now, and I think their successful track record speaks for themselves. From the significant turnaround of the company in the early to mid-2000s to the development of the growth strategies that we have today and finally to the superior total shareholder return that we have consistently achieved, I think these guys are to be commended. Moving on to our operations and sales expertise, we're lucky to have Jay Waring and Steve Tidwell with us today. Jay is a 5th generation Funeral Director and he came to us in 'ninety six when SCI acquired his family's well known business in the New England area.
Steve has over 35 years of experience in the industry and he was the former CEO of Keystone, which many of you may know was a company we bought in 2010 and at that time they were the 5th largest public company. Next to a couple of strong leaders supporting our operations, we have Elizabeth Nash and John Faulk. Elizabeth is our Senior Vice President of Operations Services. She's been with the company since 2002 and she's led our efforts in leveraging scale and leveraging technology and she's going to talk more about that today. John Fauch is our Vice President of Business Development.
John joined SEI in 2010. At the time, he was working with Bain Consulting, and we did a project with Bain to help identify and form our customer strategy. John is going to be speaking to our business development strategies as well as a high level summary of our footprint and what we think is working well and areas that we think we have room to improve. And then from a financial perspective, many of you have interacted with Aaron Foley. He's our Vice President and Treasurer.
In addition to all things Treasury and IR, Aaron oversees our trust and insurance processes, and he will be speaking about those topics today. Last but not least, we have Anastasia Jones, our Director of Financial Services. Anastasia joined the company in 2,008 in the Treasury Group. I got to give her credit. She's the creative genius behind the slide deck you're about to see, and it's amazing to us to know that someone who has a financial background can be so creative.
Anastasia will be providing an overview of our deferred revenue backlog today. Moving on to Slide 4, our last Investor Day was about 3 years ago. And if you came to that or if you've seen the presentation from then, you're going to see some similar slides and topics here in our presentation this afternoon. We understand this is a lot of material. You've seen the books.
You could use it as a weapon. It's intended to be a reference book. We still refer to our Investor Day deck from 3 years ago. We know it's a lot of material. We're going to try to go through it quickly and hit the high points for you.
But our purpose is for you to have a leave behind that will to help give you a detailed roadmap of our strategy and our company. Just a little housekeeping to get out of the way before we begin. Please refer to Slide 5 for our safe harbor language. For more information about risk factors, please see our filings with the SEC on our website. We have also provided a reconciliation of non GAAP measures at the back of this presentation.
So beginning with the global overview and first some high level information about the industry. Slide 8 shows you that the death care industry in the United States and Canada, which we're going to refer to as North America throughout this presentation, it's about a $20,000,000,000 revenue industry when you combine the funeral homes and cemeteries. The data is not perfect, but we estimate there's about 22,000 funeral homes and about 5,000 cemeteries of size that handle nearly 3,000,000 deaths. A little bit more about the funeral segment, which is the larger segment. First thing to understand is funeral employees by nature are very caring and empathetic.
They help families every day deal with the most difficult circumstances of losing a loved one. The funeral home model itself is a little bit inefficient with the average funeral home in the United States only doing about 130 funerals per year, that averages out to about 2 to 3 per week. So you can see there's a lot of idle time. This is where we think we have an advantage with our scale because we have the ability to share resources within a marketplace and help eliminate some of those inefficiencies. The part of the reason why you see such a large number of funeral homes is that customers have varying needs when they select a funeral provider, which Jay is going to touch on in his section.
Some are driven by ethnic or religious preferences, while others may want prestige and some just want convenience. As far as barriers to entry, we believe the barriers are high at the funeral home channel level. There's a significant capital investment in the land and in the facilities and then you have pretty onerous licensing requirements. Finally, when you think about the funeral business, this is a retail service business. It's very fundamental.
It's a consumer staple. We provide a necessary and essential service. People are coming to us, a time of death has occurred. And on average, we're spending 2 to 3 days between the time of segment on Slide 10, which has more of a sales centric approach. And this is really by necessity.
You have all this capital tied up in a big chunk of land and it's costly to maintain, so you have to sell today rather than wait for the business to come to you. The barriers to entry are pretty high as you might imagine. You have to find a chunk of land near a population. There's a significant capital investment, not to mention zoning restrictions because nobody wants to have a cemetery in their backyard. As it relates to capacity, we believe the industry is in a good shape and you don't really see many new startups, new builds.
For SEI in particular, we think we have ample capacity. On average, our cemeteries have 50 plus years of life remaining. And finally, think of the cemetery business as a retail consumer discretionary business, although obviously we believe it's less affected by swings in the economy than other retail companies. And we believe the way you should operate cemeteries is similar to a real estate play, where you have a tiering of options that's priced from small to big and Steve is set to talk about that more in his section. Slide 11 gives you a glimpse into the various products and services that we offer through our funeral homes and cemeteries.
All of these products are not only sold on an at need basis or when the death occurs, but we're also marketing them on a pre need basis. Now I know preneed is where the accounting can get a little bit complicated, but I just want to have you keep in mind one simple rule in that preneed sales or preneed revenue is deferred until delivery. And typically, that's at death, which is 10 to 14 years down the road. As it relates to cemetery property, we still follow the delivery rule, but we're generally able to recognize this preneed revenue at the time of sale. So why is this?
As long as that property, so the ground burial space or mausoleum space as an example, as long as that property is ready and available for internment, even though the customer is not going to use it today, if it's ready, it's considered delivered under our accounting rules and we're able to recognize the revenue at the time of sale. And because delivery has occurred, there's no trusting requirements, so it's also cash flow to us at the time of sale. So this has been a key driver of our earnings and cash flow growth and we will be highlighting this more in our discussions today. Slide 12 reflects the aging demographic wave that has us excited today and it's really the foundation of our growth strategies going forward. So let's just take a quick look at the 3 buckets of SEI customers.
First on the left in the gray bars, you can see that the late 50s, early 60s are generally when people tend to purchase their cemetery property. This event is generally first because of adjacency issues, which you've heard us say before. By adjacency, I mean, if mom dies and the rest of the family wants to be buried around mom, they've got to buy those spaces today because they might be gone tomorrow. So this is generally why we see this event occurring first. Then in the late '60s, early '70s represented by the navy blue bars, people tend to think about prearranging a funeral.
This could be triggered by a health scare or maybe someone's just experienced the death of a family member or friend, maybe wife died and husband has had to spend the last 2 days making all kinds of decisions. It's been a very emotional time for him. So he decides, I'm going to pre need so that my kids don't have to do this for me. That's generally happening in the late 60s, early 70s. Finally, our Aetna customers are those that use our services when a death occurs, the orange bucket, they're generally in their late 70s, early 80s.
So just stepping back and taking a look at this, why are we so excited about this graph? The baby boomers in 2018 are aged 54 to 72 and there are 74,000,000 of them. So we're already seeing the influence of them coming through the preneed cemetery segment already with a significant tailwind to come. Now they're beginning to enter the sweet spot of our preneed funeral customer and ultimately they will affect our acne business. Finally, in this section, let's talk a little bit about what's been happening with deaths in the United States and where we think they're headed.
The number of deaths in recent years has been affected by a few things. First, we know that life expectancy continues to increase with advances in healthcare, and that's good news for all of us. 2nd, let's just take a look at the chart on the left of Slide 13, which reflects births in the United States. As you can see, the number of births dropped significantly in the late '20s, early '30s. Of particular note, we see a 23% decline from the period 1924 to 1933.
If you think about life expectancy in the U. S. Today, it's around 79 years of age. So 79 years ago or 1939, it's kind of where we are on this birth chart. And even though you see it on the rise, it's still the absolute numbers are still much lower than the previous generation.
So we still have a ways to get out of this dearth of birth, but we're very excited about the baby boomer tailwind that's coming our way. Now let's move to the chart on the right. This gives us a look at the historical deaths in the United States and projections of future deaths. As many of you know, we've been partnering with Doctor. King at Harvard University since 2010 to form our own opinion of what we think future mortality looks like.
As you can see from the graph, we continue to see a divergence between what the Census Bureau is projecting and what Doctor. King is modeling. Why is this? Generally speaking, the government uses more qualitative judgments, which can sometimes, as you know, be subject to political pressure and human bias. Doctor.
King's forecast model is a more robust model. He looks at a number of factors like the impacts of smoking, what that's done to numbers of deaths, the obesity problem that we have here in United States and other known demographic patterns. Including this extra information makes a substantial difference in the forecast. And one thing that I think is interesting about what he does is he applies his methodology backwards. And you can see comparing the blue line to the black line, which represents actual historical deaths, that there's a pretty good fit.
There's a good high correlation there, which lends credibility to his forecast. Big picture, we're very encouraged by the steadily increasing demand for our services that are projected. And in particular, when we look at Doctor. King's projections where our businesses are located and where our footprint is, we think we're poised to grow differentially. With that, I'm going to turn it over to Tom, who will give us an overview of SCI, our performance and our strategy.
Thank you, Debbie, and welcome, everyone. Debbie doesn't give herself enough credit. I think one of the things I hear consistently when we meet with investors Investor Relations person they've ever met. And that's because of Debbie, and I want to thank her for everything that she does. I saw a lot of you kind of scratching your heads when she said she's been with the company 30 years.
I want to explain that. We used to have an after school work program for local kindergarten. And so Debbie started with us then and the child labor laws changed, but she got grandfathered. So it's good. I'm going to provide for you today a high level overview of SCI and how we compare to the rest of the industry.
Next, I'm going to go review with you our recent financial performance over the last few years and then close out with an overview of the company's strategy. So beginning here on Slide number 15, there's a lot of data on the slide. The first key takeaway that I would say is the fact that while we're differentially larger than our consolidating competitors, we're still only 15% to 16% of the market. So there's really ample room to continue to consolidate within North America and John Fox is going to touch upon that in his comments. Next, you'll notice that we have over 23,000 employees with GAAP revenues of $3,100,000,000 So we're a very people centric business.
Where distributed strategy and appropriate policies and standards and controls are truly paramount to our success. Our GAAP revenues are slightly deceiving in that we generate $1,700,000,000 in preneed sales, of which $1,200,000,000 gets deferred into our backlog. So think of us as a sales business approaching about $2,000,000,000 a year and a fulfillment business that's about $3,000,000,000 Finally, our $10,700,000,000 backlog adds tremendous stability to our revenues and our cash flows, as well as providing additional value creation opportunities for our shareholders. Next, moving to Slide 16, we highlight our Funeral segment, which generates about 60% of our consolidated revenues. We own almost 1500 locations, some with unique national brands, but most with a very valuable local brand name that's co branded with our national brand, Dignity Memorial.
We utilize the brand internally, driving operating and ethical standards, and externally, we can create brand awareness through market based advertisement and utilizing the brand in offering dignity packages with uniquely branded benefits. Our average location at SCI does over 200 funeral calls versus an industry average of about 130. So to convey to you the power of our current scale and what ultimately scale could be, I'd like to point out this fact. We own almost 7% of the funeral locations. We perform over 10% of the funerals in North America, and we believe that we write over 22% of the pre need sales production as we now begin to interact with the baby boomer generation on the funeral side of the business.
Another advantage of our scale is that through our 23,000 employees, we can transport our knowledge and experience of specific ethnic and religious customs from one market in the United States or Canada to another, further leveraging the value of our footprint. Cremation is a topic we're going to touch upon and it's nothing new to this industry. It's been growing for almost 30 years and most of our customers today, over 50%, choose cremation as their means of disposition. Having said that, cremation mix change is a revenue and profit headwind each year that we have to manage within our funeral home channel. Jay Waring, who is going to speak behind me, will explain in more detail how through SCI Direct's asset light pre need strategy, we found a way to partially offset that headwind with a new customer that we were not previously accessing.
Finally, remember that practically all revenue recognition for funeral is deferred until death. Therefore, until demographics impact the number of funeral services that we perform, we should expect slow revenue growth and consistent margins. Our cemetery segment, you'll see up here is on Slide 17, it generates about 40% of our revenue. Our 4 73 cemeteries, as you'll see on the slide, are generating much larger revenues and numbers of burials than our competitors. We're about 330 in our average cemetery of burials compared to an industry average of about 200.
On a revenue basis, the difference is even more noticeable when you think about the parks that we actually own, we generate about 30% of the industry's revenues through 10% of the locations. We've been able to accomplish this through our unique tiered cemetery offerings combined with our world class sales force, which Steve Tidwell will go into in a little more detail later in our presentation. As we mature in our use and understanding of sales force, which is our customer relationship management platform, and as we roll out Beacon, our customer facing presentation technology, will continue to enhance the efficiency of our team. And then Steve will talk about beginning to build a larger sales force to meet the needs of our increasing numbers of customers. Finally, remember from a customer sale perspective in cemetery as shown in the table, property is 65% of the customer spend and it can be recognized as soon as we sell it.
Our success selling property has been the primary factor in our recent growth as it can grow both earnings per share and cash flow immediately. Preneed merchandise and services are deferred until delivery or performance like funeral revenues and these future revenues are poised to grow both from an increased average spend due to cumulative trust earnings as well as a higher mix versus atneedproducts and services. So now I'm going to turn you to Slide 19 in the presentation. And here you'll notice that SCI's operating and financial performance, you see that we've grown earnings per share over the last 4 years from $0.92 in the orange bar on the left to $1.46 at the orange bar on the right, resulting in a 12% CAGR at the high end of our long term guidance range. The 2014 growth, you'll notice, is a little higher bar movement over 13% and it's 21%, and it was accelerated by the impact of our Steward acquisition and integrating those businesses into ours.
Then in 2015, you'll notice that it decelerates a bit and our earnings per share growth is about 6%, and it was muted by the fact that we were required under the Federal Trade Commission to divest of some really nice properties, which contributed to 14, but were gone in 2015. I think the important takeaway over the last 2 years in 2016 2017, where we grew at 9% and 13%, respectively, without any significant acquisition activity, in line with what we believe the business should be able to do. Moving to Slide 20, you'll see the gray bar at the bottom and notice that operating cash flows have been relatively flat after 2014, but this does not reflect the underlying growth of the business. As you can see from the orange bar, we've been slowly moving towards becoming a full cash taxpayer. If you follow the blue bars and there's a debate whether those are blue or brown, I admit, amongst us, you'll notice that the cash flows before taxes have grown consistently over the 4 year period at a 10% compounded annual growth rate.
Keep in mind, the previous chart with earnings per share had the benefit of share repurchases and this chart would not, thereby the difference. Later, Eric is going to address the impact of tax reform as it relates to that. I'll just click back, and the impact on our future cash flows. Finally, for those of you that value companies on a free cash flow basis, and I'm sure you do it many ways, our free cash flow per share is about $0.30 higher than the computation of our earnings per share in a semi permanent difference. This is the result of our depreciation and amortization expense of $250,000,000 annually, outpacing our maintenance CapEx of $180,000,000 This is caused by intangibles that were created when we acquired businesses along with the redepreciation of acquired facilities, which is required under GAAP as we record those assets at their fair value.
Now to Slide 21. So here you'll see the result of what we think executing well operationally, growing our preneed cemetery business and deploying capital wisely. Our total shareholder returns are well in excess of the returns of the S and P 500, as you can see on the slide, for each period presented, the 1 year, the 3 year, the 5 year and the 10 year periods. Particularly, I think longer term is the most important. If you focus on 5 and 10, we've actually had a 50% premium return to the S and P returns.
Now I'm going to turn you to Slide 23, and this really is the beginning of the overview of our strategy. On here, we display our 3 core strategies, which haven't changed, centered around the customer and our competitive advantages. The first one is revenue growth and by remaining relevant to our customers in driving pre need sales. The second strategy is leveraging our scale, driving revenues through developing our sales force, managing our almost $11,000,000,000 backlog for enhanced value, driving down costs and improving customer interactions with technology. The 3rd core strategy is capital deployment, which is a blended approach to deploying capital to its highest and best use.
Now on Slide 24, you'll see where we talk about remaining relevant. We know the trends of the business are 1st and foremost increasing cremation. Know that there's less demand for caskets every year. 2nd, we know that ethnic population growth, particularly Hispanic and Asian. And finally, the other trend I'll speak to is a shift away from the traditional Judeo Christian mourning into more contemporary celebrations of life.
These changing trends require us to be much more flexible in providing products and services that meet the modern needs. On the funeral front, these needs may or may not include a casket. We're focusing on unique celebration services, counseling, estate planning and adherence to religious and ethnic traditions. In the cemetery business, we must provide property and merchandise with a variety of customer options that meet the baby boomer generational needs that are increasingly requiring exclusivity, privacy, elevation or a view as well as meeting the specific needs of our growing ethnic centric consumers. All the while, we're embracing technology that our customers have come to expect in their daily lives with a focus on visualization and simplification.
