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Speaker 2: This is Bloomberg Business Week Insight from the reporters and
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Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: Stocks are down, use treasure yields moving up yields we've
Speaker 3: seen moving up this after this morning's US economic data
Speaker 3: amped up bets at the Fed will not cut interest
Speaker 3: rates again before July amid offlationary pressures, and even Michael
Speaker 3: McKenzie saying it's like a point in a smidge is
Speaker 3: what the market is expecting in July ten.
Speaker 4: With more joining us as John Augustine Cio over at
Speaker 4: Huntington Private Bank. It's a division of the public held
Speaker 4: twenty four billion dollar Huntington Bank shares based in Ohio.
Speaker 4: John oversees about twenty seven billion dollars in assets under management.
Speaker 4: He's back here in the Bloomberg Business Week studio in
Speaker 4: New York. John, how are you great?
Speaker 5: Great to be here again.
Speaker 4: Wappy New Year. You walked into the studio and you
Speaker 4: said it's the trifecta and that is what's hitting stocks.
Speaker 4: What are you seeing out there?
Speaker 6: Interest rates up, dollar index up, and price of crude
Speaker 6: oil up?
Speaker 5: And when those three are up.
Speaker 6: Now, they've been controlling the stock market now for about
Speaker 6: a month, and the newest member of that is crude oil,
Speaker 6: and stocks have a tough time with that. Think of
Speaker 6: it this way, the automatic stabilizers. When things go bad,
Speaker 6: when the US economy slows, dollar comes down, yields come down.
Speaker 6: Now they're both going up. They're actually trying to slow
Speaker 6: things down.
Speaker 3: So what happens. What's like if this trend continues, because
Speaker 3: we are in a market environment where I feel like,
Speaker 3: you know, you get a dump of certain news on
Speaker 3: a day and you get a trade a certain way,
Speaker 3: and then you come in the next day or two
Speaker 3: days from now, and it's a completely different narrative, especially
Speaker 3: in the treasury trade. I feel like we've been all
Speaker 3: over the place. So tell me, does this continues and
Speaker 3: if so, what are the implications it continues?
Speaker 5: Likely?
Speaker 6: And to earn season fifteenth officially we started earning season used.
Speaker 3: To be ge Now it's jp market.
Speaker 5: And all the banks that roll out. But it's going
Speaker 5: to continue.
Speaker 6: We're going to get this uneven economic news, The jobs
Speaker 6: reports are going to be very big on Friday, right,
Speaker 6: But it's the economic news is going to see to
Speaker 6: the earnings news. The earnings news is probably eventually going
Speaker 6: to be the arbiter, because earnings have been very good
Speaker 6: for two years.
Speaker 4: The S and P five hundred in twenty twenty three
Speaker 4: up more than twenty four percent, in twenty twenty four,
Speaker 4: up more than twenty three percent. Are your clients just
Speaker 4: calling you, being like, throw it all in the S
Speaker 4: and P five hundred? Why wasn't everything in the enough yet? When?
Speaker 5: When?
Speaker 6: So? You're saying box for the only thing Americans do
Speaker 6: not like to buy on sale.
Speaker 4: I've heard that before. Funny, But are they saying, wait
Speaker 4: a second, why wasn't I just in the S and
Speaker 4: P five hundred? You have me in this diversified portfolio
Speaker 4: that doesn't return what the S and P five hundred
Speaker 4: index returns? What's going on here?
Speaker 5: We we know?
Speaker 6: What we know is Americans are overcashed still, bank deposits
Speaker 6: up still.
Speaker 5: Market assets up. Still.
Speaker 6: If you look at the national numbers, Americans are over
Speaker 6: We find in our own customers.
Speaker 4: The highering customers.
Speaker 5: Yes, we've been weighted towards equities.
Speaker 4: Hiring the income spectrum, high.
Speaker 6: Income spectrums, we've been weighted towards equities, not all the way.
Speaker 5: We want to see what yields are going to bond
Speaker 5: yield you're going to do.
Speaker 6: But nobody's coming at us yet and saying, even after
Speaker 6: two years, throw at all inequities.
Speaker 5: It's just not there.
Speaker 3: Anybody coming in and saying, you know what, I'm done
Speaker 3: two great years. In terms of the equity play, we're
Speaker 3: being so kind of plain vanilla because we know private
Speaker 3: markets and a lot of things are in play in
Speaker 3: a lot of people's portfolios, especially at the higher income strata.
Speaker 3: But is anybody saying, I'm out, I want to be
Speaker 3: in something safe. I look at the treasury trade. I
Speaker 3: can kind of get a decent return there. So, you know,
Speaker 3: get into the investor's psyche right now.
Speaker 6: They they like the four percent yields and treasuries, but
Speaker 6: wants six eight percent, six eight ten percent increases in
Speaker 6: that and that you got to go to the stock.
Speaker 5: Market in the US this year. Though.
Speaker 6: What you're right on, Carol, is this year income may
Speaker 6: be the best mitigator against volatility.
Speaker 3: Right, protecting yourself against downside right and giving yourself.
Speaker 5: You're always gonna have fuel.
