1
00:00:02,720 --> 00:00:10,600
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,600 --> 00:00:14,600
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

3
00:00:14,640 --> 00:00:17,880
Speaker 1: Eastern on Apple Coarclay, and Android Auto with the Bloomberg

4
00:00:17,920 --> 00:00:21,000
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,360 --> 00:00:23,640
Speaker 1: or watch us live on YouTube.

6
00:00:23,720 --> 00:00:24,600
Speaker 2: We had an M and A trade.

7
00:00:24,640 --> 00:00:26,440
Speaker 3: Had a few M and A trades hit the tape

8
00:00:26,440 --> 00:00:29,400
Speaker 3: here this morning, one including the regional bank business, maybe

9
00:00:29,440 --> 00:00:32,400
Speaker 3: a super regional bank to be Herman Chen, Bloomberg Intelligence,

10
00:00:32,440 --> 00:00:35,680
Speaker 3: senior analyst for US regional banks, hunting to bank shares,

11
00:00:35,920 --> 00:00:36,919
Speaker 3: buying Cadence.

12
00:00:37,760 --> 00:00:39,760
Speaker 2: Herman talking to us about this deal. What's going on here?

13
00:00:39,920 --> 00:00:42,839
Speaker 4: So, Huntington's fresh off of a deal in Texas. They

14
00:00:42,880 --> 00:00:46,360
Speaker 4: just closed the Veritext deal which added to face Right

15
00:00:46,440 --> 00:00:50,640
Speaker 4: and turned Texas through the Veritext merger. And they're doubling

16
00:00:50,680 --> 00:00:56,360
Speaker 4: down in Texas, adding Cadence, which is in the Houston

17
00:00:56,360 --> 00:01:00,240
Speaker 4: market primarily and also some slower gross Southeast market. It's

18
00:01:00,280 --> 00:01:04,520
Speaker 4: like Birmingham two below. They have some exposure to Arkansas

19
00:01:04,600 --> 00:01:07,400
Speaker 4: and Missouri, but Texas is really the prize.

20
00:01:08,160 --> 00:01:10,479
Speaker 5: Texas is really the prize in Cadence. I believe has

21
00:01:10,520 --> 00:01:15,080
Speaker 5: two headquarters, one in Houston, one in Tupelo. So Huntington

22
00:01:15,160 --> 00:01:17,280
Speaker 5: now has presence in twenty one states.

23
00:01:17,080 --> 00:01:20,280
Speaker 6: And it becomes a super regional. That term super regional.

24
00:01:20,520 --> 00:01:23,959
Speaker 5: What does that mean in terms of regular regulation and

25
00:01:24,080 --> 00:01:26,000
Speaker 5: what kind of capital needs to hold on its bounce stream?

26
00:01:26,080 --> 00:01:28,919
Speaker 4: Yeah, so that's that's a good question. It will clear

27
00:01:29,040 --> 00:01:32,200
Speaker 4: the two hundred and fifty billion asset mark, which is

28
00:01:32,400 --> 00:01:35,680
Speaker 4: a step up in regulation. Really, all that means is

29
00:01:35,720 --> 00:01:41,000
Speaker 4: there's more regulatory reporting, there's a tougher regulation in regards

30
00:01:41,040 --> 00:01:46,440
Speaker 4: to liquidity. But overall, should it mean too much for Huntington?

31
00:01:46,560 --> 00:01:50,560
Speaker 4: And we are expecting some deregulatory efforts from the Fed

32
00:01:51,320 --> 00:01:55,720
Speaker 4: later down the next few months, so that should actually

33
00:01:55,760 --> 00:01:58,000
Speaker 4: work out in Huntington's favor. And I think what we're

34
00:01:58,040 --> 00:02:02,640
Speaker 4: seeing is that just the regulatory efforts increasing M and

35
00:02:02,720 --> 00:02:07,720
Speaker 4: A transactions as a result of the Trump administration being

36
00:02:07,840 --> 00:02:10,320
Speaker 4: very more open to deal making. And you're seeing that

37
00:02:10,360 --> 00:02:14,240
Speaker 4: playouts not only in this deal, but also with the

38
00:02:14,240 --> 00:02:18,919
Speaker 4: Third buying Comerica and also P ANDC buying a bank

39
00:02:19,040 --> 00:02:22,519
Speaker 4: in Denver, First Bank, So more transactions to come.

