1 00:00:02,520 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:09,600 --> 00:00:12,040 Speaker 2: This is the Big Big Day, Baker at podcast. Good morning. 3 00:00:12,080 --> 00:00:15,040 Speaker 2: It's Thursday, the twenty seventh of November. I'm Caroline Hepga 4 00:00:15,160 --> 00:00:19,360 Speaker 2: in London. Coming up today, Chancellor Rachel Reeves ramps up 5 00:00:19,560 --> 00:00:24,400 Speaker 2: UK tax increases as Labour's hikes outstript what any government 6 00:00:24,440 --> 00:00:27,280 Speaker 2: has done in the UK in more than fifty years. 7 00:00:28,000 --> 00:00:31,040 Speaker 2: Hong Kong's worst far in half a century leaves dozens 8 00:00:31,120 --> 00:00:36,000 Speaker 2: dead with hundreds still missing. Plus private capital hits a wall, 9 00:00:36,200 --> 00:00:40,680 Speaker 2: while obstacles in Europe are proving to be insurmountable for 10 00:00:40,800 --> 00:00:43,680 Speaker 2: some private equity firms. Let's start with a roundup of 11 00:00:43,720 --> 00:00:48,400 Speaker 2: our top stories. Chancellor Rachel Reeves raised taxes on one 12 00:00:48,440 --> 00:00:52,040 Speaker 2: point seven million workers and the wealthy to pay for 13 00:00:52,120 --> 00:00:56,200 Speaker 2: welfare spending and build up her fiscal headroom. It's her 14 00:00:56,320 --> 00:00:59,680 Speaker 2: second tax hiking budget in a row, with levees on 15 00:00:59,760 --> 00:01:03,040 Speaker 2: safe properties worth more than two million pounds and a 16 00:01:03,160 --> 00:01:08,240 Speaker 2: range of other measures. Speaking after her budget proposal was 17 00:01:08,240 --> 00:01:12,520 Speaker 2: announced in an exclusive Bloomberg interview, the Chancellor refused to 18 00:01:12,640 --> 00:01:15,160 Speaker 2: rule out more tax hikes in future. 19 00:01:15,680 --> 00:01:18,920 Speaker 3: I took the fair unnecessary choices today, but my focus 20 00:01:19,240 --> 00:01:22,520 Speaker 3: has been and always will be on growing our economy 21 00:01:22,680 --> 00:01:25,399 Speaker 3: so that we can keep taxes down and have the 22 00:01:25,400 --> 00:01:27,640 Speaker 3: money we need to invest in our public services. 23 00:01:28,760 --> 00:01:32,759 Speaker 2: Although the Chancellor touted growth, the Office for Budget Responsibility 24 00:01:32,920 --> 00:01:37,200 Speaker 2: downgraded economic growth in every remaining year of the parliament. 25 00:01:38,520 --> 00:01:42,200 Speaker 2: But investors have so far reacted positively to the UK Budget, 26 00:01:42,280 --> 00:01:45,199 Speaker 2: which set aside more money as a buffer against guilt 27 00:01:45,200 --> 00:01:49,280 Speaker 2: market swings. So did labour rank and file MPs, who 28 00:01:49,320 --> 00:01:51,640 Speaker 2: were pleased to see a cap on welfare payments to 29 00:01:51,680 --> 00:01:56,720 Speaker 2: families with multiple children lifted, but questions remain about whether 30 00:01:56,840 --> 00:01:59,240 Speaker 2: Reeves did enough in her budget to help her and 31 00:01:59,320 --> 00:02:03,400 Speaker 2: Prime Minister Kis Starmer survive. The pair are Britain's most 32 00:02:03,560 --> 00:02:07,480 Speaker 2: unpopular prime minister and Chancellor since polls began in the 33 00:02:07,560 --> 00:02:13,440 Speaker 2: nineteen seventies. The UK government is expecting a bigger windfall 34 00:02:13,520 --> 00:02:17,639 Speaker 2: from its taxes on non domiciled residents, despite reports that 35 00:02:17,720 --> 00:02:21,079 Speaker 2: many of them are leaving. The Treasury expects to take 36 00:02:21,080 --> 00:02:23,480 Speaker 2: in nearly forty billion pounds from people who live in 37 00:02:23,520 --> 00:02:27,720 Speaker 2: Britain but keep their wealth overseas. Billionaire founders like Revolutes, 38 00:02:27,760 --> 00:02:33,160 Speaker 2: Nick Starronsky and Checkout dot COM's Gilian Pouzas are among 39 00:02:33,280 --> 00:02:37,440 Speaker 2: those who have publicly left Britain thanks to the measures. 