Good morning, everyone. Thanks for attending. Yeah, Aaron Foley, I've been with SCI for about 18 years, currently the Treasurer at SCI. A little bit about kind of what we do for people who may be newer to the story. SCI is what we term a death care company, the largest company in this space in the U.S., North America. We've got about 2,000 locations, 1,500 funeral homes, about 500 cemeteries across the U.S. and Canada. I'd say about 7% or so of our revenue, 6%-7%, is based—I'm sorry—in Canada. And we have been really following the same strategy over the last about since 2004. It's really kind of deploying capital, executing on our business, managing our footprint, but essentially followed or targeted an 8%-12% earnings growth framework over that timeframe.
If you look from 2004 - 2019, we have really been able to execute on that and have achieved really closer to 14.5% kind of compounded earnings over that time. The company itself was really founded by a gentleman, Mr. Robert Waltrip. He actually took over his father's funeral home. What he found was executing on a clustering strategy, really leveraging your scale. You are able to really maximize the operating leverage for your business. The average funeral home in the U.S. does maybe 100 services a year, meaning the funeral home is working one out of every four days. If you can buy three additional funeral homes, then you are able to make sure that that funeral director is optimized in managing their time. You are able to manage hearses and fewer hearses and do that.
That is really how we have grown and really focusing in on those kind of urban areas that we have operated in. Now, if you noticed, I said up until 2019. Obviously, 2020, there was a wrench kind of thrown into the works when COVID really impacted the world. We saw periods of tremendous growth in our volume during that timeframe. The concept of pull forward kind of came to bear where all these deaths that had been accelerated into 2020, 2021, and so forth really had to have come from somewhere. We are now in this period that the volumes are subsiding as the COVID experience is waning. I think we have seen that come backwards and kind of normalize. I think we are to that point to some degree.
I think that we're also seeing some other changes that I'm sure we'll get into later around a smaller business, that piece of business that we have, SCI Direct, we've experienced over the last five years specifically increasing inflation, increasing interest rates, and kind of managed through that, increasing tax rates during the time as well. As we're kind of sitting here in 2025, we're really excited kind of where we stand and really looking forward to 2026 to continue to execute now on a kind of more normalized basis on that 8%-12% earnings growth framework.
Yeah. No, that was perfect. Thank you. I've got a few things I was going to touch on already. Maybe taking a step back here, touch on some industry things. America, it's aging, and that's not always a benefit for you. You provide services that everyone's going to need at some point in time. Maybe speak to the demographic trends that you're seeing right now. What are your thoughts on the short term and the longer term demographically?
Yeah. As I just mentioned, COVID, we've seen kind of subsiding over 2022 -2024. It has dropped from 6%, 4%, 2.5% decline in volumes over that time. This year, we're actually expecting a flat to slightly down. In our minds at this point from here and in the near term, we're in this flattish volume type arena. As we think about the baby boomer demographic, that's obviously a wave that's about to impact or is impacting healthcare and is going to be impacting us as well. The oldest baby boomers will be turning 80 next year. In 1946, that's kind of the beginning of that trend. The birth rates over the following two to three years really took a little bit of time to kind of ramp up. That's the beginning of the baby boomer.
When you look at mortality statistics for people who live to 79, 80 years old, generally expected to live 83, 84 versus kind of the national average of 80 years old or so. When you look at the birth cohort of the baby boomers, those who've already passed away, and then kind of the immigration that has occurred, it's really kind of made that cohort whole from a domestic perspective. We expect kind of putting all that together, the demographic will begin hitting us toward the latter part of this decade. 2029 kind of timeframe, let's say. When it starts impacting us, it's not just a kind of a check going up. It's going to be a gradual increase, we believe.
It's going to probably take us from this flattish volume, maybe up 0.5% to maybe up 1%, 1.5%-2%. That trend of growth, we expect that to occur consistently over about a 10-year period. Toward the latter part of the 2030s, early part of the 2040s until the bolus of that baby boomer cohort kind of comes through the system, stabilizes. There may be a little bit of subsiding at some point in 2040 as we get to the tail end of the baby boomers. You have, of course, got the Gen X after, I guess, coming that also had some good birth trends as well. That is kind of our near-term perspective, kind of stability, flattishness. This dynamic around COVID actually still exists. That is still one of the top causes of death in the U.S.