40
00:02:22,760 --> 00:02:26,800
Speaker 2: Wow, what's the upside for Huntingdon bank shares here? In

41
00:02:26,840 --> 00:02:27,480
Speaker 2: getting bigger.

42
00:02:27,720 --> 00:02:32,280
Speaker 4: Yeah, so they are doubling down in higher growth markets.

43
00:02:32,360 --> 00:02:32,480
Speaker 7: Right.

44
00:02:32,520 --> 00:02:36,359
Speaker 4: So Huntington is based mostly in the Midwest, Upper Midwest,

45
00:02:36,520 --> 00:02:44,440
Speaker 4: lower growth demographics. They've focused on not only hiring folks

46
00:02:44,480 --> 00:02:48,680
Speaker 4: in national businesses, but also expanding in areas like the Carolinas.

47
00:02:48,720 --> 00:02:51,239
Speaker 4: They were doing an organic push in Texas before the

48
00:02:51,360 --> 00:02:54,919
Speaker 4: Veritext deal. So the management team's being much more aggressive,

49
00:02:54,919 --> 00:02:59,079
Speaker 4: and they talked about improving their return profile, increasing their

50
00:02:59,080 --> 00:03:02,560
Speaker 4: return on tangible equity by two hundred basis points over

51
00:03:02,600 --> 00:03:06,120
Speaker 4: the medium term. So the higher, the greater scale, the

52
00:03:06,160 --> 00:03:09,600
Speaker 4: better growth demographics really will fall to the bottom line.

53
00:03:09,760 --> 00:03:11,680
Speaker 5: So what I found interesting in this Hermann is that

54
00:03:11,760 --> 00:03:14,760
Speaker 5: earlier this year Cadence bought another bank industry bank shares.

55
00:03:15,000 --> 00:03:17,520
Speaker 5: Who's a buyer, who's a seller in this great regional

56
00:03:17,600 --> 00:03:19,840
Speaker 5: bank m and a thing that we're seeing.

57
00:03:20,000 --> 00:03:23,280
Speaker 4: Yeah, I think what you're seeing today is and I'm

58
00:03:23,320 --> 00:03:26,840
Speaker 4: just looking at the Kerry Index and all these Texas

59
00:03:26,880 --> 00:03:32,440
Speaker 4: based institutions that are part of that are getting bid up,

60
00:03:32,440 --> 00:03:36,840
Speaker 4: like banks like Prosperity First Financial.

61
00:03:38,160 --> 00:03:38,600
Speaker 8: Origin.

62
00:03:38,840 --> 00:03:41,720
Speaker 4: These are We've seen a number of bank deals in Texas,

63
00:03:41,800 --> 00:03:45,080
Speaker 4: both larger and smaller. Remember, coll America is a Texas

64
00:03:45,080 --> 00:03:49,680
Speaker 4: based bank as well. So these are that's that seems

65
00:03:49,680 --> 00:03:53,000
Speaker 4: to be the area of choice for these regionals and

66
00:03:53,440 --> 00:03:56,040
Speaker 4: we're seeing that activity really pick up.

67
00:03:56,240 --> 00:03:59,320
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.

68
00:04:02,960 --> 00:04:06,680
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

69
00:04:06,760 --> 00:04:09,800
Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android

70
00:04:09,840 --> 00:04:13,160
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

71
00:04:13,200 --> 00:04:16,320
Speaker 1: you get your podcasts, or watch us live on YouTube.

72
00:04:17,240 --> 00:04:21,320
Speaker 3: No Artist agrees to buy Avidity in a twelve billion

73
00:04:21,360 --> 00:04:25,880
Speaker 3: dollar biotech deal, Sam Fazzelli, you became an analyst, You

74
00:04:25,880 --> 00:04:26,679
Speaker 3: should have become a banker.

75
00:04:26,680 --> 00:04:27,560
Speaker 2: I don't know what you're thinking.

76
00:04:27,600 --> 00:04:30,200
Speaker 3: Back in the day, Sam Fazzelli, Director of Research for

77
00:04:30,200 --> 00:04:32,720
Speaker 3: Global Industries and the Senior Farmer Analysts Folks is one

78
00:04:32,720 --> 00:04:34,159
Speaker 3: of the best out there on the street or in

79
00:04:34,200 --> 00:04:36,440
Speaker 3: the city of London, as they say, for Bloomberg Intelligence.