Our focus on SCI Direct is addressing the growing needs of the non funeral home customer, and we're doing this in a very profitable way. Finally, driving revenue through pre need is our competitive advantage as our scale affords us the ability to capture customers before our competitors can. Slide 25 presents our 2nd core strategy, leveraging scale. Using our powerful sales organization, we can take the game where our competition cannot play. We can sell preneed in a cash flow neutral way as we have the scale of a massive sales force in favorable terms with our insurance partner Assurant.
Most of our competition does not have or want preneed counselors. And for those that do, it's a negative cash flow undertaking. Our preneed backlog consisting of insurance funded and trust funded product allows us to grow the future revenues at a faster pace than inflationary pricing. We are continuously driving down costs through the supply chain and improving service levels. Our recent investments in our customer facing technology that Elizabeth Nash will cover in more detail later will enhance our customer interactions with our funeral directors in the funeral home, on the road with our sales counselors and directly with our customers through our enhanced websites.
Our 3rd core strategy that's now up on the screen of deploying capital is right here on Slide 26. It presents our disciplined approach working within targeted leverage ratios and liquidity parameters. The opportunities with the highest current returns are in our growth capital. We expect to spend $50,000,000 to $100,000,000 a year on acquisitions that have internal rates of return in the mid to high teens. Another $20,000,000 on new builds, which will have lower teen type returns, but have nice long term growth trajectories.
Then another $80,000,000 on cemetery property development, which is taking existing undeveloped cemetery property and creating inventory, everything from roads, drainage, irrigation to tiered inventory like mausoleums and private estates. These incremental investments have internal rates of return in the 40% to 80% range. Next on our capital deployment strategy, we believe in growing our dividend with the business growth. We target a 30% to 40% payout ratio of earnings per share and last week we raised our quarterly dividend by 0 point to $0.17 Finally, we believe very strongly in the future of SCI. We currently grow at a healthy rate organically and are building our backlog of future revenues.
We also understand the power of demographics and we believe they will favorably impact our business even more so in the future. So we want to own as many businesses as we can that are going to match our strategy. Still, we are blessed with abundant excess free cash flow. So we believe that shrinking our equity through share repurchases will create value for our remaining shareholders. Having said that, we take a measured approach attempting to accelerate and decelerate our repurchases based upon our view of fair value.
Finally, on Slide 27, we show you our long term growth framework where we believe we can consistently grow earnings per share in the 8% to 12% range. We believe we can achieve half of this growth or 4% to 6% organically through our existing businesses. Next with our free cash flow, we can add 2% to 3% through business acquisitions, which are accretive immediately or to a lesser extent through new builds. Finally, it's our firm belief that based on SEI's future prospects and in our view of our stock's value, we will continue to shrink the equity through share repurchase, which should add another 2% to 3% to earnings per share. Now, I'd like to turn the presentation over to Jay Waring, our Senior Vice President of Operations.
Thank you, Tom. Good afternoon. Today, we'll cover some strengths that give us a great foundation for future growth. We'll cover some customer trends. We'll cover how we're listening to our customers to be relevant today and to be relevant for the future.
So on Slide 30, what are some strengths that give us a great foundation for future growth? Well, one of our strengths is unlike most of our competition, we have not one, but 2 different channels to serve our customers through. The first channel is our funeral homes. We find these customers want quality, these customers want location convenience, and these customers want us to serve their religious or cultural needs. The second channel is our non funeral homes and these are our no frills direct cremation brands with names like Neptune Society, Trident Society and National Cremation Society.
We find these customers want simplicity, these customers want to pre plan and these customers do not want to go to a funeral home. Another strength is both the size and reach of our network. And because of our size and reach, we serve every cultural, every ethnic and every religious customer segment in North America today. There are 2 key points on Slide 31. 1st, if you look at the bottom footnote, 76% or 123,000 of our cremation customers use our funeral home channel.
And second, if you look at the 2nd line from the bottom, total non funeral home, this channel makes up 13% of our volume, but 39% of our pre need contract volume. We find these customers want to pre plan and we don't have much pre need competition here and are growing very quickly. On Slide 32, another strength is the power of our operating model. We have national scale and can leverage centralized accounting and centralized payroll, and we can also leverage our tremendous buying power. For example, we have over 7,000 vehicles, so we get factory direct pricing.
Another example is we purchase over 150,000 caskets each year, so we get deep supplier discounts. We have local scale and can leverage our crematories, our personnel and our vehicles. We find our operating model helps to support better consistency, better customer satisfaction and better quality. And we find our operating model helps to lower both our variable and fixed costs. So our breakeven point comes much earlier in the year than our competition.
So these are some strengths that give us a great foundation for future growth. So what are some customer trends and how are we listening to our customers to be relevant today and to be relevant for the future? We'll start with changing customer preferences. Historically, our profession has been very slow to change. A lot of our profession services have been the same, a lot of our profession's facilities have been the same.
But today, we live in a much different world. So Slide 35, to adapt to our changing customer preferences, we've identified 4 customer types and they are customs conscious, full service, neighborhood and price sensitive. I'll leave you with 4 important points on Slide 35. 1st, full service and customers conscious combined for 39% of the customer base, but 50% of the market spend, and we do very well serving these customers. 2nd, as we survey the market every 5 years, we are seeing a slight shift out of neighborhood and into customs conscious and into price sensitive.
3rd, while price sensitive is 23% of the customer base, this percentage has been increasing very slowly over time. And 4th, we find that 3 out of these 4 customers will drive a long way to be served by our company, full service and customs conscious drive for quality and price sensitive drive for price. So let's take a deeper look at each. On Slide 36, our customs conscious customers want us to meet their religious or cultural needs. So we give them large visitation spaces and we give them tremendous service from our associates who are from their community, who speak their language and who understand their culture.
For example, in our funeral homes that serve the growing Asian population in our markets like Vancouver and San Francisco and Los Angeles and Orange County and Houston, our chapels are all set up so families can burn ceremonial incense. Another example is our funeral homes that serve the growing Hispanic population. We have a brand called Funeraria Del Angel or Funeral Home of the Angels. We have 120 locations in California, Arizona, Texas, Florida and Puerto Rico and we have large funeral homes with large visitation spaces and we offer culturally specific catering. Our full service customers want very high quality with lots of service.
So we give them premier first class facilities and we give them very high quality in every aspect of their customer experience. For example, if you go to our funeral homes like Frankie Campbell here on Madison Avenue or George H. Lewis in Houston or Pacific View in Newport Beach, you will see and you will feel excellent quality and excellent attention to detail. On Slide 38, our neighborhood customers want location. So we give them location convenience with quality, with simplicity.
So think of a family using the local funeral home in the community where they live. In many cases, these families grew up in the community, have deep roots in the community and want to have their funeral and memorial service in that community. Our price sensitive customers want simplicity, they want fewer options and they want less cost. So we give them a no frills service experience and keep both our retail prices and operating costs low. So that's a summary of how we're listening to our customers and how we're meeting their changing needs by giving them what they want.
Another customer trend is the growth of families who are selecting cremation. So why are we so confident about our future even as we face a rising cremation rate? On Slide 41, one of the reasons we're confident is we have quantified the full impact on our funeral home channel. What this slide shows is holding all else equal, a 1% shift from burial volume to cremation volume can impact revenues by $11,000,000 and impact EBITDA by 8,000,000 dollars The good news is we do a great job mitigating this impact because our operating model is set up to address this shift. Another reason we're confident is the voice of the customer.
We have wonderful customer feedback from our J. D. Power surveys in our funeral home channel. So whether a family selects burial or selects cremation, the reasons they choose us are virtually the same and the recommendation rates are virtually the same. On Slide 43, we're confident because cremation is really a core competency of our company.
Going back to the early 1980s, our company has been leading the way through a rising cremation rate of about 100 basis points per year. And a key to our success is our proven operating model that maintains high margins in high cremation markets and high cremation states like California and Florida. For example, what Slide 44 shows is over a number of years, as the commission rate slowly rises, because of our scale advantage that I mentioned earlier, we can rationalize our location footprint, we can rationalize the size of our vehicle fleet and we can use staffing metrics, so we can have the best cost structure and we can have the best margins. And while this slide shows that we can maintain margins on a lower revenue base, remember, we can also reduce our overall investment as we can sell our real estate and reduce our vehicle count. We're confident because our pre need strategy in our funeral home channel is a great leading indicator.
Our preneed backlog and our preneed sales are both showing that future cremation rate increases will be very manageable, very predictable and very slow. We're confident because unlike most of our competition, we now have a second channel to serve these customers through. As some background, if you go back to 2,005, we were finding it very challenging to serve these customers through our Funeral Home channel. In 2011, we acquired Neptune. Neptune was founded in California in the early 70s and is the original direct cremation brand.
Neptune has the halo effect of a very strong name, has a fabulous preneed model, has a fabulous business model, and since 2011, we have grown our revenues from $45,000,000 to $161,000,000 On Slide 47 is a picture of our Neptune office in Pompano Beach, Florida. Our locations are generally in a strip mall or in an office park and average about 2,500 square feet. To open a new office, we invest about $150,000 which is for the lease build out and for office equipment and for office furniture. We offer simple packages, we offer a no frills service experience, and we offer the sale pre need to multiple channels. And we are significantly growing this business.
We're growing because we open where we have existing scale, we're growing because we don't need much capital and we're growing because our comparable volume, our comparable preneed averages and our bottom line are all growing. And to highlight the orange line on the bottom of Slide 48, with SCI Direct's operating profit growth of $4,000,000 to $5,000,000 annually, with SCI Direct alone, we can overcome half of the $8,000,000 EBITDA headwind in our Funeral Home channel. So to summarize cremation, we're listening to our customers, we have a proven operating model, we have a second channel now with SCI Direct and we are confident that we'll continue our leadership position in this growing cremation market. So Slide 50, another customer trend is moving away from the morning of death and moving towards the celebration of life. And we're seeing more and more families who are looking to capture that spirit and that zest for life that they lived.
To help capture that spirit, we've developed a contemporary service offering called Life Well Celebrated. And here's a brief Life Well Celebrated video.
Each one of us is a unique story. The chapter is filled with achievements, passion and people. So how do you celebrate a life? How do you tell someone's story in a single ceremony? Begin with what they loved.
Was it gardening? The outdoors? Cooking? Then think about how to highlight that passion in a meaningful way. We can help you design a fitting tribute from beginning to end, one that perfectly captures the individual, Coordinating everything from calla lilies to catering to a 3 piece band.
That's why we're here. To see that every life is well celebrated.
So whether a family wants a traditional church funeral or wants a celebration of life with their favorite foods and their favorite hobbies and their favorite mementos or wants just a simple gathering on the beach, our role is to listen to what they want, offer advice, offer options, offer resources and give them what they want. On Slide 52, for our product offerings, we also listen. For example, our customers wanted a way to have more convenient access to grief therapy. So we now offer our 24 hour compassion helpline, staffed with professionally trained grief counselors. Last year, we received over 150,000 calls with the average call lasting 43 minutes.
Another example is catered receptions. Families can now have a catered reception at our funeral home, at their home or an outdoor venue. Our sales are approaching $30,000,000 and another $12,000,000 pre need. So these are a few examples of how we're listening to our customers and responding with creativity and responding with sensitivity. So on Slide 53, in the near term, as we wait for the demographic wave and as we wait for the backlog velocity to increase, we'll continue to deliver solid margins and deliver solid cash flow.
And as our funeral homes are a high fixed cost business, even small amounts of revenue growth will really expand our margins. And along the way, we'll always continue to listen to what our customers want, so we can deliver on what our customers need. So that's an overview of the Funeral business. Now please welcome Steve Tidwell.
Good afternoon, everyone. Thank you, Jay. It's great for you to be with us this afternoon either here in the room or on the webcast. In this next section of the presentation, I want to be providing you with some greater insights into the Cemetery segment of our business, the types of customers that we serve, the products and services we offer and most importantly, the key drivers of the Cemetery business. Afterwards, I'll turn to pre need sales and provide you with some more detailed insights into the preneed sales strategy and growth initiatives.
So we begin here on slide 56 where you can see that we interact with nearly 300,000 customers each year. We do that through our network of 4 73 cemeteries of which 281 of these are what we refer to as a combination operation. That's where we have a funeral home either on the grounds or adjacent to the grounds of an SCI cemetery. We believe that our combos provide a strong competitive advantage because of the convenience it provides our customers. Now combos are also where we have the greatest opportunity to grow our pre need sales under the banner of such highly regarded and recognizable cemetery brands such as Rose Hills and El Camino in Southern California, Arlington in Atlanta, Georgia, Ocean View in British Columbia or National Memorial Park in Washington D.
C. Just to name a few. Now if you move down the slide in the first disposition column, you can see that we serve nearly 158,000 customers on both an at need and a preneed fulfilled basis last year. Now for clarity, the nomenclature that we use on at need and preneed to discern service type, that's identical to that of our funeral segment. So pre need units depicted in the middle disposition column illustrates that just under 140,000 pre need cemetery property units were sold in 2017.
Now each unit constitutes the sale of an internment right and it's associated with the sale of one of our property options. In other words, last year we replaced about 88% of all of the at need and matured preneed units with one new preneed unit. Turning to slide 57. Our cemeteries generate revenue from 3 distinct sources: property, merchandise and services. I'll describe each of those to you in a little greater detail.
Now property types are classified into 3 categories: ground burial, mausoleum and cremation property. I'll provide a little more detail about types of property and tiered offerings in the next few slides when we go into our discussion about our 3 customer types. So in addition to property, we offer a full line of merchandise and services, which generally include grave markers and other forms of permanent memorialization as well as outer burial containers or what we refer to as burial vaults, along with professional services, which in layman's terms include the administrative functions along with the cemetery staff and specialized equipment needed to prepare the final resting place. Now on the next three slides that's 58, 59 and 60, I'm going to describe cemetery property customer preferences, which are generally categorized into 3 types: 1, custom and premier 2, mid tier and 3, basic. So here on slide 58, the custom and premier customers primarily interested in privacy, exclusivity and adjacency, which provides the ability to accommodate multiple generations of their extended family within a defined block of property.
For these customers, we typically offer a 4 to 6 tier offering set, which includes various types of custom walled, benched and gated estates as well as private mausoleum. Now as a frame of reference, we've outlined price ranges along the bottom of each of these images for these 6 property types. The Custom and Premier Cemetery customer generally aligns with the customs conscious and full service funeral The mid tier customer generally The mid tier customer generally prefers a cemetery that's 1, close to their residence and 2, offers a good balance of price and quality. Now our experience would indicate that adjacency is not as important to these customers as it is to the premium and custom customer. We offer a full line of 3 to 5 tiered offerings, which include long cribs, lot gardens, interior and exterior community mausoleum, as well as various cremation niche offerings.
You can also see that the various price points for each of these property types along the top of each frame and we find that this mid tier cemetery customer most often aligns with the neighborhood funeral customer. The basic customer described on Slide 60, they most often prefer simplicity at an entry level price. This customer generally doesn't express a need to be close to their place of residence, adjacency is even less important and they typically have little to no religious preferences. For the basic customer, we offer 2 to 3 tiers of offerings including basic lot gardens, entry level lawn cribs as well as exterior brick niche and columbarium. Price ranges for basic offerings can be seen across the top of each of these images And the basic cemetery customer generally aligns with the price sensitive funeral customer.
Let's take just a moment now and watch a short 2 minute video, which summarizes our various property options and types of merchandise. Now we recently developed this video to be shared with customers when utilizing our new pre need sales enablement platform, which we refer to as Beacon. We'll share more about much more about Beacon a little later in this presentation.
There are many ways to celebrate a person's life. And the range of possibilities at a Dignity Memorial Cemetery might surprise you. Let's take a look. Mausoleums can be designed for an individual, couple, or entire family. They're easy to customize and can include features such as stained glass, benches, and secluded gardens.
Private walk in mausoleums provide a distinguished eternal place of remembrance. But there are other types as well, such as community mausoleums, which can be equally functional and beautiful. For those choosing cremation, there are a variety of interment options, whether ashes are present or not. These include indoor and outdoor column area, pedestals, custom memorials, and more. Traditional burial is another remembrance option that can be carried out in a variety of elegant enduring ways.
A family estate, for example, is an exclusive tranquil area within a cemetery where loved ones can be together. Such estates may be bordered by handsomely crafted stone walls or lush hedges. Bench estates also offer families a way to enjoy beauty of a memorial site in a semi private setting. Other options include community lawn gardens and upright gardens. A final resting place can serve as a powerful expression of one's life and legacy for generations to come and can be tailored to fit any budget and to reflect customs, beliefs and personal preferences.