40 00:02:39,080 --> 00:02:42,840 Speaker 2: Now to Hong Kong, where the deadliest residential fire in 41 00:02:42,960 --> 00:02:45,919 Speaker 2: decades has killed at least forty four people and left 42 00:02:46,040 --> 00:02:50,240 Speaker 2: hundreds of others missing. An eight tower housing block has 43 00:02:50,280 --> 00:02:54,160 Speaker 2: been burning for over twenty hours, throwing fresh scrutiny on 44 00:02:54,200 --> 00:02:58,280 Speaker 2: the city's housing standards are China correspondent midmn Low says 45 00:02:58,320 --> 00:03:01,440 Speaker 2: a number of issues could have caused the blaze. 46 00:03:02,040 --> 00:03:05,280 Speaker 1: The CrOx of the issue is what exactly causes fire, 47 00:03:05,480 --> 00:03:07,880 Speaker 1: and authorities are still finding that out. But they did 48 00:03:07,919 --> 00:03:10,200 Speaker 1: say that the spread of the fire was much faster 49 00:03:10,320 --> 00:03:14,120 Speaker 1: and quicker than usual. This is a very old estate, 50 00:03:14,120 --> 00:03:18,000 Speaker 1: over forty years old, and it was undergoing heavy renovations. 51 00:03:18,000 --> 00:03:22,320 Speaker 1: There were ben rule scare foldings, green mesh surrounding the buildings, 52 00:03:22,360 --> 00:03:24,720 Speaker 1: and authorities said some of the buildings were not up 53 00:03:24,720 --> 00:03:25,919 Speaker 1: to complyance standards. 54 00:03:26,960 --> 00:03:30,840 Speaker 2: Bloomberg's me and Minlow speaking their rescue operations are expected 55 00:03:30,880 --> 00:03:33,480 Speaker 2: to stretch into this evening, more than twenty four hours 56 00:03:33,480 --> 00:03:37,480 Speaker 2: after the blaze started. Chinese President Jijingping has urged all 57 00:03:37,480 --> 00:03:42,920 Speaker 2: out efforts to reduce casualties. Now, global equities were closer 58 00:03:42,920 --> 00:03:46,280 Speaker 2: to erasing their November losses as rising bets for Federal 59 00:03:46,280 --> 00:03:49,600 Speaker 2: Reserve interest rate cuts that have revived markets, the MSCI 60 00:03:49,640 --> 00:03:53,040 Speaker 2: All Country World Index climbing for a fifth straight session, 61 00:03:53,360 --> 00:03:56,320 Speaker 2: cutting its November drop to just half of one percent. 62 00:03:56,680 --> 00:04:01,200 Speaker 2: The moves track increased confidence for fire rate reductions, with 63 00:04:01,280 --> 00:04:04,560 Speaker 2: money markets pricing in a roughly eighty percent chance of 64 00:04:04,600 --> 00:04:08,480 Speaker 2: a quarter point reck rate cut next month and three 65 00:04:08,600 --> 00:04:11,840 Speaker 2: more by the end of twenty twenty six from the US. 66 00:04:12,200 --> 00:04:16,360 Speaker 2: The moves come as the Beige Book survey of regional 67 00:04:16,640 --> 00:04:21,200 Speaker 2: businesses showed that employment declined slightly and prices rose moderately, 68 00:04:21,480 --> 00:04:27,320 Speaker 2: with economic activity little changed. In recent weeks, two