Speaker 3: John, do you think that we're going to head into
Speaker 3: you know, you guys are as we mentioned publicly held
Speaker 3: division of Huntington Bank shares twenty four billion dollar institution,
Speaker 3: and I am curious. I know you are in the
Speaker 3: institutions a lot bigger than that, a lot bigger. I'm
Speaker 3: talking about the market cap, forget me, but in terms
Speaker 3: of like you're you're in, you know, the private bank.
Speaker 3: But I am curious. You know, if you talk with
Speaker 3: some of the other colleagues, what they are seeing in
Speaker 3: terms of lending in the environment and our people taking
Speaker 3: out loans or is the bank willing to loan? Like,
Speaker 3: give us an idea. Is anybody thinking slow down concerns
Speaker 3: about recession.
Speaker 6: Now, especially after the election, there's more optimism now, there's
Speaker 6: more loan demand now, business small business is ready to go,
Speaker 6: even though in the stock market nobody likes small and
Speaker 6: good caps, but businesses are getting ready to go.
Speaker 3: There's probably and the bank ready to the banks ready.
Speaker 5: Banks are ready to go. Banks are over.
Speaker 6: Capitalized arguably, and I'm not just talking about the one
Speaker 6: I'm with, but in general that the optimism has come
Speaker 6: into the business community right or wrong, right or wrong.
Speaker 6: And we have a FED now that's not a headwind.
Speaker 6: We have a new administration that wants to speed things up.
Speaker 6: So the FED and the fiscal policymakers are in unison
Speaker 6: now to move forward on the economy. That's the playbook.
Speaker 6: And and then how much how much inflation will that generate?
Speaker 5: That generate out of that and nobody knows that yet.
Speaker 4: That's the concern though, right, yeah, talk a little bit
Speaker 4: about protecting clients against consecutive quarters of inflation moving higher
Speaker 4: if we get another jobs report. We got the Jolts
Speaker 4: report today that came in hotter than expected.
Speaker 5: And sent services, etc.
Speaker 6: So now last year, importantly, let's be back up. You'll
Speaker 6: curve now is normalized tenure yield as well over the
Speaker 6: inflation rate, official inflation rate, the headline CPI that most
Speaker 6: people follow.
Speaker 5: Now there's some cushion.
Speaker 6: So now there's some income cushion, real income now that
Speaker 6: we haven't had for ten years or so. So people
Speaker 6: like that, but they still want that six eight, ten
Speaker 6: percent as mentioned earlier, Now there are sixty two some
Speaker 6: stocks in the S and P five hundred that yield
Speaker 6: over four percent. So income from all three groups. Cash
Speaker 6: bond stocks you can almost get four percent or over.
Speaker 6: Now that's a useful tool it but clients mostly still
Speaker 6: want six eight ten.
Speaker 3: They're spoiled.
Speaker 5: They're spoiled.
Speaker 3: I mean historic you know what we got the last
Speaker 3: two years, certainly on the equity trade.
Speaker 4: Is not six eight ten.
Speaker 6: Historically that stocks start to run, they generally keep running.
Speaker 6: We might have two more years of this if earnings
Speaker 6: estimates are right. Think of the earningssts, thick of the
Speaker 6: Bloomberg earnings estimates thirteen this year, fifteen next year.
Speaker 3: Yeah, although Gina Martin Adams has been a little bit
Speaker 3: more sanguine feeling or a little bit more excuse me,
Speaker 3: pulling in in terms of expectations, the comparisons become really difficult.
Speaker 3: And now that things aren't going to grow, it's just
Speaker 3: not at the dynamic rates.
Speaker 6: No, and that's where productivity comes in, that's where AI
Speaker 6: comes in, et cetera. But our our equity team, Randy Herren,
Speaker 6: our equity team, Yeah, we're not seeing any slow down in.
Speaker 5: The overall beat level. It's still four or five hundred
Speaker 5: basis points.
Speaker 3: What about the US housing market, that's in the mortgage
Speaker 3: rates staying higher, Like, could that be something that causes
Speaker 3: some problems wider problems in the US economy.
Speaker 6: I mean, arguably the USA com to be growing above
Speaker 6: three percent, but housing starts are down year every year.
Speaker 6: Everything's wrong in how the inventories are wrong, the pricing
Speaker 6: is wrong. There's a mismatch of what kind of houses
Speaker 6: are out there versus what millennials want who are now
Speaker 6: forming households. So yes, the housing market is a risk.
Speaker 6: But surprisingly, what we started to hear from National Association
Speaker 6: reeltors over the last couple months is Americans, and we're
Speaker 6: going to find this out in the spring, is that
Speaker 6: Americans might be getting used to these higher mortgage rates.
Speaker 3: Yeah, there's a point where you're going to.
Speaker 5: Say they said it, We didn't say it. It's coming
Speaker 5: from them.
Speaker 3: No, it's a good point. I do feel like that
Speaker 3: that is something we started to talk about. Happy New York.
Speaker 3: Great to have you back, John Augustine over at Huntington
Speaker 3: Private Brank.
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Speaker 3: All Right, everybody, it's a most read story on the
Speaker 3: Bloomberg on this Tuesday. JP Morgan Chase just becoming the
Speaker 3: last of Wall Street's biggest banks to abandon the industry's
Speaker 3: largest climate finance alliance. That's going on. But really what's
Speaker 3: most read is that he's saying JP Morgan, Hey, everybody, No,
Speaker 3: mo're working from home. Come on back to the office
Speaker 3: five days a week. So we wanted to get into it.