Contact us today to learn more about the options available at your local Dignity Memorial Cemetery.
So we hope that that short video helped you to visualize the lineup of property options and how we describe them to our customers. Now we'd like to provide some data to support the success of our property tiering strategy and how the baby boomer demographic is influencing the cemetery segment. Here on Slide 61, you can see that our preneed property sales production, that's the primary driver of our Cemetery revenue success, has grown at a CAGR of 7%. That's driven by 2 components. First, our tiering strategy, which supports a growing demand of something a bit more unique and personalized than we experienced with the World War II and Silent generations.
And also supporting this growth is our ability to pass along modest inflationary price adjustments. Price adjustments. You can see the light blue bubbles and how unit average has grown steadily over the last 4 years. Now we classify property production into 2 distinct categories: production generated from the sales that are less than $40,000 that's the dark blue bars then production generated from sales that are greater than $40,000 are the smaller orange bars here on the bar graph. Said another way, the dark blue represents standard inventory sales production.
This is inventory developed each year to replenish the same or similar type of inventory, which we've obviously sold through. And the orange portion represents non standard production, meaning it's a specialized type of inventory that has unique features and attributes when compared to standard inventory or its inventory that is truly a unique and one of a kind special development built to the detailed specifications of the customer. Experience has taught us that while the much smaller orange portion can be somewhat sensitive during an economic downturn, it rebounds as customer confidence improves. While the much larger blue portion of the preneed property production tends to be more stable and predictable. On an atneed basis, the velocity CAGR is down slightly over this 3 year period.
We continue to see nice average sale growth from both inflationary pricing as well as a growing number of customers who are selecting from the higher value tiers. Now on a preemie basis, the velocity CAGR is essentially flat with a sales average CAGR of 7.2%. Now it's interesting to note that when we exclude the non standard sales, again that's the orange portion of the data, the average sale CAGR is of standard inventory is about 100 basis points lower to about 6.2%, of which approximately is attributable to our property tiering strategy and the other half from inflationary pricing. So if you take a step back, all in all, we believe our property tiering strategy continues to resonate well with our customers. And as we look to the future, we believe that we can expand our tiering strategy, enabling us to address the changing needs and the desires of our 3 very important customer types.
But let's take just a moment and specifically focus on cremation property and how we're addressing this important and growing segment of our business. You can see here on Slide 62 that our sales teams continue to do a very nice job selling the value of cremation memorialization. Now this trend supports our belief that more and more cremation customers are drawn to the benefits of permanent memorialization and they find value in the property offerings that we're developing specifically for them. Over the last 4 years, we've seen preening cremation property velocity grow at a healthy 6.3% and average sales around 3.5%. In fact, last year alone, nearly 20 7,000 cremation customers purchased cemetery property and they spent on average about $3,000 We believe that this is driven by better educating customer about cremation memorialization and providing various tiers of cremation inventory that are both relevant and contemporary.
Now while we're making progress on the atneed side with velocity, customers selecting Memorialization find value in our offerings as reflected in the sales average growth of 4.3%. Now, let's break down our GAAP cemetery revenue for the last few years and look at the components of this growth trend. On Slide 63, you can see 3 very specific streams of cemetery revenue. The pre need and at need property revenue stream that's highlighted by the largest two shades of blue have generated a blended growth rate of 6.7% over the last 4 years. And as we previously mentioned, property revenue continues to be the primary driver of our Cemetery segment's revenue and profit growth.
Now it's important to note that our sales teams continue to be very focused on building heritage with existing and prospective customers by ensuring that the cemetery property discussion is the centerpiece of all sales presentations. As we look at merchandise and services revenue that's highlighted by the two shades of orange, you can see that these two important revenue streams also contribute very nicely to revenue growth with a blended growth rate of about 5.5%. Now in recent years, our preneed merchandise and services revenue stream has been growing at a slightly higher rate, which we attribute to a few things. I'll give you 3. 1st, higher quality of merchandise and services contracts that are coming out of the backlog 2, a customer service initiative that requires us to either manufacture and deliver or store memorials and markers in advance of need and 3, stronger returns from our merchandise and services trust funds fueled by the overall strength of the financial markets.
Now as for the other gray section here at the bottom of it, that's the other revenue. This is for the most part our Endowment Care revenue and my colleague Aaron Foley is going to cover that in more detail much later in the presentation. So take a step back and aggregate all three streams of this revenue. You can see that our Cemetery segment has produced an overall CAGR of 5.5%. So I just want to recap that while cemetery property production has been and will continue to be the primary driver of revenues and profits, let's not forget that merchandise and services revenue will continue to contribute incrementally to both revenues and profits.
On Slide 64, you can see sequentially how our cemetery revenue and margins have grown over the last 4 years. Now based on our track record, we expect to grow cemetery revenue by about 4% to 6% as we continue to drive preneed property sales production, resulting in margin growth of 50 to 130 basis points per year. Now the blue bars here illustrate how cemetery margins have grown steadily over the last 4 years ending 2017 at 28.6%. So with new sales tools, a growing sales force and a proven property tiering strategy, we believe that mid single digit growth in cemetery revenue, again driven by primarily by preneed property production is a very, very realistic expectation. Ladies and gentlemen, we are very excited about the future of our Cemetery segment and the opportunity to serve more customers while continuing to grow revenues and profits in the coming years.
I'd now like to transition and take you through our preneed funeral and cemetery sales strategy, including an overview of favorable demographic trends, the makeup of our sales team and how we're really beginning to leverage the power of our customer relationship management system or CRM. On slide 67, we thought it might be helpful to frame the many benefits of prearranging. We believe that prearranging allows customer to remove uncertainty for those left behind. It provides the customer with an opportunity to protect loved ones from financial and emotional decisions associated with the loss. And finally, it's a decision that provides tremendous peace of mind.
In fact, results of our J. D. Power pre need customer satisfaction survey tell us that financial and emotional considerations are the number 1 and number 2 reasons why customers choose to prearrange. Now as mentioned earlier by my colleague, Debbie Young, our preneed sales strategy continues to benefit from current and forecasted economic trends. Today, there are an estimated 74,000,000 baby boomers in the United States and they make up about 23% of the total population.
So with that in mind, you can see across the top of slide 68 that the average age of our preneed cemetery customer is late 50s to early 60s and our preneed funeral customer is late 60s to early 70s. So based on this data from our backlog coupled with favorable demographic trends, we will continue to develop and expand our preneed sales strategy to serve this ever growing base of customers. Now in addition, we believe our size and scale allow us to take the preemie game to a field where many other industry players simply don't have the ability to play. And on slide 69 here, we highlight a few of our differential advantages. First, we have the largest sales force in the industry, which numbers over 4,300 sales professionals.
We provide our sales force with a combination of best in class virtual and classroom training. We enable our sales teams with the world class CRM sales force. And we recently began deploying a tablet based preneed sales enablement tool that facilitates and streamlines the entire preneed sales process for the customer. Now we also believe that we can and in fact we do attract high quality counselors not only because of these tools that I just mentioned but because we own and operate some of the larger and most recognized cemeteries and funeral homes in North America. These advantages provide our counselors with plentiful opportunities to share our story of financial and emotional protection.
On Slide 71, I'll take just a moment and describe our sales force in a little greater detail. So at the grassroots level, we ended 2017 with approximately 3,800 market and location based sales counselors. Now we have 2 types of counselors, broadly defined as inside sales and outside sales. Our inside sales force are known as family service counselors or FSCs and they're based at an SCI location. Their objective is to radiate and establish stronger relationships with existing customers and to serve new customers who may be attending a service or visiting one of our locations.
2nd, we have our outside sales force known as preplanning advisors. Now these advisors are not based at a specific location. They're based in and around the market area with an objective of developing relationships with targeted customer segments, allowing us to expand our reach into these important areas of growth. Now typically, pre planning advisors have an established relationship with the church, a civic organization or an ethnic group, which we've already identified as a growth opportunity. Now both types of sales counselors can earn commissions in the range to 10% to 14% depending on whether that's preneed production coming from funeral or from cemetery.
FSCs receive a biweekly draw should commissions earned fall below a certain level and PPAs earned commissions on the higher end of the range, but keep in mind that these advisors have no guaranteed base wage. Our sales management team, as you can see, consists of about 6 15 professionals and on average, the team size is about 6 to 8 counselors per manager. Now with this growing sales force, we want to ensure that our lead programs can continue to support our sales strategy. Here on Slide 72, you can see leads continue to be generated primarily through 3 channels. Now the predominant channel is what we refer to as customer and family engagement.
Our post service follow-up program allows us to be in touch with friends and family members who we've recently served. We also benefit from a significant number of customers coming to one of our locations and who know our brand and express a preference to do business with us based upon our physical location and favorable reputation. 2nd, prospecting. Prospecting includes referrals from existing and new customers. This is also where many of our pre planning advisor teams go door to door and where we occasionally utilize telemarketing services in certain instances.
And finally, marketing and education. It's through this channel that we sponsor various community events such as our Your Life, Your Legacy preplanning seminar. And for specific lead campaigns, we purchased various forms of print, radio and television media. Important to note that we also receive a growing number of website inquiries. Now we believe our digital channel is poised for incremental growth with the introduction of our refreshed and mobile enabled websites, which will launch later this quarter.
Now these various lead sources add to a growing CRM database that has approximately 5,000,000 names of current and prospective customers that can be nurtured using various marketing campaigns. We strongly believe that cultivating a relationship with these and all other potential customers will continue to present our sales team with tremendous opportunities to grow preneed sales production. I'd like to point out just a couple of metrics related to our CRM and how it's helping our sales leaders to drive really good selling behaviors. You can see here on Slide 73, we measure 3 very specific items with our CRM: the number of leads created, the number of attendees at an appointment and the number of activities generated by counselors. Now over the last 3 years, we've grown the volume of these activities and we've done that with slightly fewer counselors.
We believe that these metrics support the making of a more efficient and effective sales force, which helps already productive counselors become even more productive and it informs us as to where we should focus our training resources. Here on slide 74, another key metric we measure with our CRM is the number of days before taking action on a new lead, which is the blue line here on the graph. Now the other orange line shows the number of days before a counselor makes their first sale. You can see that both have improved nicely over the last couple of years from 30 days to around one day to first contact a new lead. And you can see the counselors have also reduced the length of time it takes to complete their 1st sale from over 90 days to around 21 days.
We believe that getting counselors productive sooner is key to the sustainability of their success. Now improvement with both of these key metrics indicate a more effective and productive sales force. So suffice it to say, we are very excited about the power of our CRM and we believe that our sales counselors understand better than ever before how daily utilization of this powerful tool is helping them to become even more successful. Now in conclusion, I'd like to review some historical preneed selling trends and I'll provide some color as to where we've been and better yet our strategy to get to the next level. Here on slide 76, you can see an 8 year trend of preneed funeral sales production.
From 2010 until 2013, sales production in our core business was steady with an 8% CAGR. Now it's important to mention that this growth trend was buttressed by expanding the number of cities where we developed additional outside sales teams. Now look to the right side of the slide. You can see the most recent 4 years and a growth trend of about 2%. In 2014, we began integrating the Stewart properties and we really began to ramp up selling activities in our non funeral businesses.
Now during this time frame, former Stewart locations, that's the orange section of the graph on the right, experienced an 8.6% CAGR and our non funeral home segment drove an 11.5% CAGR. Now after integrating former Stewart locations with SCI legacy locations, we made several changes to better align and improve key facets of our preneed sales strategy. Now just to mention a few, we made changes to sales counselor and sales manager compensation plans. We set out to improve our contract quality standards. We fully integrated our CRM and we managed through a very significant consolidation of preneed insurance vendors.
Now while these changes were disruptive, we believe they were the right long term decisions to support and to streamline our preneed funeral sales program. Now in 2018, I'm very happy to report that these changes are behind us and we've worked through the disruption that comes with change. While for now, it might be challenging to repeat the tremendous growth of 2010 to 2013 without opening new markets with additional outside sales teams, that's those PPAs I mentioned a little earlier, we believe that we can and that we in fact will get back to a new normal level of prearranged funeral production growth in the 3% to 5% range. Now as it relates to preneed cemetery production, you can see here on Slide 77 a CAGR that's been around 8 percent over the last 4 years. Now you might recall that in 2015 we posted a growth of about 13%.
It's because we experienced a really nice lift from executing our property tiering strategy in the former Stewart locations. That's now normalized and we've seen better than 5% growth in both 2016 2017. So with the enhancements made with sales team and the introduction of new tools and technology, we believe mid single digit growth is clearly within our reach. So I'd like to wrap up by summarizing here on Slide 78, while we believe our preneed sales program is poised better than ever before to achieve our stated growth objectives. And we've divided these reasons into 3 categories: technology, people and products.
Now you've heard me mention Beacon a few times in my presentation and you'll hear more about it again shortly from my colleague Elizabeth Nash. Now while this technology has just recently been introduced to a handful of key markets, we're encouraged by the early results. First and foremost, we believe that Beacon is a better experience for the customer and it also enables sales counselors to educate and describe all the various options while simplifying the overall preneed sales process. Now early results indicate a slightly higher customer spend, improving close rates and a modest increase in the selection of ancillary services such as travel protection plans and celebrant services. We've also embarked on a strategy to expand the size of our sales force.
In fact, since the end of November, we've added approximately 170 new counselors to the sales team. These counselors are now completing their training and they're beginning to meet with customers. Now I want you to know that we're growing our sales force in a disciplined way to ensure that our existing efficiencies and effectiveness are maintained while also onboarding this new incremental headcount. Now we're confident that strategically placed incremental headcount will substantially support our growth objectives and overall preneed sales production. And finally, as it relates to products, we believe that the cemetery property we developed along with the packages and merchandising tiers that we design will continue to support our revenue growth strategy while also offering relevant and contemporary offerings to this growing demographic base of customers.
As we stated at the bottom of this closing slide, we really believe that future is bright and the best is yet to come. Thank you very much. And I'm now going to turn the presentation over to my colleague, Mr. John Falk for the business development presentation.
Thanks, Steve. For business development strategy, I'm going to talk about 2 areas. The first is our footprint and market strategy, which is effectively how do we use our footprint to win in any given market. And then secondly is our acquisition and new build strategy. So what are we doing to grow our presence in our markets?
And let's start by looking at our footprint. As you can see on Page 81, we have close to 2,000 locations across the United States and Canada. And as you see from the map on the left side, where our locations are generally reflects where the population lives. Now our footprint is 60% standalone funeral homes, 30% combo locations. And again, as Steve mentioned, those are locations that a cemetery and a funeral home are co located on and 10% are standalone cemeteries.
And I'll make two points about that. Most of our locations are funeral homes. Again, that's reflective of the overall industry dynamics. And then secondly, you'll notice that most of our cemeteries have been converted to combo locations with the construction of a funeral home. Now I think to really understand the power and the advantage of our footprint, you have to look at a local market.
And in this case, we've chosen Dallas. So the map on the left, let me highlight a few things. The blue dots are our standalone funeral homes, the red dots are our combos, the green dots are our stand alone cemeteries and the yellow sole dot is our SCI Direct or our non funeral home location. And I'll make a couple of comments about this. First, you see we have a geographic representation all over the market, which is important for us.
Secondly, you'll notice, again, we have the most standalone funeral homes. There's more competition in this area, lower barriers to entry and we have to be closer to our customers. You'll also notice of our 8 cemeteries, 5 of them are combo locations. In fact, if you study the customer data on the right, of the 7,500 customers that we serve in Dallas, 2 thirds of them are through our 5 combos. And I'm going to speak in a few pages a little more about the power of the combo and why it's so important to our network.
The one thing as you look at Dallas, again, we talk about the strength of the network. If you think about the scale advantages that Jay mentioned on the national level, but more importantly at the local level, you can see how we're set up to take advantage of efficiencies in vehicles, staffing and marketing in the Dallas market. A couple of other points I would make. In Dallas, we own the Sparkman Hillcrest brand. And if you were to visit Dallas, that is the premier funeral and cemetery brand in that market.
And that gives us a huge advantage by owning that asset. The other thing is we have 2 Gonzales branded locations that are customs conscious and have a high appeal to the Hispanic network in Dallas. And then finally, only one SCI Direct location. And the beauty is we can serve a market as large as Dallas out of one location because customers don't often visit those locations. They don't want to come into facility.