That being said, the pull forward dynamic is also kind of embedded into our base as well. We do not think that those dynamics and shifts are going to cause big jumps one way or the other really over the near term.
Maybe speak to the shifting of consumer preferences towards cremation and then how you're kind of aligning your offerings towards that.
Sure. Cremation is a trend that a lot of people, when they're new to the story, come in saying, "Well, this is going to completely destroy the business." It is something that is really going to tank the industry. Really, when you step back, it is a dynamic and a shift that has been occurring for the last 30 or 40 years. As we sit here today, our core business, core funeral business, has about 57%-58% cremation mix all day. When you look at other Western countries where cremation mix has also been increasing, you see that cremation mix generally seems to stabilize around 75%-80%. We have been in this world now where over the last 20 years, we had expected 100-150 basis points of shift each and every year as we have gone from 30% to almost 60% now.
As we get closer to that 75%-80%, you'd expect that slope to decrease. We actually started seeing that really back in 2024. I think we had around 50-60 basis points of an increase that year. We were asked, "Do you expect that this is the new normal?" I think that was a little too early for us to want to put a stake in the ground. This year, we've still trended in that range. Actually, in the second quarter, we were close to 20 basis points, so almost flat of shift in cremation. I think that I don't think we're ready to say 20 basis points. That's probably too low. Fifty to 100 basis points seems about right. As I mentioned, kind of where we operate, we're in these urban centers predominantly.
A lot of these on the West Coast, particularly, have cremation mixes already close to that 75-80 basis points. You are not seeing as much pressure in those geographies as you may be in areas maybe like Alabama and Tennessee and others that have a higher burial mix. That cremation trend, again, has been manageable. Effectively, a metric we like to put out is about 1% change in cremation mix will equate to about a $15 million-$16 million revenue headwind and about a $13 million EBITDA headwind. When you are talking about a $1.3 billion-$1.4 billion EBITDA company, it is a hit, but it is a manageable hit. Things that we have been doing over time just to manage that is to just make sure that we are providing the products and services that people would like, trying to identify new opportunities as well.
I think a misnomer as well is if a person wants a cremation, it doesn't mean they don't want a memorial service. It just means they prefer to be cremated. What you see is America is becoming more secular. You're seeing America is more transient, and they don't necessarily find as much of a desire to be buried as a result of that. We still provide a memorial service because the family and friends want closure associated with that. The final thought I'd impart on that is on the cemetery side, something that we've talked about for a while, but we're really kind of starting to put our shoulder behind is really delving into cremation opportunities on the cemetery side. Currently, about 1/4 , 20% or 1/4 of our unit sales in cemetery are already in the cremation realm.
When you think about opportunity and the shift in cremation that we're seeing, how can we capitalize on that on the cemetery side? What we have found, to use an analogy, is when people would come into cemeteries, they would want to just get a homogenous lot. We've gone and we spend about $160 million in capital now to tier that cemetery to create private estates, walled estates, mausoleums, indoor mausoleums, and private mausoleums. Several tiers of inventory. That family may come in wanting to get a homogenous lot, but then they may not be aware of what is out there, what the opportunities may be. When our sales team is able to show them what these other opportunities are, they've been successful at basically offering up and selling up into those tiering options.
The same can be said about or what we are expecting is on the cremation side. We think that families may not be aware of the cremation opportunities that exist. We've got these glass front niches that you can put in. We've got columbariums. We've got scatter gardens that are available. If we're able to create the media and create the information that both the funeral homes and the cemeteries can use in front of families to say, "Look, even if you get cremated, these are options for you," that rather than just taking the remains, they may say, "I'm interested in checking that out and seeing where it can go." We are excited to see how that can maybe play out over the next year or two.
Yeah. No, that's interesting. Maybe going back a bit here, then touching on the decision to stop delivering pre-need merchandise at the time of sale, what kind of impact are you expecting to sales from this, and then maybe the impact of the backlog as well?