members 69 00:04:27,400 --> 00:04:30,680 Speaker 2: of the US National Guard are in critical condition after 70 00:04:30,760 --> 00:04:34,000 Speaker 2: being shot near the White House. The suspect was also 71 00:04:34,120 --> 00:04:37,520 Speaker 2: shot before being taken into custody by other Guard members 72 00:04:37,560 --> 00:04:41,039 Speaker 2: and Washington DC police authorities say the suspect is a 73 00:04:41,080 --> 00:04:44,520 Speaker 2: twenty nine year old Afghan national. A short time after 74 00:04:44,560 --> 00:04:48,160 Speaker 2: his nationality was released, the US government said that quote 75 00:04:48,320 --> 00:04:53,599 Speaker 2: effective immediately. The country has stopped processing immigration requests from 76 00:04:53,720 --> 00:04:58,359 Speaker 2: Afghan nationals. President Donald Trump has been reacting to the events. 77 00:04:58,920 --> 00:05:02,480 Speaker 4: As heinus asw was an active evil and active hatred 78 00:05:02,880 --> 00:05:06,320 Speaker 4: and an active terror. It was a crime against our 79 00:05:06,520 --> 00:05:11,560 Speaker 4: entire nation. It was a crime against humanity. The hearts 80 00:05:11,640 --> 00:05:14,720 Speaker 4: of all Americans tonight are with those two members of 81 00:05:14,760 --> 00:05:17,400 Speaker 4: the West Virginia National Guard and their families. 82 00:05:20,040 --> 00:05:24,159 Speaker 2: That was the President speaking. He also ordered an additional 83 00:05:24,279 --> 00:05:28,480 Speaker 2: five hundred National Guard troops to Washington following the shooting. 84 00:05:29,680 --> 00:05:31,960 Speaker 2: Those are some of our top stories for you this morning. 85 00:05:32,080 --> 00:05:34,800 Speaker 2: Let's bring you up to speed with the markets right now. 86 00:05:34,960 --> 00:05:38,280 Speaker 2: So we have no cash treasuries trading, of course because 87 00:05:38,279 --> 00:05:41,920 Speaker 2: of the Thanksgiving Day holiday. Hope you're having a good 88 00:05:42,000 --> 00:05:43,919 Speaker 2: day if it's beginning for you. In terms of for 89 00:05:43,960 --> 00:05:46,480 Speaker 2: the masci Ash Pacific Index up by four tenths of 90 00:05:46,520 --> 00:05:49,240 Speaker 2: one percent, Asia equities gaining for forte in a row. 91 00:05:49,480 --> 00:05:52,680 Speaker 2: The pound yesterday climbed above a dollar thirty two, positive 92 00:05:52,680 --> 00:05:56,919 Speaker 2: reaction from some investors to the budget. Guilts also rally. 93 00:05:56,960 --> 00:06:01,200 Speaker 2: Thirty year guilt yields fell by twelve basic points this morning. 94 00:06:01,240 --> 00:06:03,360 Speaker 2: The dollar is down by a tenth of one percent 95 00:06:03,400 --> 00:06:05,520 Speaker 2: and all prices are dropping half of one percent, with 96 00:06:05,600 --> 00:06:08,320 Speaker 2: gold down three tenths too. So those are the markets. 97 00:06:08,400 --> 00:06:10,719 Speaker 2: In a moment, we will bring you the latest on 98 00:06:10,839 --> 00:06:14,440 Speaker 2: the UK budget as well as the challenges facing private 99 00:06:14,480 --> 00:06:18,240 Speaker 2: equity in the European insurance space. So we'll get to that, 100 00:06:18,320 --> 00:06:22,120 Speaker 2: but this has caught my eye today. The US Transport 101 00:06:22,200 --> 00:06:26,080 Speaker 2: Secretary Sean Duffy is calling for more civility in the skies. 