So it lowers our cost to serve and it enables us to be extraordinarily competitive in that market that wants a low price. Now let's talk a little bit about Cemetery and the role it plays in our footprint. As Steve mentioned, Cemetery is the growth engine of our footprint, and there are a few reasons why that is. First,
I'll come back to the quality
of our assets. So our 470 cemeteries averaged 3.35 burials per cemetery as opposed to the industry average, which is closer to 200. So that's a tremendous scale advantage in a high fixed cost business. There are other industry dynamics that other speakers have spoken about. Very high barriers to entry and also the beauty of the recognition of all the preneed growth that Steve mentioned on the property side with the baby boomers, we can recognize that on our profit and loss statement.
There are 2 other advantages that I'll reiterate unique to SCI as a company. One is our unique scaled approach or excuse me, tiered approach to offerings. If you were to drive through one of our cemeteries, I'll go back to Dallas and those of our competitors and as you saw in the video, customers see a clear difference in the offerings they can get at our cemeteries versus the competition. Additionally, our progressive sales model. So come back to the Dallas market, our ability across multiple properties to run one marketing campaign, generate leads, get those leads into salespeople's hands and then make sales across that market is a significant advantage for us.
And you can see that in the results of the cemetery segment on Page 84. So for the last 3 years, comparable growth from 5% to 6%. Now how do we contrast that against the funeral business? And you can see funeral is a much more steady business. And the reason that is, is that volumes and revenues in the funeral business are driven by death rates.
And as Debbie shared with us, death rates over the last 5 to 10 years have been extraordinarily steady. All the pre need growth we've been able to achieve that Steve spoke about in baby boomers, we can't recognize on our P and L statement until those pre needs mature. And we know that those deaths are coming and the future is bright. But one of the things that we look at in business development is, what if we could grow that funeral segment like we do the cemetery segment as we wait for that demographic bubble to come. And so we're always looking at ways to grow that side and that's only going to come through share growth while deaths are relatively flat.
So we want to share a few things we're looking at on this front. But let me start with how we think about the funeral business, and I'm going to come back to those combo locations. Now you can see the chart on the left. What we look at is combos represent 19% of our funeral locations, yet they're 33% of our revenues and 49% of our profits. So very important and very powerful assets within our footprint.
And there's three reasons I'll highlight that they do so well. 1st, it's convenience. If you think about a family having to arrange both the cemetery service and a funeral service, the ability to do that in one location is an extraordinarily convenience to them. And then you think about actually having the service to have that co located in one facility is a significant advantage versus our competition. Secondly, the customers that tend to use our combo locations tend to be more traditional And that's because by and large, they probably purchased at our cemetery and those customers purchase more services on the funeral side and more merchandise.
And then lastly, these locations tend to be larger and slightly newer than our average standalone funeral home. And this is because over the last 15 to 20 years, we've built a number of these to create the combos. So they're newer buildings and they're a little bit larger because if you think about the cost of land to build a funeral home, if we're building it on our cemetery, we don't have the cost of land. So you can expend a little bit more area in building these locations. Now you might say if the combos are that strong, what about the other 75% of locations that are stand alones?
And we think about these in 3 buckets and these line very closely to the customer types that Jay spoke about earlier: full service, customs conscious and neighborhood funeral home. And as you can imagine, the full service and customs conscious locations are set up from a facility standpoint, staffing and offerings to appeal to those unique needs that those customers have that Jay mentioned. So our full service and customs conscious locations, while they're not easy to differentiate, we have a playbook that we've been very successful operating and we feel very good about the performance of those. Now the neighborhood funeral homes are a little bit more competitive. And the reason that is, is as Jay mentioned, the customers that tend to go to a neighborhood funeral home don't have such unique needs as the full service and customs conscious customers.
As a result, they tend to select the funeral homes that are in their neighborhood and community, a little more difficult for us to differentiate. So what's important to those customers? The facility needs to be nice. The price needs to be competitive. You hope that they're in a growing community of the town that's socioeconomically positive.
And we have great locations in this model, but we also have some that are more challenged. The facilities may be a little more dated. They may have a very difficult competitor that prices aggressively. It could be a market that's socioeconomically on the decline. So as we look at the funeral business, this is where we think our biggest opportunity is.
And I want to talk through a few initiatives that we're looking at that we're testing that we wanted to share today. That's 3 of them. The first two relate to pricing, 1A and 1B. And the question on those is, can we actually lower prices to steal share versus the competition? The second one is about our facilities and the third one is about preneed.
And let me talk about 1a and 1b in particular. 1A is about cremation pricing and repositioning. And why is this an opportunity? If you go back to the 2,005 to 2,007 timeframe in our company's history, we made a decision to stop competing aggressively for what we refer to as the value direct cremation business. And as Jay mentioned, we now serve that through our SCI Direct non funeral home channel.
But we believe there is an opportunity to go after the mid tier cremation customer. Secondly, on burial, one of the things we're always doing is looking at different consumer metrics and one of those is discounting. And one of the things we looked at in certain markets is we saw a little bit higher discounting than others. And as we looked at those markets, we saw pricing a little bit too homogeneous between our neighborhood funeral home segments and our full service and customs conscious. So on the burial side, we think there may be a little opportunity to create a clear tier and again go after share in that segment.
Now I'm going to share a little bit more on 1a and 1b on the next page with some tests we've done. Number 2 is around addressing facilities in the neighborhood funeral home segment. And we're very proud of the way our facilities look and we've invested a lot of capital to make them state of the art. But what I would say is historically over the last 5 or 10 years, we have differentially invested in our combos and our full service and customs conscious locations. And the reason we've done that, I've really addressed on the prior slides.
If you look at our combo locations, we want to make sure those assets are in great shape. They're very important to us. And again, we want to make sure our full service and customs conscious model is set up correctly from a facility standpoint. But what we're finding is the neighborhood funeral home facility is also very important, arguably more important. So again, I'll share an example in a couple of slides of what we've done here.
And then finally pre need Steve's addressed, but we wanted to feature it on this slide because at the end of the day, this will be the number one initiative that we have to grow volume and grow share, and we know that it's coming in the future. So let's talk more about 1A and 1B. In late 2016, in October, we went to 2 markets to test the theory that I mentioned on the prior page. Can we reposition our pricing and actually go after share? And I want to share some of the results that we're excited about.
In the bottom left chart, you can see 2 bars for each segment that I'll walk through. 1 is a lighter blue bar, which represents total volume change in 2017 and the darker blue bar represents cremation volume change. And you can see for SCI in our core locations, total volume was up 0.5 point. Cremation volume was up 3%. Now in our test markets, you can see significantly improved performance.
Test market 1, volume was up almost 11%, cremation volume up 27% and in test market 2, volume up 2%, cremation volume up close to 14%. So you can see we outperformed on both burial and cremation. But if you specifically look at the 1a cremation, we significantly outperformed. You might say, well, John, sure you grew volume, but what happened on the revenue and profit side? And again, I'm going to focus on 1a.
If you look at the chart on the bottom right, we were actually able to overcome the decrease in price with the incremental volume. So this chart breaks out the revenue variance between volume impact and sales average impact. And you can see in both test market 1 and test market 2, we had revenue impact from volume that more than offset the decrease in average price. Now since these two markets were into 6 additional markets, 3 of those are burial and cremation. So it's the 1A and the 1B opportunity that we mentioned.
3 of them are cremation only. So that's the 1A opportunity. And while results are it's too early to feature them, directionally we're seeing very similar results. Now this is not something that we think we need to do in a prevalence of markets. And we're looking at this market by market, but where we think there could be an opportunity to go after share with this, we're absolutely looking at it closely.
Now, facilities. Again, very similar to pricing. We don't think this is a predominant issue across our neighborhood funeral homes. But where we feel the facility could be a little bit dated and that intersects with the community that is socioeconomically strong and growing, we think there's an opportunity to invest in our facilities and get a clear return. And the difficult thing is you do have to measure this over a couple of years because of death rate variances.
But we want to show an example in Florida. This was a location that was a bit dated and hadn't had a renovation in some time and we invested $800,000 in that facility in early 2014. Now $800,000 would be a lot for a standalone funeral home. And you can see on the right some of the improvements that we made, creation of a new catering event room, new arrangement rooms and a full refresh of the facility in terms of paint and carpet and furniture. And if you look at the chart at the bottom, the yellow bars represent year over year volume change and the blue bars represent year over year revenue change.
And if you look before 2014, at the end of the day, a lot of the bars are going down. And if you look after 2014, a lot of the bars are going up. And it's a direct linkage to what we did at that facility. So again, we're reviewing our neighborhood funeral homes, putting in the criteria that we had against this one, and we're excited about the opportunity here.
Now at this
point, I'm going to move on to acquisitions and newbuilds, but I hope this has given you a sense of what we're doing in our local markets to increase our competitiveness, particularly on the funeral side. So acquisitions, there's a lot on this chart, but let me talk about 2 things. Where do we want to grow in terms of markets and then what type of businesses? And the chart on the left shows our framework for thinking about markets and pretty simple, but it's important that we stick to it. On the horizontal axis, you can see customer and market attractiveness.
And what that is effectively measuring is, do I have more of those full service and customs conscious customers in a market or more neighborhood funeral home and price sensitive customers? And we do see a variance of that across markets. The vertical axis potential for scale, which simply says, can I have an environment like Dallas where I can take advantage of efficiencies? And the long and short of it is, I want Utopia markets, high on the vertical axis, high on the horizontal axis. Now when we're in Utopia markets, what do we look at from a target?
First and most importantly is we want scale acquisitions. So on a per property basis, at least $1,000,000 in revenue per rooftop on the funeral side and $1,500,000 on the cemetery side. Of course, we like acquisition targets that are having attractive market and customer dynamics and then proximity to our existing network. And when you have those criteria, you get 2 things. You get all the synergies that Jay Waring spoke about in his presentation, both national and regional, and you get our hours in the 14% to 18%.
So for us, it's an excellent deployment of capital, as Tom mentioned. And if you look at our history, we've been very successful in deploying capital in this manner. On the top yellow part of the chart, over the last 8 years since 2009, you'll notice we completed 2 public acquisitions consisting of over $1,300,000,000 of capital. In 2010, that was Keystone and in 2013, Steward Enterprises. Now the tuck in acquisitions are also significant.
And if you look over the 8 years, this is over a $500,000,000 of capital deployment. And with every year with the exception of when we did large public players, we're spending in the $75,000,000 to $100,000,000 range. As you can see the mix of properties that we purchased, primarily funeral homes, but when we have combos and cemeteries that meet our criteria, we're very excited to capture those too coming back to the growth dynamics. And you can see at the bottom of each year, our weighted average IRR for those deals in that 14% to 18% range that we mentioned earlier. Now in 2017, these are just a few example acquisitions we wanted to share.
In the top left, Arlington Park Cemetery was part of a 4 cemetery business that we acquired, serving close to 900 families in Milwaukee, where we had a large cemetery presence. Weed Carly Fish on the bottom left was a 5 funeral home business serving over 1,000 families in the Austin area, Austin one of the highest growth markets in the United States. And all that funeral, primarily in Fort Collins, Colorado, that was 12 funeral businesses and 1 combo. And again, Fort Collins, one of the largest growth markets in the United States. So this is a representative mix at what we want to buy and again fits the criteria that we spoke about earlier.
Now one of the questions that I get a lot is what do you do to generate this activity and how can you make sure that you're getting quality acquisitions in the future. On the left side of this page, you'll notice we have a target acquisition list and that represents approximately $1,000,000,000 of revenue that we would like to purchase into the future and we feel confident about. Now our job in business development is to maintain relationships with these business owners and make sure that when the time comes, they trust SCI, they're comfortable with us and that they're going to come to us. Now most of these businesses are family owned businesses that have been passed down generation to generation. So the way that we look at it, we're going to partner with them on their timeline.
Generally, a sale is not going to take place until the succession planning event occurs. And when that occurs, again, those businesses aren't going to train hands a lot, we want to be the purchaser of choice. The other question we get is why not buy more? If you all own 1500 funeral homes and there's 22,000 roughly as Debbie mentioned, seems like there'll be opportunity to buy a lot more And there absolutely is per the acquisition list. But the thing that I would say is, of those 22,000 funeral homes, there is a wide variance in the quality of those assets and a lot of them are in those Smallville type communities that I mentioned on that framework slide.
We feel like our footprint and the quality of our assets is a tremendous advantage for our company, and we want to make sure that, that quality stays at where it is to now or frankly improves. So we're going to be selective about who we buy. And again, the timeline has to be right for both ends. Let's in closing talk a little bit about newbuilds. So you can see from the chart at the bottom, our spend represents a more modest but growing deployment of capital relative to acquisitions.
And at the end of the day, we would rather buy a business and build it. But there are circumstances where we like new builds and it is a very good deployment of capital as you can see from the 11% to 14 percent IRRs we achieve. Number 1 is, can we build a funeral home on a cemetery and create a combo? And as I mentioned earlier, a lot of those opportunities have been executed on, but we're constantly looking at our standalone funeral homes and as they are growing, they more and more hit the filter for creating a combo. And secondly, we like to build standalone funeral homes in markets where we already operate and there's a growing community that doesn't have a funeral home already.
And we like to be the 1st entrant into there and we feel like when we do, it gives us a distinct competitive advantage. Now those funeral homes tend to be $2,000,000 to $4,000,000 of spend, roughly 6,000 to 10000 square foot of building on 1.5 to 2 acres. And the nice thing is they're cash flow positive within 2 years and earnings per share positive within 3 years. Now similar to acquisitions, we wanted to show off a few examples from 2017. On the top, El Paso, Texas, that's one of those Utopia markets that we mentioned earlier.
We bought a property there excuse me, a cemetery there called Evergreen East in the growing part of town and it was serving 400 families. One of the first things we did when we completed that acquisition was to build a funeral home on it, Evergreen East Funeral Home. And we are very happy with the success it's had March of 2017. It's a great facility for our customers in El Paso and for our associates at the cemetery. A similar example on the bottom left, Pine Crest Funeral Home in Little Rock, Arkansas.
This was a Stewart cemetery, about the same size as Evergreen East. We built a funeral home on it, opened about the same time, and it's also done very well. And a standalone example on the bottom right, Palm Southwest Las Vegas. Palm, our brand in Las Vegas, is the leading funeral provider in that market and we did not have a presence in the Southwest portion of town. We built that location, it opened in February of 2016 and it's far exceeded our expectations.
And these are examples of the type of new builds that we're going after. So in closing, we've talked about 2 things in business development, footprint and market strategy, acquisition and new build strategy. And the thing I want to leave you with on footprint and market strategy is pre need is critical, but we're always looking at data from our markets and from our customers on how we can improve. And we've shared a few initiatives we're looking at to improve performance and we have a pipeline of initiatives we want to test and really drive that funeral home needle. And then on acquisitions and new builds, we think the pipeline of opportunities is very strong and we're very confident about the ability to continue to execute on that $75,000,000,000 to $100,000,000,000 of capital deployment and potentially grow it into the future.
So with that, I'd like to turn it over to Elizabeth Nash, our Senior Vice President of Operations Services.
Thanks, John. Good afternoon, everybody. As you've heard, remaining relevant is a key strategy for SCI. One component of that is investing in consumer facing technologies that ensure we remain current and fresh in how we interact with consumers. I'd like to share some exciting developments in this area of focus.
Over the last 3 to 5 years, we've made significant investments in technology, shown on Slide 101 that have automated and streamlined processes, reduced errors and cycle times and improved our operations and sales processes. Through these efficiencies, we've not only reduced expenses, but we've reduced the amount of administrative activities in our processes. In some cases, we've chosen to use the world class systems that are available in the marketplace, such as Salesforce for managing our customer contacts and Oracle to provide our accounting and financial reporting system. Solutions, most solutions, most recently in customer facing applications. We have some additional detail about those investments on Page 102.
Our focus with new consumer facing technology is to continuously improve the experiences our customer are having, whether that's in an at need arrangement, during a pre need transaction or online. Just like consumer interactions in so many other buying experiences, the consumer today is expecting to communicate and then conduct business in a way that incorporates technology. The expectation is that by leveraging technology, we can provide a faster, easier, less stressful process for our client families. HMIS Plus is our new at need arrangement system used in our funeral homes to guide client families through the arrangement process using a modern digitized presentation of products and services. All offerings are presented and discussed in the presentation and the process facilitates all the decisions that have to be made.
Beacon, a very new preneed sales presentation to walk a consumer through a preneed sale. And our refreshed websites, which will go live early next month, have been redesigned to provide a more mobile experience, easier search and more localized content. All three of these systems create more innovative, creative ways for us to communicate with and engage with the consumer. For HMIS Plus and Beacon, the use of technology coupled with the intelligent, thoughtful design of the presentations has changed the way we present our merchandise and services. You can see on Slide 103 the before and after images of the experience.