Sure. As in my opening, I mentioned SCI Direct. SCI Direct is our non-funeral home aspect of our funeral business. It generates about $200 million of our $4.2 billion of revenue. It is about $200 million of our $2.6 billion in pre-need production. That being said, over the last two years, it has taken up, even though it is only like 5% or so of our business, it has taken up probably 50% of our Q&A and questions and 40% explaining that. Ultimately, what is happening is SCI Direct has three items that we sell on a pre-need basis. It is a cremation service itself, an urn kit, and then away-from-home travel protection, meaning if you are more than 75 mi away from your home and pass away, your remains will be repatriated back to your home.
About eight years ago, California came in and essentially said, "Look, you've been delivering that urn kit at the time of sale. You've been delivering away-from-home travel protection, but that's through a third party. And you've been deferring your cremation service." Those three parts of that agreement are all, from their perspective, collateral to one agreement. You need to defer it all until the time of maturity. We said, "We've got this 1986 attorney general opinion saying it is okay doing what we're doing." On top of that, we've been audited for the last 30 years and never had an issue. Now this is coming up as an issue.
We fought it for five, six years and at the end of the day said, "Look, we want to just kind of get this behind us." We saw a copycat sort of situation pop up in Florida, and we said, "Look, we want to de-risk our business completely." For the most part, we're deferring that cremation service now as we had been historically. Now we're also deferring that urn kit. Instead of providing it at the time of sale and delivering it, we're now also deferring that until the maturity or event of death occurs. It is really a timing perspective, and you're seeing the near-term headwind associated with that business shift occur. That being said, it's something that we will get back in the future.
You're already seeing that backlog that's growing associated with those deferred urns come out, and you're seeing that pre-need matured, matured pre-need line item for non-funeral home grow in the teens. We had 13%-14% growth in the third quarter. We expect that kind of growth to occur over the next decade or so as that backlog really fills out and we see that dynamic occurring. Now, we've been doing this in waves. We've done it over five waves or so, starting really in mid-last year. It is more choppy than we would like, but we wanted to make sure that we were managing the geographies right and making sure that they were ready for this shift.
Because another thing that we've done is to kind of counteract that to some degree is when we've made these shifts to deferring the urn kit, we've also shifted them from 100% trust selling pre-need back contract to an insurance back contract. We've done that in conjunction with a new marketing agreement for our insurance business that gives us more favorable economic terms. In doing so, as we sell insurance contracts, we're generating general agency commission. That's helping offset that decline in earned revenue that we've been seeing. If you look at our press releases, you'll see non-funeral home pre-need sales revenue, and you've seen kind of some headwinds from that over the past four quarters or so. Because of the cadence of these rollouts that have occurred, as of the beginning of 2025, we were 80% the way rolled out.
Mid-year, we were about 95%. Today, we're 100%. We're completely done and have shifted those over. The headwinds that we've seen this year for the first three quarters, we're expecting that to subside substantially in the fourth quarter. As we look forward to 2026, as Tom mentioned on the call, we're expecting some nice growth and strength going forward on that front.
Just to remind everyone from the crowd, if you have any questions, feel free to jump in at any time. I will not be offended. All right. Maybe shifting gears a little bit with your larger pre-need sales. We have seen a shift towards cremation. What have you been seeing in these larger sales?
When you think about cemetery pre-need production, we bifurcate it between a core sale and a large sale. Large sale is what we defined as $80,000 or above. It's generally around 12%-14% of our total cemetery pre-need production. When you think about the numbers backing the large sales, we're probably talking about something like 6-800 contracts that we sell in any given year. These large sales can take weeks, months, if not quarters, to kind of matriculate families coming in and picking out exactly where in the cemetery they want to be, working with our construction department to design exactly what they're looking for. If they're looking for a private family mausoleum, these can be sometimes multiple million dollar type sales that occur. They want to make sure that they're doing exactly what they want.