102 00:06:26,600 --> 00:06:30,040 Speaker 2: But as bloombergs leanne Al Roshdan has been writing, what 103 00:06:30,160 --> 00:06:35,040 Speaker 2: he really means is don't wear pajamas in public. However, 104 00:06:35,120 --> 00:06:37,360 Speaker 2: as she points out, what if your pjs are actually 105 00:06:37,440 --> 00:06:40,320 Speaker 2: the kind of first class swag that are provided by 106 00:06:40,480 --> 00:06:43,560 Speaker 2: a lot of airlines. Well, Duffy's requests set off this 107 00:06:43,680 --> 00:06:46,400 Speaker 2: huge public debate that got my attention today. I mean, 108 00:06:46,720 --> 00:06:50,040 Speaker 2: where angels fear to tread is what I think. The 109 00:06:50,120 --> 00:06:53,680 Speaker 2: reporters this week were told by Duffy, let's try not 110 00:06:53,760 --> 00:06:56,599 Speaker 2: to wear slippers and pajamas as we come into the airport. 111 00:06:56,920 --> 00:06:59,680 Speaker 2: The Trump administration has been strangely focused on sort of 112 00:06:59,680 --> 00:07:02,400 Speaker 2: looking the part, and Duffy is pledged to revive the 113 00:07:02,440 --> 00:07:06,960 Speaker 2: golden age of travel, of course, perhaps overlooking all of 114 00:07:06,960 --> 00:07:11,600 Speaker 2: the shortcomings of modern air travel, overflowing airports and flight delays, 115 00:07:11,920 --> 00:07:14,840 Speaker 2: and of course one carrier turning this whole thing on 116 00:07:14,920 --> 00:07:17,680 Speaker 2: its head. You've guessed it cheap and cheerless Ryan Air. 117 00:07:18,120 --> 00:07:21,000 Speaker 2: They are known for trolling their own customers and they 118 00:07:21,040 --> 00:07:23,880 Speaker 2: say we reserve the right to refuse service to anyone 119 00:07:24,080 --> 00:07:27,160 Speaker 2: wearing jeans on a four hour flight, so that you 120 00:07:27,240 --> 00:07:30,520 Speaker 2: have it. Shawn Duffy, the US Transports Secretary, in his 121 00:07:30,600 --> 00:07:34,880 Speaker 2: attempts to try to get rid of pjs on planes 122 00:07:34,920 --> 00:07:37,560 Speaker 2: and in airports, think you might need some luck with that. 123 00:07:37,720 --> 00:07:40,880 Speaker 2: I'm going to put a link to Lean's Peace though 124 00:07:40,960 --> 00:07:42,600 Speaker 2: in our show notes for you, and you have a 125 00:07:42,600 --> 00:07:47,200 Speaker 2: look all of that. Right. Let's think about yesterday's UK 126 00:07:47,360 --> 00:07:49,600 Speaker 2: budget now that the markets in the public have had 127 00:07:49,600 --> 00:07:53,360 Speaker 2: a bit of time to digest it. After months of 128 00:07:53,400 --> 00:07:57,119 Speaker 2: speculation and a very unfortunate pre release from the Office 129 00:07:57,200 --> 00:08:01,600 Speaker 2: Budget Responsibility, yesterday the UK Chancellor Rahed Reeves delivered one 130 00:08:01,640 --> 00:08:05,400 Speaker 2: of the biggest tax raising budgets of recent decades, driven 131 00:08:05,440 --> 00:08:08,520 Speaker 2: by a freeze on income tax thresholds beyond twenty twenty 132 00:08:08,560 --> 00:08:13,440 Speaker 2: eight and higher levees on areas including property, pensions, gambling 133 00:08:13,600 --> 00:08:16,160 Speaker 2: and dividends. Joining me now to discuss is our UK 134 00:08:16,240 --> 00:08:21,360 Speaker 2: politics reporter James Wilcock. James, good morning, Wow. Yesterday was 135 00:08:21,360 --> 00:08:24,480 Speaker 2: a huge day. The budget was really aimed at two 136 00:08:24,520 --> 00:08:28,600 Speaker 2: groups at market and at Labour MPs. That tells you 137 00:08:28,680 --> 00:08:32,640 Speaker 2: a lot about the current state of this government, doesn't it. 138 00:08:32,640 --> 00:08:35,320 Speaker 5: It does. I mean, look, there were a lot of taxes. 