In the at need arrangement, we've replaced the sometimes unsettling experience of walking through a casket room with high quality images of our products, which creates a less stressful situation for our client families while still providing them the product details that they need to help make their choices. HMIS Plus presents products and services in a guided way. However, it does allow some flexibility for the funeral director to accommodate how the family wants to progress through the discussion. The system also facilitates receipt of payment and interfaces the transaction into our point of sale system. As a side benefit, we've been able to repurpose some of those casket rooms into reception areas that provide catering as a new service to our client families.
You'll also notice that the physical space in which we talk to a family has changed. It has become more of a living room type setup, coupled with large monitors that allow everyone in the room to see the presentation. And with Beacon, where we used a multitude of paper collateral before, we will now use a seamless digitized presentation done on a tablet with beautiful imagery and high quality videos. Beacon was also designed with a focus on mobile usage, so it can be used not only in our locations, but anywhere the customer might prefer, be that at a Starbucks, at a library or in the convenience and comfort of their own home. Both of these applications provide a more streamlined, simplified and convenient experience for the consumer.
In addition to that improved customer experience, leveraging technology generates other benefits as shown on Slide 104. 1 of the most impactful changes for us is that these systems, both the at need arrangement and pre need sale application, are designed to ensure that the consumer is shown our entire suite of products and services. With HMIS Plus and Beacon, the arrangement and sales conversation stations led by the funeral director and sales counselors include everything we have to offer. So we're assured that the consumer is well informed about their options. We have a wide array of offerings.
And in the past, it might have been difficult for us to be sure that consumer was hearing about all of them. The new systems also accelerate the availability of new merchandise and services. Previously, to add a new item across the network could have taken months given the paper collateral that needed to be updated. Now with HMIS Plus and Beacon, we can add a new item and make it available within just a number of days. Lastly, worth mentioning is that both systems give us visibility that we've never had before into the productivity of our staff.
So for example, we can now see data about where a funeral director is spending his or her time in a conversation with the family. Did they only spend a few minutes talking about the earn options? Did they skip catering option altogether and so on? This helps us with training and we can also use that data to determine the optimum length of the arrangement conference. In sum, there are many benefits from these investments, be they consumer or for our associates.
In addition to those benefits, Slide 105 presents measurable improvements in 2 key metrics that we've been monitoring for HMIS Plus. We've seen a 1.4% increase in our average customer satisfaction or CSI score, which is material given that we started with a very strong score of 942. Also, our package selection rate has increased over 20%, which we know is a key driver of increases in our funeral sales average. And although it's too early to report these metrics for Beacon, as Steve mentioned, we fully expect to see similar increases once it is fully rolled out to our sales force later this year. As I mentioned earlier, very soon we will introduce our refreshed location websites for all of our funeral homes and cemeteries in the U.
S. And Canada. You can see from the example on Slide 106 that the current sites are bit dated, present an overwhelming number of content choices on the homepage and don't highlight well the specifics of the individual location. Now contrast that to the updated version on Slide 107, which is more sleek and uncluttered and provides more local content in the form of photos of the location and a more prominent display of information about the location. There are other benefits as well.
We've added the ability to better interface obituary and other information about loved ones to social media sites like Facebook, which are increasingly becoming a key means of communication between family and friends. We've also put a lot of time and thought into building out the content and keywords so consumers can find our locations quickly and easily when they search. Lastly, there is an emphasis on mobile in this new design, reflecting again changing consumer behaviors as they do more and more business online. Overall, these sites will be a much richer source of information and is another way for us to remain relevant with the consumer. On Slide 109, we share some details about customer satisfaction survey results.
I'd like to shift gears a bit and talk about how our culture of service excellence is driving customer satisfaction, which is measured through a J. D. Power survey that is sent to each of our funeral home and cemetery customers. We're very proud of our customer survey results. We have a 30% return rate, which is 5 times higher than that of the average response rate for J.
D. Power's other clients. And since implementation of the survey 10 years ago, we've received over 1,000,000 responses providing invaluable insights and feedback. 2 are worth calling out here. On the most important question, would you recommend us to your friends or relative?
97% of our customers say they definitely or probably would, which speaks to the success of our culture of service excellence. In addition, 3 out of 4 consumers state that our prices met or were below their expectations. Overall, truly outstanding customer satisfaction results that are a constant focus for us and we're always trying to improve. On Slide 110, you see a ranked list of other companies for whom J. D.
Power conducts customer surveys. Although we can't share specific company names with you, you can see the categories of some of the other highly rated companies. We're very proud that our locations rank so high on this list, with our funeral home scoring 52 points or 6% above a major luxury hotel brand that is known for its excellent service to guests. Our CSI score is the ultimate gauge of the service we provide. And so it's something not only that we monitor closely, but we use it as a key input into other important business decisions, including design of compensation plans and the allocation of capital.
Our commitment to service excellence has been recognized by J. D. Power, as you can see on Slide 111. In 2016, SEI was awarded the J. D.
Power President's Award, which is their highest honor recognizing commitment and results of customer satisfaction and loyalty. In their 47 year history, this award has only been given to 12 companies, and our receipt of it puts us into a world class group of companies, including Edward Jones, General Motors and USAA Insurance. Again, a remarkable achievement that we're extremely proud of. So in summary, we'll continue to keep our eyes on the horizon for changing customer preferences and emerging trends in technology to ensure that we're supporting our key strategy of remaining relevant to consumers. And we'll continue to invest in that technology to improve the customer experience and support our culture of service excellence.
With that, I'd like to introduce Anastasia Jones, our Director of Financial Services.
Good morning and thank you, Elizabeth. I am Anastasia Jones, the Director of Financial Services, and I will now kick off the final component of our 2nd core strategy leveraging scale. I will first begin with an overview of our deferred revenue backlog, also known as the preneed backlog, and then I will explain in detail how our insurance backlog mechanics help us achieve a cash flow neutral organic growth strategy. Aaron Foley, our Treasurer, will then follow by describing our investment strategy for the trust backlog mechanics and then he will also walk you through the uniqueness of our Cemetery Perpetual Care Trust. Aaron will then be followed by Eric Tansberger, our CFO, who will present an outlook of how we believe our backlog will grow over the next decade.
Now with that, let's talk about how the backlog is being driven. As we move on to Slide 115, I would like to explain why pre need arrangements are beneficial to both our customer and to SEI. As Steve explained earlier, our customers value pre arrangement because planning provides price protection, time to pay and peace of mind for their final arrangements. The preneed value proposition for SCI is clear. Leverage scale to create better quality sales which drive revenue growth.
Our research shows that individuals spend more on themselves than their descendants will spend on them. So this additional spend coupled with financing options allows us not only the opportunity to have better quality of sales going into our preneed backlog better than that of our atneed walk in sales, but we have also locked in an atneed service in the future. These are the drivers for our preneed backlog. So let's now move on to Slide 116, where we take a bird's eye view of our entire backlog. Through the execution of our pre need funeral and cemetery sales strategy, we have developed a backlog of just almost or almost $11,000,000,000 which is 4 times larger than our annual Aetna revenues $2,500,000,000 These deferred revenues will be recognized upon the delivery of merchandise and performance of services that were prearranged.
Until these deferred revenues are ready for delivery or performance, they are supported by our insurance and trust backlogs. As you can see on the graph to your left, our deferred revenue backlog is well balanced between both insurance and trust backlogs. In a couple of minutes, Aaron will explain our trust backlog mechanics. But if you follow me to Slide 118, I will walk you through our insurance backlog mechanics. Our insurance is a little over half or $5,700,000,000 of our total backlog.
We believe that it is because of our scale and our footprint that we are able to benefit differentially from our competition with this very predictable and stable economic structure. Our exclusive partnership with Assurant guarantees us a 1% growth factor over the life of all insurance contracts sold by SEI as well as an average 25 percent general agency selling commission structure, which comes to us in the form of both revenues and cash flows upon the sale of a preneed funeral contract. For our newbies in the audience, insurance is only applicable to our preneed funeral business. We currently do not allow insurance financing for our cemetery business. The insurance policies are administered completely by BBB plus rated Assurant.
We are solely the agent in the transaction between the customer and Assurant, so this portion of our backlog is not included on our balance sheet. Because of the upfront general agency commission that we received, in many instances, the insurance product provides SCI with an NPV that is better than our trust option. Also, this insurance product provides the consumer with an additional layer of protection if they're financing over time. The sale of the preneed insurance policies do not expose us to market risk, but we do have some credit risk exposure with Assurant. Now how do we manage this risk?
We talk to Assurant quarterly to ensure that their portfolio investment allocation has not significantly changed quarter over quarter and we have the benefit of the more formal nationwide guarantee fund, which requires Assurant to contribute to for every policy that they sell to cover the risk of default. Now with this, let's take a look at our total production on Slide 119. Let's start with the right side of the slide, which shows we produce about $1,700,000,000 in annual preneed funeral and cemetery production. Of this $1,700,000,000 $1,200,000,000 goes into our backlog and the remaining $500,000,000 of cemetery property production is not a component of our backlog. As Debbie explained earlier, we generally recognize cemetery property upon the time of sale, so this item is not required to be trusted.
Of the $1,200,000,000 production that goes into our backlog, it's about 45% insurance and 55% trust. Again, our insurance backlog is about 100% or is 100% funeral business, whereas our trust backlog is fifty-fifty funeral and cemetery business. We like this balance between insurance and trust because the stability of our insurance backlog partially hedges the financial market volatility that our trust backlog is exposed to. Now with this, let's switch gears to illustrate how this mix of insurance and Trust Squad preneed funeral business translates into a cash flow neutral organic growth strategy. As you can see at the bottom of the table on Slide 120, insurance aids heavily in funding the financing program.
Now let's go back to the top of the table where we can see that the immediate cash flows from our general agency commissions generate on average about 25% of cash inflows, whereas our average trust retainage, which is set by each state, generates on average about 10% of cash inflows. As an offset to these cash inflows, we have preneed funeral selling costs of about 21% for our insurance option and about on average 16% for our trust option. We are able to produce a higher general agency selling commission for our insurance for certain customers that we sell insurance to. So we share this added value with our sales team through the commission structure. When we net the inflows against the outflows for both insurance and trust options, we can see that our insurance general agency commissions cash inflows are significantly offsetting the cost of both insurance and trust finance options.
Our unparalleled scale and our insurance funded preneed funeral production are the key components of our financing offering, which enables us to yield a cash flow neutral organic growth strategy that cannot be matched by our competition. This concludes the insurance backlog mechanics discussion and now Aaron will provide insights into our trust backlog mechanics. Thank you.
Thank you, Anastasia, and good afternoon, everyone. Now I'm going to give you a little more detail on our trust funded preneed backlog and then discuss another set of trust funds that aren't related to our preneed backlog at all, which are cemetery perpetual care trusts. Shifting to Slide 122, you can see on the left hand side of this slide that about half a little under half or about $5,000,000,000 relates to our deferred preneed revenue backlog on our trust side. From customer proceeds on preneed contract sales, we are able to retain as operating cash flow about 10% of funeral and 30% of cemetery collected amounts in the form of retainage with the remaining funds being deposited in the trust based on state and provincial regulations. However, keep in mind, none of these proceeds are recognized through our income statement until those contracts mature.
These trust funds are primarily backed by marketable securities of about $3,500,000,000 which are managed by 25 professional investment managers across 22 different investment strategies. While we are subject to market risk, we appreciate the potential upside capture from the market returns on these assets. Our trust asset allocation is based on the average length of time a contract is in our backlog, which is about 10 to 14 years. As you can see on the left hand side of this slide, the funeral contracts are generally in our backlog for about 10 to 12 years, while the cemetery contracts have a 12 to 14 year life. During the time the assets are invested, all gains and losses are flowing through our balance sheet.
Again, it's not until maturity or the time the products and services are delivered to these trust returns impact our earnings and our cash flow. This 10 to 14 year investment horizon allows these trust assets to be invested through multiple market cycles. On Slide 124, you can see the blueprint of our trust asset allocation strategy. As you would expect, given the 10 to 14 year life, the assets are weighted about 2 thirds toward equities with a sizable component of fixed income, some trust insurance contracts, which are really just insurance policies that are held within the trust, some alternative investments and a portion of cash for the current period inflow and outflow that occurs for normal trust deposits and withdrawals. This strategy, as you can see on the bottom left, has driven a real return of about 4.5% over the past 10 years.
And adjusting out the impacts of the 2,009 financial downturn, look at our 7 year real return, rises nicely to just over 6%. Ultimately, this real return is adding both future margin and cash flow to SCI beyond regular inflationary pricing. I'd like to shift now to an overview of our management structure for our trust assets. Members of SCI Management and Board oversee the trust structure, which includes an internal registered investment advisor, Trust Advisors Inc, or TAI, as we refer to it. TAI performs several functions in addition to providing investment advice that I'll get into in a little bit.
Our trust structure also includes an external registered investment advisor, LCG and Associates, who are based out of Atlanta. There are also 5 independent trustees who are large financial institutions that you would recognize, who have fiduciary responsibilities around the trusts. They each follow an investment policy influenced by a variety of state and provincial laws with an asset allocation strategy that guides them to invest directly with our 25 professional investment managers. Now on Slide 126, I'd like to address how we manage our trust operationally. Distributions from trust funds help to cover fees charged by our trustees and for trust taxes on any taxable events that occur within our trusts.
SCI also performs accounting, record keeping and analysis functions for our trust with the help of both internal and external resources. These activities costs are all housed within TAI and are funded from distributions from the trusts. In total, these fees have almost a 200 basis point impact on our annual trust returns, as you can see on the table to the right. About 125 basis points of these fees come to SCI through our internal registered investment advisor, TAI. We set this structure up earlier this decade to be reimbursed from the trust for internal costs associated with managing, tracking and analyzing our trust assets that I just noted.
The section I just covered addresses our trust assets associated with our deferred revenue backlog related to our funeral and cemetery merchandise and service trusts. I'd now like to shift to another portion of our trust that are unique and are not related to our deferred revenue backlog, which are our Cemetery Perpetual Care Trusts. On Slide 128, we've laid out some aspects of how these trust assets are generated, how they have historically been managed and where they are heading. The Cemetery Perpetual Care Trusts are funded whenever we sell cemetery property for generally about 10% of the cemetery property sales proceeds, as required by state and provincial laws. The purpose of these trust assets are to generate funds to cover cemetery maintenance expenses perpetuity on behalf of our customers.
Historically, due to these state regulations, we were generally only able to withdraw realized earnings, interest and dividends, which led to a heavy fixed income focused asset allocation due to their yield orientation. Over the past year or so, however, as you can see on the right hand side of the slide, we've been pursuing the implementation of a more traditional total return asset allocation structure, working with many states to adjust laws and regulations to allow for a set annual distribution percentage of the asset base, which is similar to how a university endowment has operated. Shifting to this next slide. You can see that today about half of our assets remain invested in the historically yield focused income heavy asset allocation. The remainder or just under $700,000,000 is now under the new total return investment structure, which is more heavily weighted toward equities.
Ultimately, these shifts lead to higher yields to cover cemetery maintenance costs and the longer term growth of the trust corpus, which leads to further protections for our customers. On these assets that have been shifted, we were able to generate an annual incremental 1% yield that will help defray cemetery maintenance expenses by increasing trust income and creating more consistency of our earnings as we were able to distribute a fixed percentage on a growing asset base. We continue to work with states to enable more perpetual care assets to be shifted over to this total return structure, so more to come here. And with that, I'd like to now introduce Eric Tansberger, who will walk you through how these how we expect these preneed trust and insurance contracts to impact SCI going forward. Thank you.
Good afternoon, everybody, and thank you, Aaron. I think Aaron and Anastasia did a wonderful job giving you the background of the $10,700,000,000 backlog today, especially about the components of it split between trust and insurance. And then specific to trust getting specific into the asset allocations as well and the strategy over the 10 to 12 year investment life. We're going to kind of pivot off of that background though and I'm going to really talk about the future of the backlog. I'm going to talk about the value.
So remember, this is our number one long term organic growth strategy at SCI. John, I mentioned that to you earlier in terms of both printing and cemetery as well as preneed funeral. And this $10,700,000,000 backlog, we're very excited about the future growth associated with that. Now to talk about that, we have to bifurcate the conversation between funeral and cemetery. And so we're going to talk to you about when we talk about funeral, the same type of metrics or components that we talk to you about every day or on a quarterly earnings call and that is volume or the number of funeral services performed and sales average or the average price of that funeral home, especially coming out of the backlog in this example.