They can be very choppy in nature. We saw in 2024, the first and fourth quarter were very strong from a large sale perspective. The second and third quarter were a little bit lighter from a large sale perspective. It continues to be a source of growth for us. We think that it's going to be stable, if not growing, over time. Obviously, when you think about cemetery pre-need sales, it's a discretionary purchase by the consumer. The consumer sentiment and confidence can have an impact on that. What I'd also point to is our customer that we are serving is a middle, upper-middle, and upper-income consumer, particularly on that cemetery front. When you step back and you look at that core business, which is 85%-90% on the cemetery front, really we've not seen weakness on that consumer front.
It's interesting because you're hearing everywhere that the consumer is slowing down, but I believe that that's more of a component of that entry-level or lower-end consumer. Because we saw in the second quarter growth in both our contract velocity and our average. In the third quarter, we grew pre-need production 10%. About 1/3 of that came from large sales. The other 2/3 were from our core business. The predominance of that growth was from contract sales coming through. We are not seeing yet this dynamic that people are talking about as it relates to weakness in the consumer. On the large, back to the large sale front, we talk about, okay, what is driving that? What's going to drive that up or down? We have tried to correlate it with the stock markets, the financial markets.
Back in 2022, when it was the worst equity market, when it was the worst combined equity and bond market in almost a century, our large sales were up pretty nicely. People have also tried to correlate it to real estate in each of those markets. I have not seen a huge correlation there. I think what happens is people get to a certain age and they want to get these end-of-life plans in order. Depending on what their balance sheets look like at that time, I think they are happy and willing to make a transaction and get that in place.
Okay. You spoke to the higher-end consumer. Maybe taking a step back to the cremations. Is that mostly a mid to lower-tier consumer? You start off there.
I don't think it necessarily is. This SCI Direct business that we've talked about, we call it a price-sensitive consumer, but I don't think it's necessarily all price-sensitive. I think maybe a good chunk of it is. I think it's also people who just don't value the service aspect, that they truly just want to have a cremation, get it completed, and maybe the family will have some type of event somewhere else, sometime later, go to an outdoor area and have a small outdoor event or do something like that. It's not necessarily. You can have a cremation service at one of our funeral homes that has a full memorial service, but it can be tens of thousands of dollars, depending on what type of catering the people want, how much of the facilities the family would like to use.
Do they want the body present for the service, but then a cremation to occur later? There are a lot of different dynamics and aspects to a cremation that can occur. To your point, there's definitely an aspect, and there's a component of our price-sensitive consumer that does prefer it. We do do customer segmentation studies for our funeral business. We've done about three of them over the last 15 years just to try to get a sense for how the shifts and trends for these consumers are occurring and making sure that as we see these trends occur, we're able to react and make sure that we're doing everything that we can to protect that consumer, do what we can to ensure that they value our products and services.
When the time comes that they need us, their families will want to come to us to say, "Look, I've been to a service at your facility before. Y'all did a fantastic job. I'd like you to do something for one of my family members and doing that.
Okay. Maybe sticking on that line of thought, have you seen any maybe trade-downs in the service selection in the middle to lower-tier consumer?
It's interesting. On the funeral side, we've not ever really seen that. Using the Great Financial Crisis as a litmus test, we've really kind of been constrained to inflationary-type price increases. What you find is, even in a situation like that where people are getting hit, one, people do not really want to spend down on their mother or father. They go through this transaction once in their life, and they want to make sure that they're remembered and remembered in the way that they want them to be. Another aspect is, out of every 10 services that we do, four have a pre-need contract backing them up. Those are already in place and kind of protected.
The other six that come to fruition, they've got usually some type of assets that they've got, other insurance that may not be pre-need insurance backing a contract that they've got available as well. We have really not seen that come to bear. Where we did see that dynamic occur or impact us was, again, back in the 2008, 2009 kind of timeframe, was our cemetery pre-need business. Obviously, as we've mentioned, that's kind of discretionary in nature. It was one of the latter aspects in the latter part of the Great Financial Crisis that we saw that finally get impacting. The last two quarters, let's say, of 2008, we may have seen teen-type declines in cemetery production. As we move forward to March, April of the following year, you saw that consumer come back very quickly.