Speaker 3: Bloomberg New senior finance reporter Shrinatta Rajan here in studio.
Speaker 3: All right, so, first of all, let's talk about this
Speaker 3: back to work. What took JP Morgan so long?
Speaker 7: Well, first of all, Jamie Diamond hasn't quite said it yet.
Speaker 7: Senior executives of JP Morgan are talking about this. Can
Speaker 7: we assume it's very fair to assume Jamie Diamond's on board?
Speaker 7: Does anyone on board is Jamie Diamond? Everyone else has
Speaker 7: to fall in line. But all the sense we're getting,
Speaker 7: unless plans fallow out last minute, is sometime in the
Speaker 7: next few weeks and then week or two, you could
Speaker 7: very well see JP Morgan come out and say they
Speaker 7: want everyone back in office five days a week. They
Speaker 7: already had all their mds and above in the offic
Speaker 7: as a lot of the that's what I was toating stuff.
Speaker 7: Well what's the status right now?
Speaker 4: Like what change? What changes if this becomes policy.
Speaker 7: Roughly sixty percent of their workforce is full time, okay,
Speaker 7: but going from sixty to I don't know, eighty five
Speaker 7: ninety ninety five percent is still a lot because JP
Speaker 7: Morgan employs three hundred thousand people globally, so there are
Speaker 7: still a lot more people who supposed to come back
Speaker 7: in full time.
Speaker 8: And you know, this is a portion pole you see,
Speaker 8: especially on the tech side.
Speaker 7: Uh, It's it's a dynamic people have seen within JP Morgan,
Speaker 7: but it's perhaps true across the board's that's one group
Speaker 7: inside many corporations where it's proven the hardest to convince
Speaker 7: them that five days in the office is the way
Speaker 7: to go.
Speaker 3: And they need those workers, like pick your firm, right,
Speaker 3: they're kind of at their core their tech firms right
Speaker 3: in terms of needing that staff.
Speaker 7: And it's a question of where does the leverage lie.
Speaker 7: And you can see that very easily in the tech sector.
Speaker 7: Those are the companies that have the most flexible rules.
Speaker 7: When companies like Amazon first said we want everyone back
Speaker 7: in the office five days a week. There was a
Speaker 7: lot of pushback against it, and they're to delay those plans.
Speaker 7: And there are other tech films that will go out
Speaker 7: there and out their flexibility.
Speaker 8: Much less so in the banking sector.
Speaker 7: I'd probably say City Group is the only one out
Speaker 7: there who still speaks to its hybrid ethos. Everyone else
Speaker 7: is pretty much back in the office time.
Speaker 4: But do they have to City Do they have to
Speaker 4: in a sense to compete?
Speaker 7: Your point being that as one of the worst performing
Speaker 7: banks in the country, you you might as well show
Speaker 7: up your nice aside a different option.
Speaker 4: I'm curious. It's a fair point if you if your
Speaker 4: compensation has been based on company stock price and it's struggled,
Speaker 4: is it a retention issue and you have to come
Speaker 4: up with other ways to keep employees happy.
Speaker 8: I think it's a fair point.
Speaker 7: But in my mind it's more a leadership ethos more
Speaker 7: than stock market performance or your price to book ratio factor. Here,
Speaker 7: I think that is more Jane Frasier's leadership style coming through,
Speaker 7: and you can be fairly certain that she's not in
Speaker 7: the Jamie Diamond, David Solomon amp Off. An office only
Speaker 7: works when everyone's there five days a week. Could that change, Yes,
Speaker 7: But she's certainly been out there sort of showcasing that city.
Speaker 7: Is this nice, gentle place to work in.
Speaker 3: Listen. To be fair, I really think we all thought
Speaker 3: coming off the pandemic that oh my god, our working
Speaker 3: environment in every industry had changed. And what we've slowly seen,
Speaker 3: whether it's banking, whether it's you know, kind of pick
Speaker 3: your firm, everybody slowly coming back to their offices. I mean,
Speaker 3: let's not say, did you even ask about, oh, you
Speaker 3: did about the JP Morgan office building. It's an expensive building, right,
Speaker 3: You don't.
Speaker 4: Build a building like that and not have people come
Speaker 4: to work.
Speaker 3: It's down the street from us.
Speaker 7: It is one of the largest office buildings on the
Speaker 7: construction in the world, if not the largest. From what
Speaker 7: I understand, it's definitely safe to say one of the
Speaker 7: largest buildings.
Speaker 3: It's new, New Man, It's shining and new, and.
Speaker 7: It does look fabulous. So I'm sure Jamie Diamond would
Speaker 7: like to see it buzzing. But to me, it's also
Speaker 7: interesting that when we look across over the last few years,
Speaker 7: having covered the sector, having looked at the various announcements
Speaker 7: that have flowed through. Over the last few years, we've
Speaker 7: gone through fits and starts. First, it was the first
Speaker 7: few months after the pandemic when we're like, can you
Speaker 7: please start coming back into the office, not five days? One, two,
Speaker 7: three days, let's start there. Then maybe a year or two, Okay,
Speaker 7: not enough, let's go five days. Then it was pretty
Speaker 7: please can you do five days. Now we're again in
Speaker 7: this moment where with this new administration, and especially look
Speaker 7: at the Trump administration and its doge boys Elon Musk
Speaker 7: and vive Ramaswami training their guns at federal employees and
Speaker 7: office buildings being empty. They're all talking about that. Jamie
Speaker 7: Diamond himself has talked about how disappointing it is to
Speaker 7: see some of these federal offices being empty. So I
Speaker 7: think you will see the drumbeat of RT or at
Speaker 7: least that cycle go on for a little while longer,
Speaker 7: at least over the next few months.