From a cemetery driver, similar to the way we talk about on a quarterly basis, we're going to talk about preneed production. But instead of what you normally hear us talk about in terms of preneed property production, what produces the backlog is actually not property, but cemetery merchandise and services, which has created a $2,800,000,000 backlog out of the $10,700,000,000 So let's start with Slide 131 and we'll talk about funeral. And to be able to talk about what's coming out of the backlog, we first have to talk about what's going into the backlog, which is a function of the preneed sales force. And we're going to talk about this in comparison to the at need average. The lower part of the slide, the gray area are the at need averages, both historical on the left as well as the projections on the right.
And then you have 2 of the pre need, averages, sales averages. The blue is pre need trust and the orange is pre need insurance. Now notice starting on the bottom part of Slide 131, we have 5 year CAGRs, so from 2012 to 2017. And what you're going to see is the atneed average is growing about 60 basis points per year. But notice in the lower right hand part of Slide 131 that what's going into the backlog in that same year, what the preneed sales force is selling to consumers on a pre ranch basis is actually growing 90 basis points on a 5 year CAGR from 2012 to 2017.
So a nice differential of about 30 basis points in terms of what's going into the backlog. Now the left hand part of the slide, you could tell the historical part gets to be a little bit noisy, especially in that 'seven to 2012 period. Remember, as we talked about before, we took on a tremendous amount of very large acquisitions and integrating those acquisitions during that period. Alderwoods in 2007, other examples were Palm in 2,009 out of Las Vegas and then Keystone being the 5th largest in 2010. So anytime you're integrating that, you're really shifting that sales force that we inherited over from predominantly a trust sale over to the insurance model for the overall cash flow neutrality of the company that Anastasia walked you through in one of her earlier slides.
The right hand part of this slide on Slide 133 31, excuse me, is the projection. And what you're going to see is that we expect the at need sales average or the CAGR to continue very similar to what it is historically, that growing about 50 to 60 basis points. What you'll also see is we expect the preneed average going into the backlog to also grow similar to the historical average, which is about 100 basis points per year. So why is that? Let's talk about.
First of all, when you talk about the consumer, whether it's a pre need situation or an at need situation, that consumer is generally going to communicate their wants and wishes and spend about the same, whether it's in a premium environment or an atneed environment. However, the prearranged consumer though by definition cares a lot about the merchandise and the services and therefore they're more prone to memorialize. And any type you have a customer that's prone for memorialization, you're probably going to capture a customer with a slightly average sale and you can see that in the growth rate. Secondly, our sales force is very good at using the customer satisfaction initiative of packaged funeral plans. That adds ancillary products and services that the customer is asking for, drives customer satisfaction, but also drives the average price as well.
Lastly, as we described earlier with the footprints that Steve talked about as well as John talked about, the sales force of over 4,000 counselors is more heavily concentrated in the larger markets. And in the larger markets, you're going to have those combination facilities as well. And any time you have a customer coming in on a preneed basis related to a combination facility, there's probably going to be more of a propensity to the burial consumer as opposed to the cremation consumer. And in fact, what's going into the backlog in the preneed environment actually has a mix of about 54% of burial consumers versus the atneed environment of only about 49% in terms of burial consumers. So you could see how that would drive a larger average sale.
Now on Slide 132, we're shifting gears here, staying with funeral, staying with sales average, and this is what's coming out of the backlog, the historical on the left, the projections on the right. Again, you see some of that same kind of noise in the 2,007 2012 area related to taking on those acquisitions and integrating those acquisitions. However, the blue line, which is matured trust sales average, were also affected in the 'eight, 'nine timeframe in terms of the markets in the Great Recession as well, which is why the slope slightly leveled out before it regained its growth from 2012 and beyond. Ultimately, the right hand part of the slide is the projection. And that's the new information that we're really sharing with you today and really trying to communicate what we view as very exciting value coming out of this backlog, again, in terms of sales average on this particular slide.
What you're going to see is that the CAGRs that you see at the bottom, again, the atneed sales average going about 60 basis points, but notice the trailing 5 year CAGR on what's coming out of the backlog is growing about 1.9%. Well, we expect those historical figures to really kind of continue into the future, the way we're modeling this. So we expect the at need sales average to grow about 50 basis points to 60 basis points. We also expect the preneed contract coming out of the backlog to continue differentially growing by about 190 basis points. So you have a nice 130 basis points to 140 basis point differential.
Now why is that? Well, first of all, it's what I just described in the previous slide about what's going into the backlog, good memorialization customer, high utilization of packages by the sales force and then a slightly higher burial mix at 54% versus 49% that I just described to you. Also though, remember what Aaron was talking about in terms of how we're investing these monies. On average, it's about a 10 to 12 year life that a contract stays in the backlog. That takes that trust contract and exposes it to a positive financial market return over a long term basis.
It also takes that insurance contract and exposes it to a very stable increase in insurance benefit of about 1 percent to 1.5 percent per year. Notice on the upper right hand corner while we're talking about those returns on Slide 132, And you're going to see that the trust contract, in fact, exceeds the insurance contract in our projections. Obviously, that's because of the financial market returns being greater than the 1% to 1.5% that we have on a very stable increase in insurance benefit. And on one of Aaron's slides, after the TAI fees and such, you'd see that we have a 10 year return of about 4% after those fees and that in fact is what is built in to this particular model. So Slide 133 is shifting gears, staying with funeral, but again we're shifting away from sales average and now going to the number of funeral services performed or the volume aspect.
And notice in the bottom right hand corner, something I want to point out on 133 is that the number of funeral services that were performed on one of Jay's slides earlier were just over 263,000 in 2017. And we kept that constant for purposes of this illustration. So there's no opinion that we're putting into this illustration in terms of demographics or any type of market share change as well, just to hold it constant for purpose of this. So what you're seeing on the left hand part of this slide, which is the historical part of it, is you're seeing a mix change. About 10 years ago, about 32% of the contracts were coming out of the backlog versus an atneed walk in family.
That's grown all the way to just under 36% in 2017. And notice the right hand part of Slide 133, we expect that mix to continue, growing about to 38% in the next 5 years and actually to about 40% 10 years from now. That is a very nice trend for us. That is going to be a revenue tailwind. Why?
Because of the slide I just showed you before, what's coming out of the backlog has actually a higher sales average than the at need walk in call. And because there's going to be a mix change with more and more coming out of the backlog, that bodes very well for our future revenues. What's also interesting about this, if you look in the upper right hand corner of Slide 133, you'd see most of this mix change is coming from the orange part of it, which is matured insurance. In other words, what's coming out of the backlog in terms of matured trust is actually pretty stable. But the growth in the mix change is coming from the insurance contracts.
That's primarily what we described to you earlier in Steve's presentation, where from the core funeral home perspective, about 3 out of every 4 contracts that are sold in the prearranged funeral environment are actually insurance contracts. But just stepping back though and talking about SCI as a whole, we take a very balanced approach in this part of the equation. So remember, as Jay mentioned, SCI Direct is 100% trust contracts. And from a cemetery perspective as well, from a preneed basis, that is also 100% trust. So overall, it's a cash flow neutral program, but it's also very balanced in terms of how we choose insurance over trust at the highest levels of SCI.
Now we're going to shift to the cemetery side of things. And again, when you hear us mostly talk about cemetery, as I said earlier, we usually talk about preneed cemetery property production. We're going to point you to a very nice sales production story today as well as a very nice revenue stream now and in terms of growth going into the future, and that's related to merchandise and services in the cemetery preneed area. This is a big part of our business. This is $2,800,000,000 backlog out of the total $10,700,000,000 And as you can see, we're communicating to you today about what's going into the backlog using sales production growth.
Now why is that? It's because there is a plethora of units that are being sold in merchandise and services and there's really no common unit to really break this down effectively between units and sales average like we're able to do on the funeral side. So you'll have units such as large granite markers all the way down to small bronze vases or small bronze scrolls with dates on them as well. So the way to really look about this is similar to funeral, let's talk about what's going into the backlog and what's going out of the backlog. And in terms of sales production growth, as you see on the top of Slide 134, you're seeing a very nice 11% CAGR over the past 4 years in terms of what we are selling on a preneed basis, cemetery merchandise and services going into this backlog.
But notice the big jump between 2014 2015 in the lower left hand corner of Slide 134. That's really us taking on in 2015 the Stuart cemeteries and incenting that sales force like they were not incented before the acquisition to really build this backlog for future value. So if you really understand that and you take a 3 year CAGR of 2015 to 2017, that 11% becomes much more of a normalized 6% to 7% production growth of cemetery merchandise and services going into the backlog. And on the very far right of Slide 134, we expect the future to be somewhat the same as what you're seeing historically here on this. We expect to see mid single digit sales production growth in this area continue in that 6% to 7% range that I just described to you.
Similar to funeral, what has to go what's going into the backlog has to go out at some point in time. So Slide 135 is exactly that. The lower part of this slide is actually the at need revenue of merchandise and services, but the upper part of this slide in the orange section is what are the merchandise and services for cemetery that's coming out of the backlog. And notice in the upper kind of center to the right, a nice CAGR over the past 4, 5 years of 9% in terms of this revenue stream coming out. Now Steve Tidwell mentioned to you before that over the past couple of years, we've had a customer satisfaction initiative related to delivering a merchandise delivery program in this area.
So if you take that into account, that's pushed that about a 7% normalized CAGR up to this 9% that you see on this slide. But if you think about the 7% that compares over 500 basis points in growth over the nice stable growth of the atneed down at the bottom of slide as you can see the 3 year CAGR being 2%. Couple of reasons why for that. First of all, as I just mentioned in the previous slide, there's high quality contracts that are growing in terms of production going into the backlog. So that lends itself to coming out of the backlog at a higher growth rate.
And lastly, just like I explained to you in funeral, these monies that are invested into these trust funds are exposed from a long term perspective into positive financial market returns. Ultimately, on the right hand part of Slide 135, we expect this to continue. We expect low to mid single digit growth in total from this revenue stream. It's going to be But then you also have this very nice 2% atneedrevenue but then you also have this very nice 2% atneedrevenue stream that's clipping along as well. So to really wrap up the backlog section of this presentation for Anastasia as well as Aaron, it really is a pillar of our growth going forward.
We are just huge believers in both funeral and cemetery pre need programs at SCI. What you're going to see the value coming forward into the future from the funeral segment, you're going to see higher volume from a mix perspective, as I showed you coming out of the backlog and those are going to carry higher averages than the at need call or the at need situation, which is favorable. From a cemetery perspective, you're going to see disproportionately more growth going into the backlog and therefore more coming out versus the at me call that I just described to you. That lends positive growth characteristics that also lends stability to our revenue and cash flow stream as you're able to model this $10,700,000,000 backlog. Furthermore, as Elizabeth talked about in terms of the customer, this is very customer centric as well.
This really gives the customer peace of mind who is prearranging their funerals and preneed cemetery. It also gives them the ability to finance this spend and also gives them ability to interact and enhance conversation with the counselor with grief not being present as it is in the atneed environment. So you will see us continue to put our shoulder behind this growth initiative. You're going to see us investing into the sales force as we continue forward that Steve talked about. We're also going to invest into technology, whether it be further invest into the CRM system or items like Beacon, which is the tablet customer facing technology that Elizabeth walked you through.
This future value of the backlog is exciting and it's enticing for our growth perspective going forward. Okay. We're going to shift gears now in terms of the financial overview. We appreciate you hanging in with us. It's been a little bit over 2 hours now and you're really in the home stretch.
I'm going to give you a financial overview and really make it forward looking, not only 2018, but a little bit beyond as it relates to the cash flows and capital deployment philosophy of us. And then Tom is going to come back up and really talk about the overall growth of the company. Before I start with the forward looking information, I want to just pause here on Slide 138 and talk about cash taxes, since obviously tax reform affected us somewhat materially at SCI. You see in the center of Slide 138 in 2017, we were not a full cash taxpayer in 2017. You can see that by the book provision on our income statement or the adjusted effective tax rate on our income statement being about 29% and our cash tax rate adjusted cash tax rate, I should say, of about 32% yielding about $135,000,000 of cash taxes during 2017.
Without tax reform, we would have been a full cash taxpayer and you can see that in the blue column in the center of the page on Slide 138 with an effective tax rate both for the book provision as well as cash is in the mid to high 30s, yielding about $165,000,000 of estimated cash taxes during 2018. But after tax reform, look on the right hand part of Slide 138. What you're going to see are those rates, the adjusted book effective tax rate and the adjusted cash tax rate coming down into the mid-twenty percent and you're also going to see it then therefore yield a cash tax outflow of about $115,000,000 That would have been about $50,000,000 of savings if we were a full cash taxpayer, as you can see, compared to 2018. But since we were not a full cash taxpayer, 2017 only spent in $135,000,000 versus the 115, it's actually a $20,000,000 net windfall in 2018 versus 2017. So where is that capital going to go?
Well, if you listen to our call last week, we described to you a program where we're going to invest in our employees about $7,000,000 from a wage perspective, which affects positively about 10,000 of our 23,000 employees. You also saw last Tuesday night that we raised our quarterly dividend from about $0.15 per quarter to $0.17 per quarter, which is the additional 14,000,000 dollars of the $20,000,000 in terms of this investment of this tax reform. So now let's go ahead and shift gears and talk about the capital deployment and the free cash flow as we go forward. Before we deploy any capital at SCI, we really look at 2 foundational areas in terms of giving us the ability to deploy capital, which is CLion 139 is liquidity. Do we have adequate liquidity, which we define as more than $250,000,000 to $300,000,000 per our models.
And if you look at the right hand part of Slide 139, we have very substantial liquidity. We have over $200,000,000 of cash on hand and just under $800,000,000 of availability on our long term bank credit facility, which expires in 2022. The second aspect that we look at before we really deploy capital from a foundational perspective is the debt maturity profile. And as you see on Slide 140 in the lower left hand corner, the first thing you'll see is a $250,000,000 bond that we refinanced back at the end of 2017, but was actually paid off in early 2018. And that was shifted to the $550,000,000 new senior bond that you see all the way to the far right of Slide 140 and about 4.5eight interest rates.
So in addition to that refinancing of $250,000,000 we paid off about $300,000,000 of the old bank credit facility. What you're left with in the lower left hand corner then on Slide 140 is a very, very favorable debt maturity profile. You really see no meaningful debt maturities until you get all the way to 2022. So with that then, that lends itself with a strong foundation to be able to deploy capital. So what are our priorities in terms of deploying that capital?
You can see that in order on Slide 141. The first thing are acquisitions and growth capital. And some of the statistics on the far right, you'd see that over in John's presentation, where this generally returns an after tax cash IRR of 11% to 18%. Acquisitions kind of in the mid to the high end of that range and newbuilds being in the low to the mid part of that range. Secondly, we feel very strongly that as the company grows, we will distribute an incremental amount of that growth in the form of dividends.
In fact, the metric we use is about 30% to 40% of our adjusted recurring net income is what we'll distribute in the form of dividends. And then lastly, having excess cash flow beyond that will go to our share repurchase program. And I think Tom described to you a little bit earlier about we look at the return, which here we want it north of 9%. Ultimately, the return in the shares though over the past several years have been the low double digit type percentage return. And that's a function of our opinion of intrinsic value of the shares versus what we were able to repurchase in them.
But we will move that share repurchase spend up and then move it down according to that value relative value metric that I just described to you. And then lastly, we'll continue to manage our debt maturities to keep a favorable debt maturity profile. So then let's shift gears and get really specific as it relates to 2018 on Slide 142. The midpoint of our cash flow guidance that you saw us announce last Tuesday is $570,000,000 of cash flow. You see that in the upper left hand corner of Slide 142.
So first, this is a good illustrative slide of how we plan on deploying that capital. About $135,000,000 will go to maintenance, which is primarily maintenance CapEx investing back in the businesses as well as some leases. About $180,000,000 is estimated to go to growth, which are the acquisitions, the new builds, as well as about $80,000,000 towards cemetery property development, very, very high returns on the cemetery property development projects. And then the excess cash flow, which is just expected to be just over $250,000,000 will go back to the shareholders in the form of dividends and share repurchases. So you see on the right hand part of Slide 142, it's really a balanced approach.
With the orange part of this pie chart on the right side being growth capital, the navy blue being more maintenance and reinvesting in the businesses and then the light blue about returning to the shareholders. Also on the lower left hand corner of $142,000,000 this is illustrative of the free cash flow, but we should have actually some more capital to deploy. As you know with our philosophy, we should maybe even have as much as $50,000,000 to $100,000,000 more in capital. As our company grows, our EBITDA grows and we maintain our leverage, we'll be able to deploy that additional capital in 2018 going forward. So what's the result of all that historically in terms of how we deploy capital?