In 2008, I think our cemetery pre-need was down 7%. In 2009, it was up 7%. I think that people want to get this transaction completed and behind them. Obviously, if there's been a shock to the system, they may not be thinking the first thing they want to do is get that in order. Once they feel more confident, you see that they come back from the sidelines.
Okay. Maybe shifting gears here a bit to the consolidation opportunity. 74% of the market, independent operators, 9% consolidators, and you're at 17% of the industry revenue. It feels like there's quite a bit of opportunity here. How would you say the opportunity is looking for you guys right now moving forward?
Yeah. So that market share is based on revenue in the U.S. and Canada. I think we've got a great pipeline of deals that are either under contract, under LOI, or evaluating those. We've got a target spend of about $75 million-$125 million. We have a team in corporate development that their job is to go out and cultivate relationships with targets that we would like to kind of fill out our footprint. I think the tuck-in-type acquisitions that we do a great job at completing are going to be there. There's nothing at this point that makes me think we're going to be, particularly for 2025, outside of that range. Of course, we'd love to see more 2024s. We were about $180 million- $185 million of acquisitions, and that was primarily made up of two chunkier deals that came through. Those deals are out there.
What you find is these are very generational-type businesses. The families, and they're pretty strong as well. I mean, the cash flow strength is just very consistent coming through. Unless you have a family whose subsequent generations do not really want to be part of the business anymore, if you have the kind of owner of the business who is ready to retire, you kind of have to wait for that experience. What we target is a mid-teen-type IRR on our acquisitions. Back in the 1990s, we did not really talk about this, but back in the 1990s, the entire industry was just a creative EPS, a creative roll-up type strategy. People were paying 15x-20 x type EBITDA multiples just to get people off the fence. That is the only way really to get them to sell until they are ready, outside of providing fair pricing.
We learned from that, realized that a focus on return on invested capital is key to maintaining the health of your company. I think that us, as well as the rest of the industry, has stayed pretty disciplined in that regard. We do try to make sure that, look, we want to be the preferred acquirer that's out there. When I think about that 17%-18% by revenue market share where we are today and think about our footprint, I think that a good gut feel is probably around 25%-30% would be a good target to be at, to be in those urban areas that we want to be in to make sure that we're taking advantage of our scale and those opportunities. It'll take some time to get there.
From a chunkier acquisition type perspective, the bigger consolidators that are out there, it's going to be a difficult, I guess, play to follow, if you will. Because a lot of the current operators, Carriage, Park Lawn, NorthStar, they had been born from our previous FTC divestitures. They have been born from just assets that we decided to hive off that we did not want. As we think about a consolidation opportunity and kind of build out our DCF model to evaluate, at the end of the day, the IRR, we can model in synergies, but we have to get comfortable with whatever amount of EBITDA we would have to divest. Under the previous administration, we may have had to divest, let's say, just an example, 55% of that EBITDA to make sure to get FTC clearance. Under the current administration, I do not think that goes to zero.
I think it's closer to maybe 45%, let's say 40%-45%. But again, you've got to put that through your algorithm and see what your IRR comes back with. I don't think that there are a lot of good opportunities in the U.S. on that front. In Canada, there is a nice opportunity up there. It's a private company called Arbor Memorial. We would love to acquire Arbor. It's a family-run business up there. It's about the same size as ours. I think we'll be patient and cultivate that relationship. When that family's ready to do something, hopefully, they'll know that we're going to be a good acquirer.
Maybe sticking with this talking discussion, maybe talk to the economies of scale you get, and then what would make you an acquirer of choice for some of these smaller independent operators?
Sure. From an economies of scale, when we acquire someone, we can switch to our casket agreement. We can switch to our marker agreement. We are able to buy granite markers, caskets, urns cheaper than pretty much anyone out there because of our scale and our teams that kind of manage that business. We have obviously also got a back office that we are able to really synergize that from a trust processing perspective, really tuck those into our current businesses or operations. From a back office perspective, we have healthy economies of scale. Even the backlog, as it relates to this insurance agreement with the economics associated with that new marketing agreement, we are able to, because of our size, drive better economics there.