Speaker 3: No, that's a good point, and from now we're always
Speaker 3: going to call on the doors boys. Thank you so much,
Speaker 3: stre for that. Hey, one other story you want to
Speaker 3: ask you, JP Morgan quitting the Climate Finance Group. They're
Speaker 3: following City, They're following Bava just you know, thirty forty
Speaker 3: seconds on this what's going on here? Does it mean
Speaker 3: that everybody's saying we don't care what happens to the
Speaker 3: climate the environment or is it something more nuanced.
Speaker 7: Easiest parallel I can make for you was look at
Speaker 7: Facebook or Meta adding Dana White to its board a
Speaker 7: Trump ally Trump buddy. If you're a large bank, how
Speaker 7: much do you want to be out there doubting the
Speaker 7: fact that you care for the environment and esg Yes,
Speaker 7: That's what all of them used to say. They just
Speaker 7: want to shout a little less louder. They don't want
Speaker 7: to be seen as in forefront of that revolution caring
Speaker 7: about the climate or climate change.
Speaker 8: With the Trump administry, do they.
Speaker 3: Still care about the climate and like, will investments reflect
Speaker 3: the or we don't know?
Speaker 8: Their also depends on who's in power.
Speaker 3: The doge boys never going to forget that making a
Speaker 3: pats and T shirts as we speak. Thank you so much.
Speaker 3: Rihna Raja and senior finance reporter here at Bloomberg News.
Speaker 3: Check them out on Twitter, on x on the Bloomberg
Speaker 3: and at Bloomberg dot com.
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Speaker 4: Extreme weather throughout the US this week. Carol, Yes, she
Speaker 4: tweeted this photo this morning. I loved it.
Speaker 3: It was so I can't say freaking, but I'm gonna say.
Speaker 3: It was so cold.
Speaker 4: It was so cold.
Speaker 3: Oh my god, it was colder than Greenland. I put
Speaker 3: that out there.
Speaker 4: Yeah, that's what you tweeted.
Speaker 8: I did.
Speaker 4: Yeah, I love that.
Speaker 3: I was just layer upon layer and a big hat
Speaker 3: and you name it.
Speaker 4: It was just so Yeah, and days like this, I'm like,
Speaker 4: I hope my pipes don't freeze. That's what I think
Speaker 4: about it. Exact kind of scary stuff. Insurance companies don't
Speaker 4: like that either. Our BN team reporting exceptionally powerful dry
Speaker 4: winds expected across southern California this week that's set to
Speaker 4: set wildfire risks skyrocketing in a region that's endured more
Speaker 4: than eight months without significant rain. So you got fires,
Speaker 4: you got hurricanes, you got floods, ri ken havoc on
Speaker 4: traditional insurance, Yeah, I mean even if you don't live
Speaker 4: in an area that's at risk. Look no further than
Speaker 4: what's happened to your race.
Speaker 3: You and I talk about RATEL the time.
Speaker 4: Okay, So you add in risks from cyber attacks, pandemics,
Speaker 4: marine war, and more, and that's where specialty insures such
Speaker 4: as AXE come in. Vince Tizzio is president's CEO of Access.
Speaker 4: It's a seven point three billion dollar market cap company.
Speaker 4: It offers specialty insurance around the world. He joins us
Speaker 4: from New York. Vince, you play sort of in all
Speaker 4: these areas that I mentioned, but the specialty is really
Speaker 4: specialty insurance. Talk a little bit about what your bread
Speaker 4: and butter.
Speaker 9: Is, no doubt. Good afternoon, Good to be with you.
Speaker 10: You know, as a specialist insurer, we really fit the
Speaker 10: bill that comes to the consumer that isn't in the
Speaker 10: traditional landscape. Now you detailed in your outset com and
Speaker 10: some of the natural catastrophe and weather related risks. But
Speaker 10: as you mentioned as well, there's directors and officers and
Speaker 10: liability insurance, there's environmental There's a whole host of products
Speaker 10: that are not uniquely covered by traditional package policies sought
Speaker 10: by commercial entities across the globe.
Speaker 4: What would you say is the biggest segment for you
Speaker 4: when it comes to specialized insurance. Just to give our
Speaker 4: viewers and our listeners an understanding of the context here.
Speaker 10: Yeah, So I think, broadly speaking, think about industry first,
Speaker 10: the marine industry. Within the marine industry, it's not only
Speaker 10: about thinking about ships out in the water. It's also
Speaker 10: about how goods and services are transported on land one example.