80
00:04:36,880 --> 00:04:39,200
Speaker 3: Is this just another deal kind of right out of

81
00:04:39,240 --> 00:04:41,799
Speaker 3: central casting, Sam, Pharma buying biotech?

82
00:04:43,760 --> 00:04:45,800
Speaker 7: Yeah, well, so, Paul, before we do that, can I

83
00:04:45,920 --> 00:04:48,000
Speaker 7: just make sure that when we come back in our

84
00:04:48,040 --> 00:04:50,839
Speaker 7: next life, can I work with you there we both

85
00:04:50,880 --> 00:04:54,479
Speaker 7: do this together, and can just you know, go and no,

86
00:04:54,600 --> 00:04:58,479
Speaker 7: but look, farmer copies. The story is similar here. We

87
00:04:58,520 --> 00:05:02,720
Speaker 7: have a company here of artists doing okay. They have

88
00:05:03,080 --> 00:05:06,720
Speaker 7: a atent exspirery that they're dealing with. Now remember that phrase,

89
00:05:06,839 --> 00:05:09,760
Speaker 7: it's always the one that rears itsumily head eventually, which

90
00:05:09,800 --> 00:05:13,000
Speaker 7: is good for consumers and drug budgets, but obviously in

91
00:05:13,040 --> 00:05:14,880
Speaker 7: the end bad for the top and bottom line of

92
00:05:14,880 --> 00:05:18,159
Speaker 7: pharma companies. They have another drug that's really big, expected

93
00:05:18,160 --> 00:05:20,440
Speaker 7: to hit about seven point four billion dollars of sales

94
00:05:20,680 --> 00:05:23,840
Speaker 7: by twenty twenty nine twenty thirty, called Cocentics that's going

95
00:05:23,880 --> 00:05:25,880
Speaker 7: to go off pattern. So what do they need. They

96
00:05:25,880 --> 00:05:28,320
Speaker 7: need assets and products to feed it. They do their

97
00:05:28,320 --> 00:05:30,240
Speaker 7: own R and D, but here they also have an

98
00:05:30,240 --> 00:05:33,440
Speaker 7: opportunity to go and get really exciting stuff from biotech companies,

99
00:05:33,440 --> 00:05:37,880
Speaker 7: which is exactly what Novartist is doing twelve billion dollars

100
00:05:37,920 --> 00:05:42,680
Speaker 7: for Avidity Biosciences. And then what they're getting here is

101
00:05:43,279 --> 00:05:46,159
Speaker 7: three products there are at different stages of development but

102
00:05:46,279 --> 00:05:49,440
Speaker 7: very soon to get to hit the market, all rare diseases.

103
00:05:49,760 --> 00:05:53,560
Speaker 7: So it's one that's harder for people to argue against

104
00:05:53,560 --> 00:05:56,080
Speaker 7: in terms of price, et cetera. And it will help

105
00:05:56,120 --> 00:06:00,600
Speaker 7: them with that post twenty twenty nine, twenty thirty revenue

106
00:06:00,600 --> 00:06:04,960
Speaker 7: growth and earnings growth, so pretty much fits perfectly in

107
00:06:05,000 --> 00:06:08,080
Speaker 7: this sweet spot of what they need and what this

108
00:06:08,360 --> 00:06:12,280
Speaker 7: company and for their growth and also their technology platforms.

109
00:06:12,400 --> 00:06:16,159
Speaker 5: Sam you laid out beautifully strategically why Novartists is buying Avidity.

110
00:06:17,040 --> 00:06:20,760
Speaker 5: The CEO of Novartists, Vasenara Simhun, has been making some deals,

111
00:06:20,800 --> 00:06:24,360
Speaker 5: but mostly they've been focused on deals under five billion dollars.

112
00:06:24,400 --> 00:06:27,200
Speaker 5: Regular therapeutics you bought for one point seven billion, and

113
00:06:27,320 --> 00:06:31,120
Speaker 5: those therapeutics also in that neighborhood. Is this purchase, this

114
00:06:31,240 --> 00:06:35,080
Speaker 5: twelve billion dollar purchase a shift in strategy?

