Monthly Archives: March 2016

The Safest Place On Earth

The Safest Place On Earth

The Safest Place on Planet Earth for Your Money

If you’ve been smart, you’ve secured a copy of my book, The Banker’s Secret to Permanent Family Wealth, and you’re familiar with the term “Private Family Bank.” It’s a specially designed interest- and dividend-paying account in one of the oldest companies, in one of the oldest industries in America. Most financial professionals have never heard of these accounts.

One of the financial newsletters I subscribe to made a list of 35 of these special companies doing business in America today.

  • The oldest company on the list is 177 years old.
  • The average age of these companies is 106 years.
  • Nineteen of them have been in business for more than a century.
  • These companies are rare.
  • No one has formed one in a very long time (worldwide), and no new ones are likely to ever be formed again.
  • These companies do NOT trade on the stock market.
  • Their values don’t fluctuate like traded stocks.
  • They don’t use debt.
  • Acquiring one of these companies is illegal. This is why Wall Street has no business with these companies.
  • They generate tons of cash, and they pay large dividends to their owners every year.
  • And you’ve probably never heard of them…at least in the application we use them.

The World’s Safest Industry  

The companies I’m talking about are a special type of life insurance company. I’ll explain why I focus on this type of insurance company and how they’re different from regular life insurance companies in a moment. But first, I want to explain why life insurance is such a great industry for safety-conscious wealth accumulators…

  • Life insurance is one of the oldest financial products in existence.
  • The sale of life insurance in the U.S. began in the late 1760s.
  • Life insurance has proven itself through two world wars, a revolution, a civil war, the Great Depression, and numerous other recessions.
  • There hasn’t been a single life insurance contract default in the last 300 years in America.
  • Mutual funds, ETFs, 401(k)s, and IRAs and other tools for stock/bond market gambling have only been around for a few decades.

Life insurance is a recession-proof business

People need life insurance regardless of what’s going on in the economy. Life insurance is also a mathematical business, where the geniuses at the helm know the odds out to several decimal places. The fact that has made life insurance profitable for more than two centuries is that, as long as you price your risk correctly and you don’t do anything stupid with the premiums you collect, you won’t lose money over the long term.

It is a VERY predictable business.

Life insurance companies are the safest of all insurance companies. Consider most insurable property and casualty events, such as fires, earthquakes, hurricanes. They’re rare, so scientists have limited examples to study. The damage claims to the insurance companies, however, can be astronomical.

Now consider life insurance. A person’s death is certain. Life expectancy is highly-predictable for large groups. There’s plenty of data. And the insurance company’s actuarial scientists (smarter than NASA scientists) know what the payout for death claims will be each year. Operating costs in the life insurance industry are arguably more predictable than most other industries, because there is so much data (death rates by age and gender) to analyze.

Life insurance demand never changes

Even in the Great Depression or during economic booms, this industry doesn’t have a business cycle with peaks and valleys. Statistics drive the profits in this industry. As long as the actuaries do their jobs and the insurance company has enough customers, they can virtually guarantee it’ll be profitable. That’s why they can guarantee a major portion of your cash growth inside a policy.

During the Great Depression, more than 9,000 banks went bankrupt. However, according to a the Temporary National Economic Committee in 1940, only 2% of all life insurance company assets in the U.S. became impaired during the same period. Because the life insurance industry was so strong, policies and their cash values played a big part in keeping the country afloat and helping many troubled businesses get back on their feet.

One example is department store giant James Cash Penney. The great stock market crash of 1929 almost wiped J.C. Penney out of business. But Penney was able to borrow funds from his life insurance company against his policy to keep his department store chain in business through the Depression. Today, JCPenney has 1,000 stores and is worth $5 billion.

Similar stories can be told about a couple of business startups called “Disney” and “McDonald’s.” Walt Disney and Ray Kroch both accessed money from their life insurance policies to fund their businesses in the early days.

Insurance companies weathered the more recent stock market crash of 2008-2009 with similar flying colors. Less than 1% of their investments were listed as “nonperforming” during the financial crisis.

Not only did the recent financial crisis not affect these insurance companies, but they also continued their century-long track records of paying dividends.

But, again, I’m talking about a select subset of the overall life insurance industry. The safest subset. And I explain how we modify and use certain life insurance contracts offered by these companies in my book, The Banker’s Secret to Permanent Family Wealth. 

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