Speaker 10: Second example energy, the energy sector, whether it be onshore
Speaker 10: or offshore. There's a variety of specialist insurance needs that
Speaker 10: are created and we deliver products and solutions. You mentioned cyber,
Speaker 10: and gosh, cyber has taken its own form in shape
Speaker 10: and is now a separate product that we, like other specialists,
Speaker 10: underwrite and bring to consumers around the world. And then finally,
Speaker 10: there's those professional liability products, whether they're E and O based,
Speaker 10: Arizona missions, malpractice insurance, directors and officers liability insurance. Those
Speaker 10: are some of the core capabilities that we bring to
Speaker 10: the insurance marketplace and are really considered specialist offerings.
Speaker 3: All right, So when you know, you really kind of
Speaker 3: cut across a bunch of different I feel like sector
Speaker 3: segments of the global economy. I was just looking at
Speaker 3: a story from Bloomberg that was back in about mid December,
Speaker 3: and it pointed out you guys, among a couple of
Speaker 3: other insurers that basically are providing credit risk insurance for
Speaker 3: the private arm of the World Bank as it looks
Speaker 3: to expand lending and emerging market economies. So help us
Speaker 3: understand from what you are seeing. First of all, is
Speaker 3: it getting more expensive to do that insurance? And I
Speaker 3: realize you play into a lot of different markets, but
Speaker 3: give us some color around that. And then what are
Speaker 3: you seeing in terms of what is going on in
Speaker 3: the global economy. Are there more risks out there? Is
Speaker 3: it getting more expensive for entities to ensure it? And
Speaker 3: that means just kind of higher costs on their organizations
Speaker 3: or companies for that matter.
Speaker 10: Yeah, Carol, credit insurance is a very niche specialist insurance
Speaker 10: offering we provided globally, and if you think about really
Speaker 10: what it's solving for. As banks make loans to consumers
Speaker 10: around the world, they want those loans to be insured
Speaker 10: on some basis, they want to have alternative financing capability.
Speaker 10: Specialist insurers like ourselves provide that capability. When you think
Speaker 10: about that risk landscape and the origination of loans through
Speaker 10: the banks around the world. It's a different marketplace between
Speaker 10: Europe and the United States. And as a globalist in
Speaker 10: this capability, we're fit for purpose really to suit any
Speaker 10: of those different market dynamics.
Speaker 3: All right, so good to know. So is there anything
Speaker 3: though from your point? Well, actually, let's pick apart some
Speaker 3: of the markets, because I feel like we could talk
Speaker 3: to you for a long time because you do play
Speaker 3: into so much, you know, just kind of reading in
Speaker 3: and doing some research ahead of you joining us. You know,
Speaker 3: we saw that some underwriters are ware of cyber insurance,
Speaker 3: given it's fairly new and could potentially clash with other risks.
Speaker 3: What would you say to investors to make them more
Speaker 3: comfortable with your company's cyber insurance book of business specifically?
Speaker 10: Yeah, So, first of all, it's the ability for insurers
Speaker 10: to identify how large that exposure is on their balance sheet,
Speaker 10: to recognize its inter relationship with other types of insurance
Speaker 10: that it provides. And so company like Access that is
Speaker 10: a specialist, it takes great care and how it brings
Speaker 10: its cyber product to the market, making certain that its
Speaker 10: other products really exclude exposures that would really relate to
Speaker 10: cyber and I think additionally, this is a type of
Speaker 10: insurance that's relatively recent in the risk landscape. It's a
Speaker 10: twenty odd billion dollar marketplace. There's lots of specialist participants,
Speaker 10: and the key consideration that consumers are facing when making
Speaker 10: this important coverage is number one, whether or not the
Speaker 10: coverage is specific enough to their unique exposures.
Speaker 9: Secondly, can the insurance.
Speaker 10: Company absorb a loss from their company because of the
Speaker 10: concern that you raise? And then finally, do we have
Speaker 10: enough consultive expertise with that underwriting company to help the
Speaker 10: company mitigate their exposure to cyber What.
Speaker 4: About when it comes to regional difference when it comes
Speaker 4: to cyber risk, for example, pricing outside the US versus
Speaker 4: pricing domestically here in the US. Help us understand how
Speaker 4: underwriters do that?
Speaker 10: Yeah, so, Tim, It's a very different risk landscape around
Speaker 10: the world and made more complex by the size and
Speaker 10: the industry of the consumer. And so broadly speaking, the
Speaker 10: United States has a more developed marketplace with respect to
Speaker 10: the purchase of cyber There are many more tools that
Speaker 10: allow underwriters insights around the risk landscape here in North America.
Speaker 9: In Europe, there are any number of.
Speaker 10: Regulatory imperatives that are thrusted upon companies to be able
Speaker 10: to show their wherewithal and in the United States, most recently,
Speaker 10: the SEC has also promulgated certain new regulations on the
Speaker 10: disclosure side.
Speaker 9: And so the risk landscape is varied.
Speaker 10: But I think more notably, depending upon the industry that
Speaker 10: you're in, the size of your company, your cyber risk
Speaker 10: varies greatly.
Speaker 3: All right, risk insurance, as you said, can vary greatly.
Speaker 3: I got to tell you one of the topics that
Speaker 3: we heard folks in the newsroom, Tim and I talked
Speaker 3: a lot about was property insurance generally. I want to
Speaker 3: ask you though about property reinsurance. You guys recently stepped
Speaker 3: back from what's become pretty much a volatile business, like
Speaker 3: the property reinsurance business right before that market saw dramatic
Speaker 3: price increases. How do you feel about that decision a
Speaker 3: few years removed?