115
00:06:35,960 --> 00:06:38,920
Speaker 7: Yeah, I mean it's so hard us on lists, we

116
00:06:39,040 --> 00:06:42,000
Speaker 7: love asking a pharma companies, so what kind of deals

117
00:06:42,000 --> 00:06:43,320
Speaker 7: are you going to be doing? And you go back

118
00:06:43,360 --> 00:06:46,000
Speaker 7: and look at the Q two results. Ah, we like tukens,

119
00:06:46,000 --> 00:06:48,560
Speaker 7: et cetera. Right, and here we go. I mean, you know,

120
00:06:49,040 --> 00:06:51,760
Speaker 7: in my world, a tuck in is three to five

121
00:06:51,800 --> 00:06:54,640
Speaker 7: billion dollars, two to four billion dollars that sort of size.

122
00:06:54,839 --> 00:06:58,920
Speaker 7: So but they all give you this caveat we will

123
00:06:58,960 --> 00:07:02,120
Speaker 7: be opportunistic. And I think here there was an opportunity,

124
00:07:02,560 --> 00:07:06,960
Speaker 7: an opportunity that came up to access some very novel technology.

125
00:07:07,000 --> 00:07:09,200
Speaker 7: I have to say, it's really interesting what these guys

126
00:07:09,200 --> 00:07:12,280
Speaker 7: are doing, and it's late stage enough for it to

127
00:07:12,280 --> 00:07:14,840
Speaker 7: make a difference to the bottom line of the company,

128
00:07:14,960 --> 00:07:17,200
Speaker 7: and it's not after you get that mix. So I

129
00:07:17,240 --> 00:07:20,360
Speaker 7: think the artists decided this is this takes so many

130
00:07:20,400 --> 00:07:23,600
Speaker 7: boxes that it was worth doing. Particularly it fits also

131
00:07:23,640 --> 00:07:26,360
Speaker 7: with their internal assets and their approach to some of

132
00:07:26,360 --> 00:07:29,320
Speaker 7: the other diseases. So it is really pretty good, pretty

133
00:07:29,360 --> 00:07:29,720
Speaker 7: good fit.

134
00:07:30,600 --> 00:07:30,920
Speaker 8: Sam.

135
00:07:31,160 --> 00:07:35,200
Speaker 3: Is the patent runoff or expiration for this industry?

136
00:07:35,480 --> 00:07:37,680
Speaker 2: Is it abnormally high these days?

137
00:07:37,840 --> 00:07:39,720
Speaker 3: Or is this this kind of a normal course of business,

138
00:07:39,760 --> 00:07:42,080
Speaker 3: because it seems like we hear about it more and

139
00:07:42,120 --> 00:07:43,600
Speaker 3: more or less several years.

140
00:07:44,480 --> 00:07:48,640
Speaker 7: Well, the companies have got bigger, there's broader pipelines, and

141
00:07:48,960 --> 00:07:52,040
Speaker 7: you know, I mean there was a period where it was,

142
00:07:52,800 --> 00:07:54,800
Speaker 7: you know, we had the pattern cliff in the twenty

143
00:07:55,040 --> 00:07:58,720
Speaker 7: ten eleven twelve time period. I don't remember exactly. It

144
00:07:58,760 --> 00:08:01,560
Speaker 7: was a while ago now and now we have another.

145
00:08:01,600 --> 00:08:04,080
Speaker 7: It's not quite a cliff, it's a hill that but

146
00:08:04,360 --> 00:08:06,400
Speaker 7: this is this is how it should be. These companies

147
00:08:06,440 --> 00:08:10,880
Speaker 7: get rewarded with reasonable pricing for the ten to twelve years,

148
00:08:10,920 --> 00:08:13,800
Speaker 7: and then it becomes generic so that it creates more

149
00:08:14,120 --> 00:08:16,720
Speaker 7: space in the drug budgets for the governments to pay

150
00:08:16,760 --> 00:08:20,080
Speaker 7: for the next good drug. So I don't think there's

151
00:08:20,080 --> 00:08:24,120
Speaker 7: anything new here, which is it varies by company by company, Sam.