On the trust funds, we've got about $7 billion of trust funds that, again, we're able to pool those assets and work with investment managers to create common trust funds, separately managed accounts, and other vehicles that will help reduce the cost associated with them. Those are examples of economies of scale that we're able to generate. Now, as it relates to an acquirer of choice, what you find is former owners are our biggest cheerleaders and kind of proponents to other owners that are out there to say, "Look, SCI is a great acquirer." What we do is, even if it's a spectacular facility that we're acquiring, we'll find some way to deploy capital to kind of spruce it up, to do something.
Because at the end of the day, that owner's name stays on the side of the wall. We want them to be proud to have sold to us. Additionally, we give the owners flexibility to say, "Look, if you want to stay working full-time, you can do that. If you want to come full-time, you can do that. If you want to pack up and go to Florida, you can do that as well." Giving the flexibility to do that. We do not come in and just lay off a bunch of people to generate those synergies, the back office type synergies that I was talking about. We allow natural attrition to occur to kind of right-size that business model.
When currently we generally pay about 8x-10x EBITDA for our acquisitions, I'd say that we get about a turn, turn and a half of synergies on top of that. Because of that dynamic I was just talking about, it may take 12-18 months to kind of get to where those levels are and expectations. We've also got a former owners' council that gets together twice a year that they all talk about opportunities, their colleagues and friends. We even have owners on that owners' council who aren't even from companies we've acquired. It really helps to let them know that we're helping to build a community that, at the end of the day, we hope that they're proud to be part of.
All right. We touched on the M&A growth now. Maybe shifting gears a bit to the EPS growth, the 8%-12% goal you guys put out there, keeping to the 5%-7% base business growth within there with the drivers going to be?
Sure. This 8%-12% that I mentioned back from 2004, as we look to 2026 and really beyond until the baby boomer demographic started impacting us, should help boost it even more. That 8%-12%, as you mentioned, is 5%-7% base business. The pieces and parts of that are flattish volume on the funeral side, low single-digit growth from average. That should drive low single-digit growth in the top line. We do have a big fixed cost structure, though. That is going to grow, we believe, at an inflationary type level, 2.5% or so. We are going to net positive margin dollars, but margin percentage is probably going to stay stable. On the cemetery side, we target mid-single-digit growth in cemetery pre-need sales.
When you take into account the recognition rate, which is generally around 95% of that production that we've got, impacts the top line. A low to mid-single-digit growth in top line with that fixed cost growth is going to help drive not only margin dollar growth, but maybe 40-70 basis points of margin expansion. It's really that algorithm that helps drive that 5%-7%. Of course, the remaining 3%-5% is going to be driven by share buybacks that we've been effective at reducing the shares outstanding from 2004 of $340 million. We're now $140 million today. We've also, of course, the $100 million of acquisition spend that we drive to.
We incur about another $80 million or so of growth capital, whether it be building new cemeteries or new funeral homes to help fill out our footprint in that regard.
Maybe just digging into some of the revenue lines a little bit further, pre-need, there's two buckets in the pre-need cemetery customer and pre-need funeral customer. Can you give us some color on differences between these customers, age, preference, and trends you're seeing within each?
Yeah. Usually, the first kind of touchpoint that a customer has with our industry is when a loved one has passed away, whether a mother or father or someone else. They get on the cemetery side interred, and then the family has to make a decision. Do they want to be interred around the family, from a proximity perspective, or what do they want to do? What you find is people will generally go ahead and try to lock in that property sale, the cemetery property sale. That is what we find close to the early 60s when that occurs. On the funeral side, it is generally the early 70s when families come in and say, "Look, I want to be either buried or cremated.
I want a celebration of life where everyone comes in and parties and we all drink old fashions or do something like that, just get something in place in that regard. Do I want something more somber and just kind of more low-key and more traditional? That is the early 70s, kind of getting that in place. They do not want their families to be burdened with that decision necessarily. It is not necessarily a financial decision that they are making. It is really more of peace of mind, making sure that that plan is in place and they know that their families do not have to deal with that when they pass. The early 80s is usually the time of death that occurs.
Okay. Maybe just shifting gears over to SCI Direct, the change from selling trust funded pre-need products to insurance funded pre-need products, what was the main driving force there?