Speaker 10: Yeah, we feel very good, Carol. We do our decision, Yeah,
Speaker 10: we do. Let me tell you why.
Speaker 5: So.
Speaker 10: When we were making the decision, we made a decision
Speaker 10: that was grounded in what our risk profile was. Frankly,
Speaker 10: we liked the bet of making a property risk on
Speaker 10: an individual insured basis looking at the risk in total
Speaker 10: as opposed to a subscription, which is the approach that
Speaker 10: we underwrote on the reinsurance side. Now, I would just
Speaker 10: point out that the property business at ACCESS is a
Speaker 10: very substantial business. It's highly accreative, and we think it's
Speaker 10: a distinct value proposition, and so we are choice in
Speaker 10: removing ourselves from the property cap market.
Speaker 9: It was less about whether the market would be good or.
Speaker 10: Bad and more a statement around how we wanted to
Speaker 10: be understood by our investors.
Speaker 3: So no regrets at all. You're happy with the decision.
Speaker 10: We are, and we think our twenty twenty four financials
Speaker 10: should encourage our shareholders on the bet that we made.
Speaker 4: Okay, talking a little bit about reinsurance and portfolio lost
Speaker 4: portfolio transfer reinsurance. You guys recently announced this lost portfolio
Speaker 4: transfer reinsurrement in reinsurance agreement. Explain what that exactly is
Speaker 4: and why your company would want to do it?
Speaker 10: Sure, Tim, So, Access is a twenty odd year old company.
Speaker 10: It has reserves that are essentially money to pay future
Speaker 10: liabilities over ten billion dollars, and so we're an underwriting
Speaker 10: company that has a leaning towards the insurance business, and
Speaker 10: when we looked at our risk profile, we found that
Speaker 10: our reserve pool in our reinsurance business was a little
Speaker 10: bit more than half and we found that the portfolio
Speaker 10: really wasn't right size the kinds of risks that we're
Speaker 10: writing today. And so what we wanted to do was
Speaker 10: bring balance balance to the revenue recognition on the front
Speaker 10: end of our company, which is seventy five percent insurance
Speaker 10: twenty five percent reinsurance, and we wanted to bring the
Speaker 10: same to our balance sheet on the reserves. And so,
Speaker 10: as you note, we engage in a transaction with a
Speaker 10: company called Enstar where we essentially transferred our reserves to
Speaker 10: this third party and retained twenty five percent of the
Speaker 10: risk thereafter. That's essentially what we did and why we
Speaker 10: did it.
Speaker 3: So you know, we are talking a lot, Vince, as
Speaker 3: you might guess about the upcoming earning season. You guys
Speaker 3: report towards the end of the month. I believe it's
Speaker 3: January twenty nine. Just looking at my Bloomberg, I know
Speaker 3: there's certain things you can and can say, but when
Speaker 3: you look at the business environment, you guys had a
Speaker 3: great year in terms of your share price up about
Speaker 3: sixty percent in twenty twenty four. How are you thinking
Speaker 3: about this year with a new administration with a lot
Speaker 3: of talk about me be less regulatory oversight over some industries,
Speaker 3: and I'm just curious about the impact of that, and
Speaker 3: just how you're looking at the year where a lot
Speaker 3: of folks come in investment folks or even heads of
Speaker 3: companies like yourself are saying, too many questions still out there.
Speaker 3: We're gonna have to wait and see how some things
Speaker 3: play out.
Speaker 10: So we think that the risk landscape is fairly dynamic.
Speaker 10: We took a number of actions in our company last year,
Speaker 10: really positioning us for this changing insurance market that has
Speaker 10: been spoken about. What we don't think will change is
Speaker 10: number one. The risk landscape will remain challenging. You mentioned
Speaker 10: that the outset around property insurance and the natural catastrophe events.
Speaker 10: We don't think that that's going to change some one
Speaker 10: hundred and thirty six odd billion dollars of damages in
Speaker 10: twenty twenty four. Secondly, directors and officers liability insurance directors
Speaker 10: and officers of public and private companies are facing increasing
Speaker 10: severity associated with how they discharge their duties. You have
Speaker 10: a bad drop of eight percent increase in bankruptcy you
Speaker 10: rate filings in twenty twenty four, I think nearing the
Speaker 10: levels of the financial pandemic. And then finally, you speak
Speaker 10: about exposures like cyber, energy and marine that are critically
Speaker 10: important to commerce generally around the world, and we have
Speaker 10: a number of solutions to meet those expectations. So net
Speaker 10: we think it's an environment that will be challenging. We
Speaker 10: think we have a number of products to meet the
Speaker 10: needs of our diverse global customer base, and we stand
Speaker 10: ready to bring our capital to bear to meet those needs.
Speaker 4: Vince, thanks so much for joining us this afternoon. You
Speaker 4: really do appreciate it. That's Vince Tizio, president and CEO
Speaker 4: over at Access, seven point three billion dollar market COC company.
Speaker 4: They offer specialty insurance around the world.
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Speaker 10: Now.
Speaker 7: But you let me drive?
Speaker 6: Oh no, no, no no, this is not a toy, alright.
Speaker 8: Please travels. I don't want to drive.
Speaker 11: It's a question.