152
00:08:24,200 --> 00:08:28,120
Speaker 5: We know that Novartis is going to be reporting earnings tomorrow,

153
00:08:28,200 --> 00:08:30,720
Speaker 5: I believe, and it's already raised its profit outlook I

154
00:08:30,760 --> 00:08:34,199
Speaker 5: believe two times. What are you anticipating is how much

155
00:08:34,240 --> 00:08:37,120
Speaker 5: is it going to tell us in terms of whether

156
00:08:37,240 --> 00:08:40,920
Speaker 5: this deal, this Avidity deal will add to earnings in

157
00:08:40,960 --> 00:08:42,240
Speaker 5: the near term.

158
00:08:42,800 --> 00:08:45,000
Speaker 7: Yeah, but they already told us that they think that

159
00:08:45,040 --> 00:08:48,199
Speaker 7: it's going to be clearly dilutive next year. And of course,

160
00:08:48,280 --> 00:08:50,640
Speaker 7: as soon as you do these deals, a large amount

161
00:08:50,640 --> 00:08:52,640
Speaker 7: of the value goes into what's called IPR and D,

162
00:08:52,800 --> 00:08:55,679
Speaker 7: which which you have to charge to your p and

163
00:08:55,800 --> 00:08:58,600
Speaker 7: lic cont just put it onto a goodwill anymore and

164
00:08:58,720 --> 00:09:02,320
Speaker 7: just live with that as an intangible. So here there

165
00:09:02,360 --> 00:09:04,240
Speaker 7: would be dilution next year, but I think they could

166
00:09:04,240 --> 00:09:09,079
Speaker 7: start seeing some at least a positive contribution maybe from

167
00:09:09,120 --> 00:09:11,320
Speaker 7: twenty seven to twenty eight on Wehre's definitely twenty nine

168
00:09:11,480 --> 00:09:14,280
Speaker 7: thirty as these drugs hit the market. Of course, they

169
00:09:14,320 --> 00:09:16,120
Speaker 7: have to still get to the market and they have

170
00:09:16,160 --> 00:09:18,720
Speaker 7: to be successful. But the drugs are looking really interesting

171
00:09:18,760 --> 00:09:20,280
Speaker 7: and the dates is looking very powerful.

172
00:09:20,520 --> 00:09:23,640
Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.

173
00:09:27,559 --> 00:09:31,280
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live

174
00:09:31,360 --> 00:09:34,400
Speaker 1: weekdays at ten am Eastern on apple Cocklay and Android

175
00:09:34,440 --> 00:09:37,760
Speaker 1: Otto with the Bloomberg Business app. Listen on demand wherever

176
00:09:37,800 --> 00:09:40,920
Speaker 1: you get your podcasts, or watch us live on YouTube.

177
00:09:41,480 --> 00:09:44,080
Speaker 5: All right, let's talk about what's happening in the Caribbean.

178
00:09:44,280 --> 00:09:48,920
Speaker 5: Hurricane Melissa plowing towards Jamaica. It's a powerful Category five storm,

179
00:09:49,000 --> 00:09:52,600
Speaker 5: the third Category five storm this Atlantic season, and Melissa

180
00:09:52,600 --> 00:09:56,440
Speaker 5: threatens to bring widespread destruction to the island. Matthew Paalazola

181
00:09:56,480 --> 00:09:59,640
Speaker 5: has been monitoring this development. He is the senior analyst

182
00:09:59,679 --> 00:10:02,880
Speaker 5: of p See Insurance for Bloomberg Intelligence, and he joins

183
00:10:02,920 --> 00:10:05,160
Speaker 5: us now with more. Matt, good to speak with you

184
00:10:05,520 --> 00:10:08,600
Speaker 5: when you try to figure out what kind of economic

185
00:10:08,679 --> 00:10:10,439
Speaker 5: damage this storm could reak.

186
00:10:10,840 --> 00:10:12,600
Speaker 6: What historical analogs are you using?

187
00:10:12,920 --> 00:10:15,360
Speaker 8: Yeah, so it is a lot easier for the US.