And you really see that's illustrated on Slide 143. And on the upper left hand corner of this, we've deployed about $3,300,000,000 back to our shareholders since we really started these programs back in 2,004. You can see on the bottom part of this slide, you'll see the orange is the number of shares and how it is how it has decreased over the past over 10 years. And in fact, it's decreased about 23%, you can see on the slide since 2010 alone. The dividends has also grown proportionally as I described to you as the EBITDA growth has occurred.
So you can see in the blue part of the slide, you see dividends per share growing over time and in fact over that same time period since 2010 actually has a 20% CAGR as well. And this is before you get to more excess cash flow as you see at the bottom of Slide 143, which we expect to have $185,000,000 to $235,000,000 deploy in this way towards share repurchases to continue this trend. That particular metric at the bottom of $143,000,000 actually includes the $50,000,000 to $100,000,000 that I just described to you of maintaining our leverage as the EBITDA growth also continues. So lastly, just to wrap up this financial overview, what I what a message I really give to you is what you've seen historically, you're going to see more of the same. We're going to continue to deploy our capital to the highest relative return opportunities, acquisitions and new builds with the higher returns with all likelihood come first.
We'll continue to grow the dividend as the company grows and we'll continue to deploy our cash flow towards the share repurchase program in a meaningful way, always ramping it up and ramping it down as a relative statistic in terms of value does. With a foundation of that of having a favorable debt maturity profile and at any point in time have an adequate liquidity. So with that, we're going to keep going on the growth outlook of the company. And now I'm going to shift it back to Tom, so he talks about future growth of the company.
Thanks, Eric. So I'm going to point you guys to slide, if I can get it to go there. Okay, $146,000,000 And you'll notice on here from our earlier comments, this shows the building blocks of our consistent 8% to 12% earnings per share growth guidance. And now I want to define with a little more precision the assumptions behind the building blocks of our long term growth framework. So now on Slide 147, we break down for you that we anticipate that we'll continue to generate funeral revenue growth of about 1% to 2% annually as relatively flat core funeral volumes and slightly increasing core funeral average are aided by mid single digit growth from SCI Direct.
Margins should ebb and flow around the 20% level. Cemetery revenue should grow in the mid single digits as the effects of our strong pre need sales production impact property as well as merchandise and services revenue. This should afford us the opportunity to grow our margins 50 basis points to 130 basis points a year and together funeral and cemetery should provide a base of 4% to 6% growth in earnings per share on an annual basis. The next building block on Slide 148 captures the effect of deploying our capital into growth opportunities, both through acquisition of existing businesses as well as new construction of funeral homes. As you can see, we've deployed capital within a range of $80,000,000 to $100,000,000 over the last 3 years.
The acquisitions tend to have IRRs in the mid teens, while the new builds have them in the lower teens. Acquisitions are immediately accretive to earnings per share, while the new builds will take a few years to begin to contribute. We continue to see a strong pipeline of candidates, as well as ample opportunities to continue to grow through construction
of new builds.
Therefore, we have raised the annual anticipated impact from business growth to 2% to 3% a year from the previous 1% to 2%. Our final building block on Page 149 is the impact of shrinking our equity base through share repurchase. Our annual program's velocity and speed will be first a function of available cash and liquidity, so it can be impacted by how much we spend on acquisitions in a given year. 2nd, it's a function of working within our leverage ratio. And finally, it's a function of our assessment of the value of our stock at a point in time.
The bigger the perceived discount, the faster we'll go. As you can see from the share repurchase program, it has impacted us in earnings per share around 4% in recent years until 2017, where you see it had about a 2% impact. Here, we're a victim of our own success and that our share price has risen as much as it has and our available cash flows do not have the same effect. Therefore, we've lowered our annual earnings per share growth impact to 2% to 3% from the previous 3% to 4%. Slide 150 brings it all back together to show you the most recent 4 years and our compounded growth rate of 12%, we are confident we can continue to grow and deliver earnings per share growth within our guidance range.
Moving to Slide 151, you can see the details of our annual guidance for the year 2018. When using the midpoint of our 2018 annual earnings per share guidance of $1.81 we are growing earnings per share by about $0.26 or 17 percent over the 2017 earnings per share of 1.55 dollars 0 $0.14 of the $0.26 improvement relates to a $0.04 favorable impact from an accounting change and a $0.10 favorable impact from a lower tax rate as a result of recent tax reform. 0 point translates into a 7% increase at the midpoint of our cash flow guidance for 2018. Core funeral revenue should grow around 1% this year, while SCI Direct should grow in the mid single digits, resulting in total funeral revenue growth of 1% to 2%. This should allow us to report funeral margin percentages of 20% or slightly higher.
Cemetery revenue growth for 2018 should be in the mid single digits, as we experienced nice growth in both property revenues as well as merchandise and service revenues, resulting in an expanding cemetery margin percentage somewhere around 29% or 30%. We definitely noticed a pickup in activity during the month of January. We believe this is primarily a result of the effect of the nasty flu season that we've all experienced. While this should drive revenue growth in the Q1, it's too early to tell how much we may give back in revenue growth as we enter the warmer months. So now I'd normally ask for a drum roll or something to that effect because this is supposed to be the sizzle part of our presentation, I was told.
Too bad it's me giving it. So on Slide 152, we thought we'd do a little what if for you to understand. So 152 tries to capture the impact of demographics when they begin to affect our funeral operations. So for instance, you'll see under 2018 guidance, if 1% to 2% funeral revenue growth goes to 3% to 4%, it improves our funeral margins by over 100 basis points. It adds $0.11 to earnings per share and improves our earnings per share growth rate by 600 basis points or 6%.
While we believe this will happen, it's very difficult to predict when or how fast it can ramp up to these levels. Then on Slide 153, we attempt to show the same for cemetery. What if we can grow cemetery revenues an additional 200 basis points? This would add an additional 70 to 80 basis points to cemetery margin percentage. It would add over $0.06 to earnings per share, improving as you can see on the bottom right hand side, the earnings per share growth rate by 300 basis points or 3%.
The difference here from the funeral assumption is that this could happen in any given year. If we can experience a little more property revenue growth, a higher growth rate from the merchandise and service revenues coming out of the backlog into reasonable growth in income from our new perpetual care income strategy, we could surprise to the upside in any given year. So in conclusion, on Slide 154, just remember, we will continue to focus on growing our revenues, leveraging our scale, which will result in growth in cash flows. Then we'll deploy those cash flows and that capital to its highest and best use with the intention of continuing to deliver to you, our shareholder, superior shareholder returns. So thank you for being with us today and we're going to be happy to take some questions now.
And I know we did a apparently Debbie picked on the sell side, she ranked her questions by her favorite analyst first. So that would be Chris Rigg.
I'll take it.
Thanks, Chad.
Just one clarifying question first. I don't know if you can get it up, but Slide 63, it's the slide where you show the comparable cemetery revenue breakdown. What I and you talked and Eric touched on it a little bit as well. The at need merchandise and services growth versus the pre need services or merchandise and services growth, big difference. And there's it's like an inverse relationship to even the property growth on the atneed and the preneed side.
I'm just wondering what the difference is.
Yes. So a couple of things there. On the preneed side, one of the big components is the compounding income effect as it relates to the cemetery trust funds. Remember those are all trusts. And so over a long period of time, you're going to get better, much better than inflationary pricing as Aaron's slide showed if you remember, the real return on some of those assets are in the 4% and 5%.
So that's a big component of it. And remember that's still there. So even in a down year, you're going down against a compounded 7 year good time. So that shouldn't be that should be relatively stable. Obviously in a tough year it would come down.
The other thing is what Eric was talking about, we're selling more and more of this stuff through our sales force. So if you think about it, we're selling it at a very good price, high quality stuff with very good salespeople. Historically, Chris, we may have acquired that backlog from an acquisition and it may have been sold not in a very aggressive way or not put enough money in there in the trust fund. So we're getting a higher, higher quality of business coming out of the backlog, which is causing the other piece. The other thing I would just tell you as an example, Steward didn't sell services pre need.
So as we went in and started selling pre need services. We also were very good at selling preneed merchandise today. The advent of that is in the old days people would sell property with the hope of, hey, we'll sell the merchandise when they come in later, we'll sell the services later. What you find is a monument store may open up right around the corner from your cemetery. And so now as they walk in, they say, oh, I need now I need a monument.
There's a store. I'm going to go price shop. Well, on a preneed basis, we'll sit down and say cover the whole thing, finance it over time and we get the marker sale. We also sell the services at a full price and invest those over time and have the benefit of the trust earnings. So that's why we continue to believe it's going to be there, and Adneed is going to grow at the kind of low single digit rate.
Okay.
And then just one more. On the new builds, are those is that a combination of combination facilities, just replacing existing homes and just straight up de novo like a brand new home and a new marketer. What's the breakdown there? How do we think about that? Thanks.
Yes. So when we talk about new builds that Chris talked about, those are actually new funeral homes. So they would not be John mentioned in his presentation the refreshing of a funeral home. That would not fall under that category. That's capital we would spend that we probably historically would have called maintenance capital.
And so you may see us want to bump that up as the years go on to say we're going to go refurbish those homes. And because it's not a new home, we're not going to pull it in the new build, But that would be something different, Chris. So think of those as standalone funeral homes either on a cemetery or a new home built on land that we've purchased or acquired. Thank you, Chris. Obviously, you're Debbie's favorite.
Who's last? Scott, you're last. Joanna, I think you're next.
Thank you. So I guess I'm second favorite. That's good.
Yes, at least.
Thanks for taking the question. So just to harp on a little bit on the pricing dynamic, right, and the property growing 7%. Can you just flash out or break it into 2 different pieces, which I guess you mentioned in terms of the tiering of your property and also the inflationary updates? And how do you think that could kind of play out over a longer term in terms of property pricing?
Sure. So if you look at our slide, I think where Steve was talking about that, we've seen our preneed property sales grow at a compounded average rate of call it rounded 7%. If you break out that orange bar that he had on there, remember the orange bar was the over $40,000 sales and you just look at what we'll call the more basic cemetery property sales, they're growing at about 6%. So if you take that 6% and the volumes are relatively flat, if you take that 6%, again rounding, we believe about 3% of that is inflationary pricing. As you can imagine, the cemetery business, as Debbie talked about in her comments, there's not a lot of new cemeteries.
So cemeteries that are needed are built. There'll be a few communities where you will, but you just don't see the type of price shopping and there aren't as a variety of as many options when you look out at the cemetery business. So passing along inflationary price increases is actually pretty simple in most of these places. Beyond that cushion, we talk about the tiering inventory. So you saw what Steve said and John referenced it too.
We're spending capital in our cemeteries to create very differential product, very, very high end, just below the high end, just below that kind of high end, all these different tiers, which raise the overall quality of what we're selling. So that component of itself, we believe has driven about a 3% and sometimes 4% increase year over year. Now we're trying to explain is we had access to 200 of Stuart cemeteries to go do that to back in starting in 2013 2014 and you really saw that impact in 2015. As you got into 2016 2017, they became part of the base. And so we're seeing the growth rates as you think of property on a preneed basis probably coming back to that, what we'll call, mid single digits.
So let's call it 5% for middle of the road. So 3% of that might be inflation and 2% of that would probably be continued mix change as we're constantly going in and opening new sections of cemeteries, which will have water features. You saw some of the beautiful things that we have. So we feel pretty confident that, that can continue. And the only other thing I'd add Joanna and this is just Steve Tidwell being the person he is and the commitment he gave me, he says watch for that velocity to go up.
So all kidding aside, we do believe I think with the new sales tools that we'll be able to talk to some growth in that velocity number as time goes forward. And again, if you look at that velocity, we've stayed flat. And if you look at what's happened in funeral over 4 years, it's down, right? So we do think that through our outreach program and through more baby boomers, we're doing better than what would walk into our store, but at the same time, we can do more.
And the second question on Slide 7, it speaks. You mentioned about on the funeral side, the sales production there that was sort of lackluster in a 2% range, but you expect improvement up to 3% to 5%. So can you just spend a little more time fleshing it out why you're so confident that it could accelerate to that degree?
Sure. So a lot of as Steve mentioned on that slide, if you remember, there was a nice growth rate on the front end of that slide of about 8% a year. And then he picked a point, I think it was 2013, 2014 really, where a lot of change began to happen. We took on Stuart, which is a very big integrated acquisition. They had different selling sales compensation programs.
They sold different things. They had a different insurance provider. So as you can imagine with any big integration and we took that time to say not only and this was again I think the bold vision of Steve and Jay and others that said, look, let's make let's build this thing to last. There's things you can do around the edges to try to maintain your growth rates. But what we did is we said, let's take a new approach to how we compensate our sales managers, how we compensate our sales counselors.
Let's recalibrate what value is provided by cemetery versus funeral. Let's look at the quality of business that we're writing in the backlog and make sure that that's better. So all these are fine tunings to our training, fine tunings to our compensation programs. And oh, by the way, let's launch salesforce.com as our customer relationship management tool. So there was a drastic amount of change being introduced into the sales force that we believe caused us to slow down, if you will, as you think about those growth rates.
What Steve was referencing before is saying, we're not so sure we can get back to that 8% growth rate because part of that was going into these market based sales. We'd go into new markets and that growth would help us achieve that 8%. So we think with really relatively no new market based programs going into new markets that we're now poised with having sales force in place in the training, having a few years under our belt with the tweaks of the compensation, getting the training up and running, we're very confident that we can return to those, call it, low single digit to mid single digit growth rates on
preneedfuneral.
Next was Duncan, right? Yes. Yes. So I was interested in
what you guys were saying on the I guess what you're classifying is the neighborhood market and some changes it sounds like you're making there on some pricing strategy. It sounds like it's in early stages in only a few markets, but I wonder if you could give us a better flavor on maybe how much pricing is going down on average and what the strategy thought process there is? Sure.
As you referenced to pricing, the first thing that comes to my mind is fake news. I'm kidding, I just wanted to say fake news. I've been wanting to say that my entire life. Anyway, Duncan, back to your question. Just too tempting.
So as we think about pricing, I think John did a great job of kind of bifurcating that. What he tried to show you was when you look at our combo facilities and our customs conscious and our full service, we're really not seeing a lot of pricing issues. We generally are holding our own on share. We're passing along inflationary pricing. And so the one thing that may be happening in those buckets is a little bit of conversion from burial to cremation and therefore put a little bit of a headwind on what we're charging.
But everything is generally good in those pieces. And then Jay showed you the same thing on SEI Direct. We're actually growing volume in that bucket. So as you think about challenges as it relates to price and how that might affect volume, what John was concentrating on was saying, let's you really got to go to the neighborhood funeral home. Then I think what John was saying is, there's a probably the majority of our neighborhood funeral homes are in good shape because they're either good facilities, we've got a good preneed program, we have a good manager and they compete very effectively.
What we're finding and John again is part of his role of business development is finding ways to improve the way we operate and helping Jay and Steve's teams transport that knowledge that we find in different markets. So what John's team did is they went in and searched and said, let's go find places where we may be losing more volume than we think and places where we see higher discounting. And so they found 2 markets that kind of jumped off the screen at first And they went in and John showed you what they did. They found really I'd say for the most part we're finding more of our pricing issues centered around that cremation consumer. We'll call it the low to mid tier cremation consumer.
So it's somebody that's not going to be a full service robust buyer of our services, but somebody that says, I still care about a funeral home. I don't want to go non funeral home channel, but I just don't want to spend very much. And do you have an offering for me SCI? And I think what we're finding is when we find that sweet spot of what is the package that's desirable to them, what's the price point that we can John showed you that we can convert that into an opportunity to grow share for that business. Then the other side said, hey, what if my demographic say customers are willing to spend, have the money, want it, our problem is our facility doesn't represent what they want.
So that's the opportunity that Chris was talking about. We should go refurbish more of those. John showed you one from 2014 because we had a lot of data. I visited 1 in Baltimore probably about 4 or 5 months ago and it was so impressive what they've done. And they've seen the exact same statistics.
They just haven't been there for as long. So we're doing that from time to time. I think our opinion is, John shared with you, we've gone to 6 other markets. There'll be more that we go to, but I would generally say we feel good about pricing this industry. I think it will always maintain a competitive nature.
But we feel like for the most part we're priced right for the level of service and products and services we can provide to our client families. And we will deal with situations where we feel like we may be losing share. We're going to take these types of learnings and apply them to those markets. But I would tell you today, we don't believe it's a big issue, particularly on the cemetery side and really not on the funeral side either, Duncan.
So if there's 6 markets that you're looking at it now, it's not something like you could you're not thinking it could be 50 in a few years or something like that.