Speaker 2: This is the Drive to the Clothes for music jo
Speaker 2: Don on Bloomberg Radio.
Speaker 4: Wow, Wow, what timelies When you're having fun, they say,
Speaker 4: we are having fun. We are having fun. Yeah, yeah,
Speaker 4: you know it's not having fun's having text talks. Taking
Speaker 4: a real hit today. Yeah, look, perspective exactly, thank you.
Speaker 3: Everything doesn't go up everybody ways forever.
Speaker 4: Now i'zac one her down about one point eight percent
Speaker 4: right now.
Speaker 3: Uh.
Speaker 4: This is Sylvia Jablonski's world. She also joins us on
Speaker 4: days where markets move higher. Yeah okay, so yeah, that's
Speaker 4: what they were doing earlier in the session. To be fair,
Speaker 4: come on anytime we do. Let's Drive to the Clothes.
Speaker 4: Is Sylvia Jablonski. She's CEO and CIO over at Defiance ETS.
Speaker 4: They've got about four billion dollars in assets under management. Sylvia,
Speaker 4: good to have you on the program. As always, for
Speaker 4: people who don't know definance ETFs, you've got thematic ETFs.
Speaker 4: They follow industries like travel Leverage gtfs, which provide leverage
Speaker 4: exposure to companies such as micro Strategy, Broadcom, and even
Speaker 4: commodities such as uranium. You've got income ETFs as well.
Speaker 4: Joining us from New York this afternoon where would you
Speaker 4: say in your business, the biggest area of growth is.
Speaker 11: Thanks for having me, And I actually prefer being on
Speaker 11: when the markets are up because everybody's happy.
Speaker 4: But hey, maybe if you're maybe you get one of
Speaker 4: those like leverage short ETFs for one of those companies
Speaker 4: that's lower today that you guys offer than you're fine.
Speaker 11: Exactly totally, We've definitely got one of those. I would say,
Speaker 11: you know, the biggest point of interest this year has
Speaker 11: actually been in quantum computing. Okay, yeah, we've had a
Speaker 11: quantum ETF since twenty eighteen, and I would just say
Speaker 11: that you know, a whole lot of people maybe didn't
Speaker 11: pay attention to it or didn't know about it or
Speaker 11: work fully invested in the theme. And last year when
Speaker 11: you had that chat Shept moment for Microsoft and you know,
Speaker 11: all sorts of funds went to AI related funds, we
Speaker 11: were kind of on the sidelines, and we knew it
Speaker 11: was just a matter of time before you know, the
Speaker 11: connection was made that you actually need quantum computers supercomputers
Speaker 11: to process all of this vast data that we're going
Speaker 11: to use to have AI actually you know work and
Speaker 11: come to fruition and so that ETF went from you know,
Speaker 11: being like a one hundred million dollar fund for a
Speaker 11: long time to close to a billion in assets, and
Speaker 11: it's just been like wildly interesting for retail and institutions
Speaker 11: this year.
Speaker 3: That's what I wanted to ask you. I mean, as
Speaker 3: you said, you can, you know, very specific trades. Where
Speaker 3: is the money flowing in? And I want to ask
Speaker 3: you especially kind of since the election, since the new year,
Speaker 3: where's the money flowing in? Where's it flowing out?
Speaker 11: Yeah, I think that, you know, since the election, there's
Speaker 11: just been this shift to risk on. I mean, we
Speaker 11: had you know, twenty twenty four was really a great year.
Speaker 11: I know that not the entire market participated, but if
Speaker 11: you had broad based market exposure, which most people do,
Speaker 11: you did pretty well. Right, You're up in the mid
Speaker 11: twenty percent inches or more and some of the ETFs
Speaker 11: you had and things like that, and so the.
Speaker 3: Consumer remains healthy.
Speaker 11: You know, we have an economy that's probably still going
Speaker 11: to grow somewhere around two to three percent. Eventually rates
Speaker 11: will come down, inflation will be under control, and so
Speaker 11: when you have rates coming down, usually see double digit
Speaker 11: returns in those years in the market. And so I
Speaker 11: would just say broadly that I think it's going to
Speaker 11: be a risk on market. You know, they also investors
Speaker 11: like the idea of a new president coming in that
Speaker 11: is going to be you know, kind of like low
Speaker 11: on business regulation, supportive of markets and things like that.
Speaker 11: And so I just think that the market is just
Speaker 11: poised to have a good year this year, and so
Speaker 11: the flows will go I think to quantum computing, quantum
Speaker 11: computing stocks like AI.
Speaker 3: I have to jump in because I'm not sure if
Speaker 3: you like got the day's memo, but like the economic
Speaker 3: news today, now as people think or traders investing that
Speaker 3: we're not going to get maybe a rate cut and
Speaker 3: it'll be maybe a little bit more than a point
Speaker 3: is what traders are you know, pricing in now come July.
Speaker 3: So maybe it's not a lower rate environment or as
Speaker 3: much lower as everybody was anticipating. Because you sound pretty upbeat.
Speaker 3: If we don't have that, how does that, you know,
Speaker 3: outlook change?