188
00:10:15,880 --> 00:10:17,920
Speaker 9: We have a lot more data, a lot more storms

189
00:10:18,240 --> 00:10:21,200
Speaker 9: for this one. The method we use as the same,

190
00:10:21,280 --> 00:10:24,360
Speaker 9: We look at older storms, older hurricanes, and we try

191
00:10:24,400 --> 00:10:26,840
Speaker 9: to see in what they did, we adjust for property

192
00:10:26,920 --> 00:10:30,080
Speaker 9: values inflation and try to come up with something. The

193
00:10:30,200 --> 00:10:32,560
Speaker 9: issue has been there haven't been a lot of major

194
00:10:32,640 --> 00:10:35,559
Speaker 9: hurricanes that have made landfall on Jamaica. It's really only

195
00:10:35,640 --> 00:10:38,640
Speaker 9: two since nineteen eighty actually hit the island. A bunch

196
00:10:38,640 --> 00:10:42,440
Speaker 9: of passed. The one that we're looking at is nineteen

197
00:10:42,559 --> 00:10:47,839
Speaker 9: eighty eight Hurricane Gilbert, and that one there's not great

198
00:10:47,840 --> 00:10:50,960
Speaker 9: insurance data, there's not great damage data. The best we

199
00:10:51,040 --> 00:10:55,520
Speaker 9: can find was one hundred thousand homes wiped out power communication,

200
00:10:55,600 --> 00:11:00,800
Speaker 9: killed forty five people. The economic damage, inflation adjusted, maybe

201
00:11:00,840 --> 00:11:04,400
Speaker 9: in the mid single digit billions. The way Melissa's shaping

202
00:11:04,440 --> 00:11:05,680
Speaker 9: up could be a lot worse than that.

203
00:11:05,720 --> 00:11:09,000
Speaker 3: Actually, So in your note, you're saying that Jamaica has

204
00:11:09,040 --> 00:11:13,480
Speaker 3: a low insurance penetration, and but what coverage is written

205
00:11:13,480 --> 00:11:14,600
Speaker 3: there is heavily seated.

206
00:11:14,679 --> 00:11:15,360
Speaker 2: What does that mean?

207
00:11:15,520 --> 00:11:18,559
Speaker 9: So that means that it's your your favorite business, Paul's

208
00:11:18,559 --> 00:11:22,199
Speaker 9: heavily seated to reinsurance. That's so you know, I was

209
00:11:22,200 --> 00:11:24,680
Speaker 9: talking about one hundred thousand homes ashured in Gilbert. That's

210
00:11:24,720 --> 00:11:28,199
Speaker 9: where the low insurance penetration comes in. So people's homes there,

211
00:11:28,240 --> 00:11:30,520
Speaker 9: they just they don't have insurance on them, so there'll

212
00:11:30,559 --> 00:11:33,920
Speaker 9: be a wide gap between the economic losses and the

213
00:11:33,960 --> 00:11:37,600
Speaker 9: insured losses. So that's kind of a real unfortunate aspect

214
00:11:37,679 --> 00:11:39,960
Speaker 9: of this. Like the resorts and things like that will

215
00:11:40,000 --> 00:11:41,880
Speaker 9: have insurance on them, that'll be the majority of the

216
00:11:41,880 --> 00:11:44,679
Speaker 9: insured losses. But so that's what we're saying with the

217
00:11:44,720 --> 00:11:48,640
Speaker 9: low penetration and even all any of the business there

218
00:11:48,760 --> 00:11:50,920
Speaker 9: is heavily seated to the reinsurance market.

219
00:11:51,160 --> 00:11:53,720
Speaker 6: So which reinsurers then are exposed?

220
00:11:53,760 --> 00:11:55,880
Speaker 8: You think, So, I don't. I don't have specific names

221
00:11:55,920 --> 00:11:56,840
Speaker 8: to be a lit over remiss.

222
00:11:57,840 --> 00:12:00,760
Speaker 9: You hear about Lloyd's of London kind of does you

223
00:12:00,800 --> 00:12:03,960
Speaker 9: know one off or special risks like this, So you

224
00:12:04,000 --> 00:12:08,160
Speaker 9: might have a big, a big resort that might you know.

225
00:12:08,320 --> 00:12:09,160
Speaker 8: Have a policy with them.

226
00:12:09,160 --> 00:12:10,760
Speaker 9: So a lot of the business might not be written

227
00:12:10,800 --> 00:12:14,840
Speaker 9: by the domestic companies. We cover the Bermuda reinsurance companies,

228
00:12:14,840 --> 00:12:17,320
Speaker 9: and it wouldn't be surprised if they had some the

229
00:12:17,480 --> 00:12:20,920
Speaker 9: big big European companies like Swiss Raad Munich Race. So

230
00:12:20,960 --> 00:12:23,240
Speaker 9: those are kind of the usual suspects, but I wouldn't

231
00:12:23,559 --> 00:12:25,840
Speaker 9: ascribe losses to any of them, just Yet.

