The American Council of Life Insurers issues a report every year sharing details of the life insurance industry. In 2021, the report shows that life insurance companies paid $100 billion to beneficiaries of life insurance policies and $97.7 billion to annuity holders in 2021, both record highs for a single year. In fact, those payments increased 10.8% over 2020. In that year, payments increased 15.4% over 2019, the largest year-to-year increase since the Influenza Epidemic of 1918.
Don't worry about your poor insurance company, though. A common measure of industry strength – state regulators’ risk-based capital (RBC) ratio – remained above 400% in 2021, indicating life insurers overall maintain more than twice the amount of capital required to pay out future claims. In fact, with the public becoming aware of the mortality threats due to Covid-19, people continued to seek life insurance coverage in record numbers. Nearly 46 million life insurance policies were purchased in 2021, a 6.1% increase over 2020, and total life insurance coverage reached a record $21.2 trillion.
As someone with a financial mind, life insurance is an amazing thing. We take the one thing that we absolutely know is going to happen - death - and allow people to benefit their families financially at its occurrence. The more I study the habits of the wealthy, the more often I see life insurance as the cornerstone upon which generational wealth is built.
“The art is in what you leave out.”
— Kevin Kelly
Apple is winning. Last year the tech platform company included a new mandatory feature for apps. It required them to ask users for permission to track their personal data. Companies like Meta/Facebook, Twitter, and Snap! rely on the stealthy collection of that data to serve personalized ads to garner greater clicks and sales for their advertiser clients. So if users opt out, the ads become less effective and dramatically less valuable.
I had a sense at the time that this might be a watershed decision but didn’t have any reason for believing it was and couldn’t have quantified it at the time. It turns out that it was a much bigger deal than I thought. It turns out that when Apple’s privacy prompt pops up, less than 1 out of 5 people agree to be tracked. Catch this: Facebook’s ads are now worth 80% less to its buyers … and the market knows it. Since the Apple announcement, Facebook stock is down 68%. Factor in the rise of TikTok and the fact that much of the ad spend has migrated to that platform, and the writing is on the wall for Facebook.
“Did you collaborate in your own defeat? A lot of people do. Learn not to.”
— John Gardner
Speaking of Facebook, let’s also note that Mark Zuckerberg has spent so much time and energy on trying to reinvent the platform inside the metaverse, going so far as to rename the company Meta.
It’s a controversial opinion but I’m not buying the VR space. Every 7 years in my investing career, VR has been the next-big-thing. It seems to rise to the top of expectations when there is too much money to be spent on enough real world projects. Big Brands get fooled every time, sinking money into some ethereal promise of owning a piece of the future virtual world. The problem is, though, that the real world is valuable because its the only one we’ve got. No matter how you slice the data, you are only putting one Dunkin’ Donuts on the corner and that corner real estate derives its value from that fact. In the Metaverse, you could clone an infinite number of those corners and each one of them only has value owing to how many people traffic there … something that changes by the second.
I don’t like VR. I have to wear a stupid looking device that prevents me from interacting with the real and virtual world simultaneously. The graphics and lag is terrible and makes me feel terrible physically … and most importantly for someone like me, I can’t multitask there. Right now, I can write this newsletter while on a Zoom call. If it was in the metaverse, everyone would see me not paying attention and hold me accountable for it. Don't think that’s a big deal for the future? Try having a 30 minute conversation with anyone under the age of 30 today without a screen present.
“You never conquer the mountain, you only conquer yourself.”
— Jim Whitaker
I was happy to do the Making More Money for You Radio Show with Magnus Carter this week. You can have a listen here, as we discuss the challenges of family businesses and how we decided to put together a Family Office.