Speaker 11: Great question, and I think, you know, I would still
Speaker 11: argue that we are going to be in a lower
Speaker 11: we are at a lower rate environment. You know, rates
Speaker 11: haven't come down all that much, but they're going downward directionally, right,
Speaker 11: We're not expecting to have rate hikes. We're not expecting
Speaker 11: the FED to kind of change course. And the market
Speaker 11: has now kind of, you know, accepted this, right because
Speaker 11: economic data is pretty good. I think that it's a
Speaker 11: sweet spot. Honestly, Like I think that, you know, we
Speaker 11: avoided this recession, the FED cut a little bit, we're
Speaker 11: going to get another cut. We're not going to get
Speaker 11: rate hikes this year. The market has kind of accepted that.
Speaker 11: And then behind the scenes, you have excellent corporate earnings.
Speaker 11: You have these quality companies that continue to grow again, but.
Speaker 3: They're not growing as fast. And again I'm just curious.
Speaker 11: If inflmation going as fast, but you know, not going
Speaker 11: as fast. But I think that, you know, maybe if
Speaker 11: we don't get twenty twenty five percent this year, I
Speaker 11: think that the market would be okay with ten to
Speaker 11: fifteen percent, right, and then you have some high flyers
Speaker 11: and those would be those, you know, those kind of
Speaker 11: like thematic that we talked about, the quantum and AI stuff.
Speaker 11: But I still think you're going to have loavate double
Speaker 11: digit returns in the broad based in disease this year.
Speaker 3: So let me go back to you. I know you
Speaker 3: were saying were you think things are going to flow
Speaker 3: like quantum and so on and so forth, But where
Speaker 3: have they been flowing in and out? Give me an idea.
Speaker 3: You guys obviously can track the data, you know, I'm
Speaker 3: sure on a kind of daily basis. So where has
Speaker 3: money been flowing in? Where has money been flowing out?
Speaker 11: Yeah, and so we've seen just on our side, I mean,
Speaker 11: we've seen some shift from mag seven to quantum, to
Speaker 11: AI to crypto. We've definitely seen a lot of flows
Speaker 11: into names like micro Strategy, which I think, you know,
Speaker 11: represent the crypto trade. I think the entire market has
Speaker 11: seen more flows in terms of you know, breath expansion.
Speaker 11: So for example, the x mag so the other four
Speaker 11: hundred and ninety three stocks, like whether that's th the
Speaker 11: x mag etf or whether that's through the next top
Speaker 11: seven stocks, like you know, kind of like the broadcom
Speaker 11: the the Lilyes, the Berkshire Hathaways of the world and
Speaker 11: things like this. So I think you have a combination
Speaker 11: of investors kind of cherry you know, cherry picking like
Speaker 11: the ideas that they're going to support in terms of
Speaker 11: like innovation, and I think, you know, maybe some of
Speaker 11: the mag seven there's some fear that they could be overvalued,
Speaker 11: so you know, broaden that out a little bit.
Speaker 3: So you are you guys are seeing as of late,
Speaker 3: whether it's post election and kind of continuing into the
Speaker 3: new year, you're seeing more money maybe move into something
Speaker 3: like or you are into the defiance x MAG ETF.
Speaker 11: Yeah, we've seen more. We've seen more flows into x MAG.
Speaker 11: I we the most, you know, the highest amount of
Speaker 11: flows that we've seen are in micro strategy, right so
Speaker 11: that crypto trade remains alive and well for us. Second
Speaker 11: most would be quantum and then you know x MAG
Speaker 11: x MAG Broadcom is another big one that we've seen
Speaker 11: flows into, So you know, they're kind of sitting sitting there.
Speaker 11: And I think if you look at the other ETFs too,
Speaker 11: you have seen a lot of flow into the AI
Speaker 11: machine learning stuff less so into some of the mag
Speaker 11: seven types of ETF products too, So you're seeing a
Speaker 11: little bit of diversification that way.
Speaker 4: When I was looking at your website earlier this morning
Speaker 4: preparing for this at the ETFs, I was surprised I
Speaker 4: didn't see an Nvidia leverage GTF. Why not?
Speaker 11: Yeah, someone got there before us.
Speaker 4: Okay, so it doesn't make sense.
Speaker 11: We would have one and if a bunch of other
Speaker 11: people didn't.
Speaker 4: But yeah, so's business perspective. It doesn't make sense to
Speaker 4: offer something that anyone else offers in your business.
Speaker 8: It has to be I think I think that.
Speaker 11: There are you know, I think that you know, in
Speaker 11: the ETF world, like first mover usually gains a lot
Speaker 11: of leverage, and then maybe you get a second and
Speaker 11: third that can pick up a little bit. But but
Speaker 11: at this point there, you know, there are many issuers
Speaker 11: that have different Nvidia ETFs out there, single stocks or
Speaker 11: other and so you know, I think that we probably
Speaker 11: wouldn't launch the same thing. Not to say that we,
Speaker 11: you know, aren't going to come up with something that
Speaker 11: has to do with that video, but kind of a
Speaker 11: classic single stock ETF trade is just just tough to compete.
Speaker 3: Totally get it, Totally get it. Hey, thank you so much.
Speaker 3: I love the specificity. Sylvia, be well, Happy New Year.
Speaker 3: By the way, Sylvia Jablonski, she's CEO and CIO over
Speaker 3: at Defiance ETFs. They've got about four billion dollars in
Speaker 3: assets under management.
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