Yes. And even within a market, like I said, we say market, well, you may only adjust pricing. If you may have 12 funeral homes in your market and you may adjust pricing on 3. So I don't want you to think we're going in and jamming the prices in the market. What we're doing is we're looking at the tiers.
Like John said, we've got full service provider at this price point. Customs conscious may be a little bit unique. And then we say, gee, our neighborhood is really bunched up against and it doesn't look anything like that customer. So I can either step up to my pricing with some capital or I can step down with some pricing and capture more market share. And that's the kind of things we're doing.
So even within these markets, I don't want you to begin to think that we're adjusting pricing on everything as we walk in. It's tweaking it with generally locations that are having some form of issue as it relates to competition.
Great. Thanks. And then on the perpetual care trust side, you're talking I guess, Aaron was talking about moving the portfolio over time. I guess, I don't have a great sense, how long do you think you can get from I And then the second follow on to that is, is part of the thought process here that you all are going to be able to pull out more of those funds and maybe help us think about that from a quantified standpoint?
Yes. So I think what Aaron showed you in that slide is 47% or 43% that are in this now. One big one is California, which apparently we've got unapproved, but we can't actually execute the strategy until 2020. So that will be a big move when we're able to get to 2020. I kind of view this as what the old eighty-twenty rule.
I think we'll get to 80% pretty quick. And then some of the smaller pools of capital where you may have a little more resistance from lobbying and independent funeral directors and the like, it's hard to get the last 20. But I'd say by 2020, we probably feel pretty confident we can get to that 70 5, 80, Erin, wouldn't you say? So and I think he mentioned before this what we're finding is that we're going to yield about 1% more a year once we get to the strategy. So if you look, I forget which slide it is, it shows you the pool of these assets.
It's gone from $1,300,000,000 to $1,400,000,000 to $1,500,000,000 Remember the corpus never comes out of here. So this thing just keeps growing as more people get buy cemetery property and the like. So think of that as a larger pool of assets that we're going to get 1% more a year on. So 1% of $1,500,000,000 I was not a math major, but that's $15,000,000 if I did that right. That's not a small amount of money and that will again continue to grow as we add to that pool of assets.
So I think I got through Debbie's favorites and now I'll start with the naughty list. John Ransom, you're next.
Thanks, Tom.
Being a simple guy, I used to like Eric's simple rule of thumb that every 1% in the trust return was about $1,500,000 in EBITDA. Can we get an update on that stat for simple minded people like myself?
Yes. I think we think that generally holds true. We haven't lost that. The problem with trust income, John, that I think we've tried to move away from is remember trust income is a cumulative number. So a lot of times you guys as asset managers and people like that, you're looking at it and saying, hey, what happened in the market?
Well, the trust income we're going to report happens to be a contract of cumulative earnings over the last 12 years. So even in a bad market, Tom may report to you, Tom's contract got me $4,000 of trust income. Well, part of that was keeping up with inflation, right? And that's why we tried to steer away is there's really a disconnect between the performance of the trust and what our trust income that we report. Because remember, a lot of that trust income we report is just inflationary catch up from what I sold 15 years ago that today costs more.
So we think it's just easier. But John, I think generally because of the large pool of
the assets, you and Eric's simple approach is still acceptable. All right. Again, staying on the simple theme, if what is coming out of the backlog today is about $6,000 and it's in there for about 12 years and you're compounding at 4% net. That means what went in 12 years ago on average is about $4,000 So it's up about 60%. So the question I have, so the stuff you're putting into the backlog today, what is the ASP today that's going and that will come out 12 years from now or so?
Yes. So I think if you look at slide, what is that, 132, dollars Yes, that's out. We got to go $131, AJ. $131 $131 is showing you that what's going into the backlog is just about that $6,000 in 2,000 it's just above
$6,000 I misread that. I thought that was what was coming out. Okay. So that's going in today. Yes.
So see it's slightly above the 59,79. I can't because this is a graph, but my memory is that that number is
in the very low 6000s. Unsolicited suggestion, what might be helpful is to show that, gosh, we're selling stuff at a 50% or whatever, dollars 6,000 today, 12 years ago, it was $4,000 Yes.
Well, that's on that slide. We just need to make it a little more simple.
It's not clearly not simple enough.
Yes. We'll simplify it.
And then lastly, just to clarify the what's a little confusing to me at least is the 1.25% that you are pulling out of your trust as a management fee. So that's the net. Is that should we just think about that money as fee income to SCI, but it doesn't compound? But it's just it's earnings today that's kind of perpetual you're an asset manager, so you get that fee, but it doesn't compound
the trust. So it is getting pulled out. It's actually a component of trust income. So when you think about our trust income, it's reimbursing ourselves for that those fees plus what we're able to take out based upon state laws from an earnings perspective.
And just to be clear, do you take out I mean, I think I know the answer to this, a capital gain in a funeral trust, do you take out capital gains? Is that part of your trust income in cash?
Yes. So remember, we only take capital realized capital gains that are allocated to contracts that go at need. So the fact that we have a capital gain even realized, it spreads all the think of it as spreading to 1,000,000 contracts. And now $80,000 of you are going to die this year. So we'll take that portion of the capital gain out.
We'll get $80,000 more next year and vice versa.
But you're not pulling stuff out of a contract that hasn't? No. Okay, got it.
Thank you. Thank you, John. Next up, Mr. Rice. A.
J? Thanks. So I have a handful of them here, if I could throw them out to you. Some are clarifications for what other people have asked. So on the perpetual care, maybe I'll do that one first.
Does what you're changing to affect what you have to defer on a sale in any way? Is that still roughly running 15%? Yes. So when we sell what that internal care fund is, if you remember, Aaron said 10% of our property sale by state law or provincial law is required to go into this trust. And so all these what you found in the old days was old cemeteries that didn't have perpetual care funds.
If you see them, they look like this. There's some really old cemeteries because they weren't selling they didn't require people to put vaults into the ground to hold the casket. So over time, the casket crushes and you've got a big hilly cemetery. So they created a law a long time ago to say, we think it's important for these private cemetery operators to a fund to maintain these in perpetuity, mow the grass and then there's some laws around what you're putting in the ground. So the eternal care fund, that 10% stays the same.
So it's no change. It's required by them. What we've done historically is because the rules in the state generally say, hey, you can only take dividends and interest income and in certain states they might like you take capital gains. What did you do? You invested in income assets.
You invested in predominantly bonds for that matter. So here we sit knowing that we've got this huge bond portfolio. It's a very low interest rate environment and we know we can't grow that pool of assets like we want. So we're being proactive going state by state to say, hey, this is an endowment fund, no different than the University of Texas, hook them horns. With their funds and how they're able to distribute them.
So they get to rake 3% to 4% to 5% out every year with the idea that if you monitored correctly that will last into perpetuity. So that's what we're doing. We're basically saying we want to take that approach. It allows us to convert out of those fixed income investments into equities. So now we think we can grow that pie more.
And so as you think about, let's say, the way it impacts our income statement, it's going to be a larger pool of assets that will take, call it, 4% a year on a larger pool of assets. So it's going to vary the predictability of earnings out of that fund is going to be much more stable and also have kind of a built in growth rate as time goes on and won't be subject as much to the ebbs and flows of the market. Okay. And then on Eric's slide, I think it was 133 where we talked about the percentage of funerals done coming out of the backlog will gradually increase over time. But I but you're holding in your forecast period that constant the number of overall cases.
I mean you have a period from 2010 to 2014 where you're growing sales 8%. Is that a realistic way to look at it or won't? Well, I think what we're trying to say there, you're probably right, AJ. What we didn't want to confuse is to start predicting what volumes are going to be in the future. So instead, what we the point of this slide was really to show you that no matter what happens, more a higher percentage is going to come out of that backlog.
And then the point so again, if our volumes go up, we think the percentages stay the same. So we get even more cases that come out of that backlog if that's what happens demographically as it flows through. So the point of this slide was to say, hey, everyone's concerned about atneed pricing, right? We had a great question. Duncan talked about it earlier.
It's tough. We do believe we'll continue to be able to do that, but in a low inflationary environment that's tough. What we're trying to tell you is more and more is coming out of that backlog, which is growing. I think on Eric's slide, what's coming out of the backlog 130 basis points higher growth compounded than what we're getting on an add need basis. So there is a wind at our back as it relates to the velocity of what's coming out of the backlog as well as the average sales coming out of the backlog.
And that was the point of the presentation. Sure. Is there any way to look? I'm assuming that 10 to 12 year average life is something of a bell curve. Can we see at all whether that 8% growth period that you have for those 4 or 5 years is driving any incremental share to you?
We don't have the ability A. J. One of the problems and this is why historically we've hesitated to get too deep into this stuff. As you can imagine, when you acquire contracts, particularly from other people, you get not great data sometimes. And quite honestly, even in SCI's historical sales, we probably didn't capture as great a data as we should.
The one thing we did do is put all the money and trust that should be there. A lot of these acquisitions, you may buy somebody and not all the money is there. Lo and behold, I'm not sure where it went. Either it wasn't a good investment or they didn't put all the money in, but we got to go fix that, right? We're going to go put the monies in the trust fund.
Less and less of that business is there anymore. Most of what we're selling and that's what A. J. Is getting to is we've had real success selling high quality stuff. We put the monies in the trust fund.
We manage the trust fund. So that's why we're excited about growth. And I'd tell you A. J. I don't know with any specificity I would say that you're probably right, but I couldn't quantify for you what that is that's flowing through today.
And then on the your slide on the merchandise trust fund showing the compound annual growth rate of 11%. I know that's the one area where it's all about taking delivery. So there's a little bit of do you go after those people and have them take delivery or not. Has there been any change? Is that in any way impacting that 11% growth rate?
Yes. Let me tell you. So this is what goes in, right? This is what we sell. So that what you just said has nothing to do with this slide.
So think of this as what goes in and then we'll talk about what comes out. So what goes in grew by 11%. What Eric said on this slide, if you remember, was in 2015, we have like a 13% growth rate. And that 13% growth rate, if I go back, where was it? And who's messing with my slides?
Okay. So the $269,000,000 represents 13% growth and that was Steward. Now we're starting to sell services for Steward, right, which they weren't doing before. We're selling more merchandise than they used to sell. So now you get Steward all up and running.
Remember it was 2013, 2014. Now everybody is up to speed on 2015. So 2016 and 2017 is like over 5% growth a year. Everybody all in, no weirdness in the numbers. So now let's talk about what's coming out, which is what you're referring to.
God, they did it to me again. If you go to that slide, I think it's 134. Yes, one more. 135. 134, right there.
Yes. So if you look at that slide and this is what A. J. Is talking about. If you remember, this is going at a 9% if you look at the orange bar on the top.
And what we tried to say and I know it's hard because we're compacting a lot of information here. A few years ago, we started feeding we get feedback from J. D. Power. The number one complaint in J.
D. Power was, when I order my marker, it takes too damn long to get that marker put up in the cemetery. I keep waiting and calling and saying, where's my marker? And we find out, gee, it's backed up. It's on order.
We're trying to get it from a vendor. So one of the things that we partnered particularly with Matthews on is we said, can we get these things pre ordered if the customer says they want them? And if they do, we'll pre make them. It helps Matthews if you think about it to run their factory. And now they've got them ready to go, Tom Ryan, everything I want to say, loving, wonderful father, my favorite CEO ever, whatever else, whatever comments you may want to say.
And then maybe all I got to do is put in Tom's death date, right, when I'm done. So we can get the marker put in place a month ahead of what we were doing before. So by doing that with Matthews, we started that probably in 2015 or 2016. When we started doing that, it added probably ramping up to $10,000,000 $12,000,000 a year where we're selling something and making it. And by making it and storing it, we get the money and we get the revenue.
So 2016 to 2017, that number was the same number. But if you go from 2014 to 2017, it added about what Eric was saying on the slide, 200 basis points to the 9. So if you eliminate the Matthews Marker delivery program, we're growing at about 7% on a compounded basis. Okay. Does that make sense?
Yes. And my last question, I'm going to do one more here, is it's been quite a while since Service Corp. Was big in the international markets other than Canada. Obviously, one thing you've said off and on over the years is if the pricing was right, you might revisit that. Any update in your thinking about international opportunities?
You had to ask me that question, didn't you? Not really, A. J. I think and here's why. I think what A.
J. Is referring to, as probably people know, Dignity, the U. K. Business has probably lost about 65%, 70% of their value, which we get closer to a fair value to A. J.
Fair point. I think the way we look at it is this. It's hard to it is not a market that we have as comprehensive an understanding. I have all the confidence in the world of Mike McCollum and Peter Heinle and I'm sure they'll figure a way to fix that. But as we think about deploying our capital from a risk reward perspective, I mean, John showed you there's $1,000,000,000 worth of stuff we could buy that we know how to run, that we can get synergies from.
The U. K. Is we're not going to get a synergy on the product side. We've got to have a management team. They've got a separate system.
You just don't have the same level of synergies. So as we think about it, I don't think the odds have gone up much at all. We're still very focused on the domestic market, A. J, but good question. So this is really interesting because this is when you find out someone's intelligence.
You get down to there's been 5 questions already and now Scott Schneeberger has listened to all these questions and come up with an original one. Scott?
Hi. Thanks, Tom. I'm just going to ask one. It will be a multipart, but no one wants many more than that. All right.
So on Page 147, the 1% to 2% funeral growth, revenue growth. So what are the core components of that, volume, pricing, acquisition, cremation? If you could just break down how the mix looks within that 1% to 2%? And then a quick follow-up on that subject.
Sure. So remember, this is trying to say in any given year, right? So this isn't based on we don't know how long it is until we get to that what if slide. But what we've experienced and what we believe is going to happen is that the core funeral level, so not this is the core funeral home business, that we generally are going to experience what I'll call generally flat volumes with price increases that probably approximate 1%. And again, we'll fall on either side of that, right?
We'll have a year where volume is down a little bit. But I'm just trying to get you to 1% core revenue funeral business growth. Then that's so that's the tough part of the business that needs one day some help. Within that, we're assuming 100 basis point cremation mix change. So that's why you only get the 1% top line average contract because it's probably closer to 2 the gain gets knocked down to 1 because of the cremation mix.
So now let's go to some smaller businesses that we have in our funeral portfolio and they all center really around SEI Direct. There are 2 line items on your income statement. 1 is what I'll call the at need fulfillment part of this business where people die, we pull monies out of trust and we perform a service. Then there's another one that's really a sales driven one. We're selling an earn and we're selling travel protection plans.
Those when we sell them we get to recognize them. If you look at those two businesses, they're growing their revenues somewhere between 5% 8%. The problem is they're very small compared to our core funeral revenue. But that 5% to call it mid single digit growth when you combine it with what's going on in core is going to get you to this 1% to 2%. And so we think that's the way it looks until you get to that Slide 152 or 3 where we demographically begin to see volume.
And the other thing to keep in mind is what Eric's slide did, remember what's coming out of the backlog is going to grow at a higher rate and be able to lift that average revenue per case and more is coming out of the backlog. Great.
And then the follow-up is right along those lines. We would appreciate it, it would be very nice if you would tell us when the funeral demographics arrive? Thanks.
I was saving that for this moment. Someday, so it's going to count. No, we don't. I mean, I would tell you that if you look at Doctor. King's stuff and we try to it makes no sense.
But if you go to a graph, I would say the meaningful changes probably wouldn't occur until you get into 2022, 2024, if I remember right. Now between now and then and I think Debbie did a good job of showing you we're at the bottom of this thing. And so you're beginning to climb out of the very bottom and I think that's good. But to get to the higher slope jump that's probably another 4 or 5 years away. But again, things change between now and then and these predictions are not very accurate, particularly when you look at CDC data.
I wish we could show you remember Debbie showed you the blue bar versus the black bar and how correlated that is. If you took the old CDC line, it would be well above that black line and that blue line. So they've been wrong forever. We think we know we understand why there's some political motivation behind that. How many people are we going to have to provide Social Security for?
How many people are we going to have to provide medical benefits for? Well, I don't want that number to be too big if I'm a politician. So they don't want to fix the number. So it's tough to tell with the data that's available. I think what you'll hear us say is, we think we're going to capture more share through preneed.
We're going to capture more share through the things John's talking about. And when that comes, we're going to get more than our fair share.
Great.
Thanks a lot.
Good job. Thank you. Anybody else questions? We need a lucky 7th question questionnaire. Okay.
Well, then I just want to say to all of you both here in the room and on the Internet, we really appreciate you guys as shareholders. We hope you enjoyed this Investor Day. And if you have any follow-up questions, please feel free to reach out to Debbie, Eric, myself, Aaron. Happy to answer them. Thanks for coming and safe travels back.