232
00:12:25,679 --> 00:12:27,679
Speaker 3: When I owned a home in California, it got to

233
00:12:27,720 --> 00:12:30,120
Speaker 3: the point where the only place we could get home

234
00:12:30,160 --> 00:12:32,600
Speaker 3: insurance was Lloyd's of London. Really, I mean as saying,

235
00:12:32,600 --> 00:12:35,480
Speaker 3: people who ensure you know, tankers going through the strait

236
00:12:35,520 --> 00:12:36,079
Speaker 3: of her moves.

237
00:12:36,120 --> 00:12:36,920
Speaker 2: That's why I had to.

238
00:12:36,840 --> 00:12:38,440
Speaker 6: Go to Well, no one's even doing that now. You

239
00:12:38,480 --> 00:12:40,920
Speaker 6: only have the state insurers, the lender of nature of

240
00:12:41,000 --> 00:12:41,480
Speaker 6: last resort.

241
00:12:41,520 --> 00:12:44,319
Speaker 4: At this point, I think mine is like Joe's Insurance

242
00:12:44,320 --> 00:12:46,600
Speaker 4: of South Jersey, only one.

243
00:12:46,720 --> 00:12:49,559
Speaker 3: Exactly talk to us about the hurricane season for from

244
00:12:49,600 --> 00:12:51,839
Speaker 3: your perspective, it doesn't seem like it's been that bad.

245
00:12:51,960 --> 00:12:54,040
Speaker 8: No, it's been. It's been quite good for.

246
00:12:55,520 --> 00:12:58,959
Speaker 9: People who suffer from hurricane losses and for insurance companies.

247
00:12:59,000 --> 00:13:05,360
Speaker 9: So very mild. I think minimal US activity. We look

248
00:13:05,360 --> 00:13:09,720
Speaker 9: at catastrophe lost estimates for our companies. We started off

249
00:13:09,720 --> 00:13:11,480
Speaker 9: the year with the wildfires and I said, oh, no,

250
00:13:11,559 --> 00:13:13,200
Speaker 9: like this is going to be bad. We're going to have,

251
00:13:13,280 --> 00:13:15,760
Speaker 9: you know, major another major hurricane. It was going to

252
00:13:15,760 --> 00:13:20,560
Speaker 9: be pretty significant. Third quarter was very mild. We've only

253
00:13:20,559 --> 00:13:23,840
Speaker 9: seen a couple of companies report earning so far. Those

254
00:13:24,080 --> 00:13:26,840
Speaker 9: have been good. The catastrophellas have been very low, so

255
00:13:27,840 --> 00:13:30,200
Speaker 9: hurricane season mild. This is pretty rare to have a

256
00:13:30,200 --> 00:13:33,520
Speaker 9: major hurricane this late. We did a hurricane Sandy was

257
00:13:33,600 --> 00:13:36,680
Speaker 9: around this time when it hit. But the hurricane season

258
00:13:36,720 --> 00:13:40,040
Speaker 9: technically runs through November. But it's pretty rare for major

259
00:13:40,080 --> 00:13:42,240
Speaker 9: storms to hit that late.

260
00:13:42,600 --> 00:13:45,880
Speaker 5: Yeah, hurricane season officially ends November thirty, so we just

261
00:13:45,880 --> 00:13:48,240
Speaker 5: have to get through the next month or so. Matt,

262
00:13:48,320 --> 00:13:50,840
Speaker 5: if you have a mild hurricane season, does that mean

263
00:13:51,200 --> 00:13:54,439
Speaker 5: people's insurance premiums won't go up at that stay static?

264
00:13:55,640 --> 00:13:56,080
Speaker 8: Probably not.

265
00:13:57,160 --> 00:13:58,120
Speaker 2: That's pretty as.

266
00:14:00,200 --> 00:14:01,960
Speaker 8: Yeah, no bologna on that one either.

267
00:14:02,080 --> 00:14:09,960
Speaker 9: But yeah, and the issues behind home insurance haven't necessarily

268
00:14:10,000 --> 00:14:13,600
Speaker 9: been the large losses. It's been inflation and building materials.