It was really that business shift that we've done where we're now deferring the urn kits. That's a big chunk of it. On top of that, this marketing agreement that we entered into in July of 2024, we'd really been with the previous insurance company for like the last 25-30 years. We'd owned them really at some point and sold them in the late 1990s, early 2000s from a liquidity perspective. At the end of the day, in late 2023, early 2024, we started an RFP process to evaluate that marketing agreement. I think we kind of hit when the iron was hot because interest rates were kind of close to their zenith at that point.
Insurance companies obviously have to manage two interest rates to a certain degree because they are required under regulatory requirements to maintain a very significant portion of fixed income to back that up. As that interest rate was higher, the size of the economic pie was also higher. The incumbent insurance company did put forth an RFP response that provided for higher economics than what we were getting, but the current provider just provided for a lot more economics. It has basically taken a GA commission percentage of 26%-27% up to closer to 35%-36%. When you step back, it is really no cost to us. You have seen a big step up on the core business from July 2024 to really June 2025 until we left that associated with that increase in general agency commission.
Having that percentage, when you kind of step back and look, do you want to do a trust contract or do you want to do an insurance contract? The insurance contract at 35%-36% makes that NPV a lot easier to say yes. It makes more sense to kind of shift toward an insurance contract versus trust. Those two dynamics really were the deferral of the urn kit and then better economics on that GA revenue helped to push forth that shift. On the funeral side or on the core side, I'm sorry, we've kind of already been at that 70% basically is insurance, 30% is trust. We've tried to maximize that percentage of insurance.
The 30% just for your benefit is really made up of terminal imminent contracts, people who we're writing pre-needs for who are expected to pass away because they're in hospice over the next month or so. The insurance company really doesn't want to get those into their backlog and then have to ship them out. There is also a premium tax associated with it. We try to incentivize counselors that if they expect this to occur, that they shift to a trust terminal imminent contract. There are some state regulations. In New York, for example, we can't sell insurance. We can only sell a trust product. Those are the dynamics there that have driven that shift.
Okay. Maybe digging a little bit deeper into the partnership with Global Atlantic, we've gone to last that partnership here. Are there any points you'd like to highlight for the benefits? Any headwinds you've seen through the partnership here?
Yeah. I would say there are definitely new products that the core consumer had to wrap their heads around. That created some volatility. On the SCI Direct side, because they have been 100% trust, we have had to get all of those counselors' insurance licenses, which has created a lot more headache, I think, than we had anticipated when we rolled this out. Additionally, Tom mentioned this on the call, on the core, when we made this shift in the core business, we decided to completely not sell what we term a flex product. Essentially what that is, is when you buy an insurance product, you generally expect to be covered that if it is over a five-year payment plan, if you pass in year two, let's say, insurance will kick in and cover the remainder of that contract.
Now, what comes with that is a premium, an insurance premium that the consumer pays over the life of that contract as well. There was another contract available called a flex product. And it's an insurance product, but there's no insurance really benefit to it. If you pass in year two of five, the family really unfortunately has to come out of pocket for the rest. When we did a, but it has no insurance premium. The counselor did not have to sell that insurance premium and the benefit of it. When we took away that flex product, what you found is, one, there was a big chunk of counselors that that's pretty much all they sold was a flex product. That made it a lot more difficult for them to wrap their heads around and do.
There was also, even on the core side, there is a middle-income consumer who may not want that insurance benefit. We have had to pivot a little bit in that regard because we have seen some weakness on the production front and really focused on our West Coast markets shift to the flex type product to protect that production. At the end of the day, even though we are selling that flex product, and I did not mention this, but we get a lower general agency commission, we would rather that consumer be in our backlog, secured as a future market share, if you will, rather than run the risk of them shifting to another provider out there.
All right. This was great, Aaron. Do you have any closing comments you'd like to make? Any questions?
No, this has been great, Tom. Really appreciate the conversation. This is our first time having you host as a fireside chat. Really appreciate seeing you all as well and hope the conference goes well.
Perfect. Thank you.
Thank you very much.