269
00:14:14,200 --> 00:14:19,000
Speaker 9: It has been kind of poor regulation in certain markets

270
00:14:19,040 --> 00:14:23,520
Speaker 9: like Florida and California and causing reinsurance rates to go up.

271
00:14:23,880 --> 00:14:26,400
Speaker 9: So the things that are driving that hasn't necessarily been

272
00:14:26,480 --> 00:14:27,760
Speaker 9: these these large losses.

273
00:14:28,680 --> 00:14:31,320
Speaker 5: When is the next wildfire season or is there even

274
00:14:31,320 --> 00:14:33,200
Speaker 5: a wildfire season or is it kind of year around now?

275
00:14:33,320 --> 00:14:38,000
Speaker 9: Yeah, so in California there are times where the Santa

276
00:14:38,040 --> 00:14:40,640
Speaker 9: Ana wins are stronger. I don't have the exact dates

277
00:14:40,640 --> 00:14:42,760
Speaker 9: off the top of my head. There kind of are

278
00:14:43,040 --> 00:14:46,680
Speaker 9: seasons to it, but you know they could break out

279
00:14:46,960 --> 00:14:48,400
Speaker 9: kind of at any time.

280
00:14:49,280 --> 00:14:51,520
Speaker 2: How are they property and casualty socks doing this year?

281
00:14:51,600 --> 00:14:57,560
Speaker 9: Yeah, not great. So you know, despite the mild hurricane season,

282
00:14:58,160 --> 00:15:01,960
Speaker 9: good jumps and book value good are 's The fundamentals

283
00:15:02,000 --> 00:15:06,600
Speaker 9: are I think past the peak. So the valuations of

284
00:15:06,640 --> 00:15:08,800
Speaker 9: these stocks on a price to book basis usually peak

285
00:15:08,880 --> 00:15:12,880
Speaker 9: before they're ros. The ros have probably peaked. It's tough

286
00:15:12,880 --> 00:15:15,120
Speaker 9: to see. I keep saying it, and they keep kind

287
00:15:15,160 --> 00:15:18,360
Speaker 9: of incrementally being a little bit better, but it's tough

288
00:15:18,360 --> 00:15:21,120
Speaker 9: to see their underwriting get better next year. Interest rates

289
00:15:21,160 --> 00:15:24,680
Speaker 9: clearly are you know, at least going slightly down by

290
00:15:24,760 --> 00:15:28,320
Speaker 9: step by step. So the fundamentals are not great. Valuations

291
00:15:28,320 --> 00:15:30,560
Speaker 9: were high, so going into the year it was not

292
00:15:30,640 --> 00:15:31,560
Speaker 9: great for performance.

293
00:15:31,720 --> 00:15:33,320
Speaker 6: Does that mean there's going to be M and A

294
00:15:33,400 --> 00:15:34,000
Speaker 6: in this sector?

295
00:15:34,600 --> 00:15:35,080
Speaker 8: Probably not.

296
00:15:35,200 --> 00:15:39,040
Speaker 9: So the issue there is these companies have reserves, right,

297
00:15:39,080 --> 00:15:42,440
Speaker 9: so we write liability business for things that happen and

298
00:15:42,520 --> 00:15:45,400
Speaker 9: it could impact me many years in the future. What

299
00:15:45,520 --> 00:15:49,760
Speaker 9: has been happening is those losses from the past have

300
00:15:49,840 --> 00:15:53,560
Speaker 9: been higher than companies expected. So you'd be remiss to

301
00:15:53,560 --> 00:15:55,560
Speaker 9: want to buy another company and have this book of

302
00:15:55,600 --> 00:15:57,960
Speaker 9: business that could be worse than you expected. It's usually

303
00:15:57,960 --> 00:16:00,920
Speaker 9: the biggest obstacle to m and asrugs.

304
00:16:01,520 --> 00:16:06,200
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

305
00:16:06,400 --> 00:16:09,880
Speaker 1: and anywhere else you get your podcasts. Listen live each

306
00:16:09,880 --> 00:16:13,640
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,

307
00:16:13,760 --> 00:16:17,320
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

308
00:16:17,720 --> 00:16:20,680
Speaker 1: You can also watch us live every weekday on YouTube

309
00:16:21,040 --> 00:16:23,280
Speaker 1: and always on the Bloomberg terminal