139 00:08:35,320 --> 00:08:37,600 Speaker 5: There was a whole laundry list which adds up to 140 00:08:37,920 --> 00:08:41,120 Speaker 5: twenty six billion pounds and that you've got to put 141 00:08:41,120 --> 00:08:43,800 Speaker 5: that twenty six billion pounds in context, Caroline. Last year, 142 00:08:44,080 --> 00:08:46,480 Speaker 5: when Rachel Reeves came into government, she put up taxes 143 00:08:46,520 --> 00:08:50,200 Speaker 5: by forty billion pounds roughly, and that was one of 144 00:08:50,240 --> 00:08:52,920 Speaker 5: the biggest tax rising budgets on record and sort of 145 00:08:53,040 --> 00:08:57,240 Speaker 5: in modern British politics. To come back again after promising 146 00:08:57,400 --> 00:09:01,200 Speaker 5: she would not do this is a mentor's moment for 147 00:09:01,320 --> 00:09:05,000 Speaker 5: her career as the chancellor of the first Labor government 148 00:09:05,000 --> 00:09:08,160 Speaker 5: in fifteen years. Why has she done that? And to 149 00:09:08,200 --> 00:09:11,040 Speaker 5: this the story is about one surprise and two winners. 150 00:09:11,440 --> 00:09:14,520 Speaker 5: The surprise is that we were all expecting a massive 151 00:09:14,600 --> 00:09:17,160 Speaker 5: downgrade in her fiscal headroom due to the Office for 152 00:09:17,200 --> 00:09:21,480 Speaker 5: Budget Responsibilities forecasts. Now, although they brought down the growth 153 00:09:21,520 --> 00:09:24,840 Speaker 5: downgrade because of inflation and people being pulled into higher 154 00:09:24,880 --> 00:09:28,040 Speaker 5: tax brackets, they actually forecast that RACHERL. Reeves would have 155 00:09:28,120 --> 00:09:30,320 Speaker 5: far more money to play with. So where did that 156 00:09:30,400 --> 00:09:33,560 Speaker 5: money go, and these are the two winners. First it 157 00:09:33,600 --> 00:09:37,320 Speaker 5: went to the markets, arguably Rees putting money into her 158 00:09:37,360 --> 00:09:40,760 Speaker 5: fiscal buffer, so she now has far more room to 159 00:09:40,800 --> 00:09:43,960 Speaker 5: protect its guilt market swings and markets racted quite positively 160 00:09:44,120 --> 00:09:48,480 Speaker 5: to that yesterday. And then it went to welfare's budget, 161 00:09:48,720 --> 00:09:51,559 Speaker 5: the scrapping of the two child benefit cap, which broadly 162 00:09:52,000 --> 00:09:54,040 Speaker 5: most MPs I was talking to and also our rest 163 00:09:54,040 --> 00:09:56,640 Speaker 5: of our politics team went that was something they could back, 164 00:09:56,800 --> 00:09:58,400 Speaker 5: that they could sell on the doorstep and they could 165 00:09:58,400 --> 00:10:00,000 Speaker 5: say it's a progressive government. 166 00:10:00,640 --> 00:10:03,840 Speaker 2: Yeah. And so to the reaction, and I'll just quote 167 00:10:04,040 --> 00:10:07,360 Speaker 2: as one example, the Daily Mail's front page this morning, 168 00:10:07,480 --> 00:10:12,560 Speaker 2: spiteful raids on strivers to lavish billions on benefit Street. 169 00:10:12,600 --> 00:10:16,000 Speaker 2: I mean, it's only a kind of straw pole view, 170 00:10:16,040 --> 00:10:18,160 Speaker 2: isn't it. What has been the reaction? 171 00:10:18,679 --> 00:10:21,240 Speaker 5: I mean, look, there was this kind of initial shock 172 00:10:21,840 --> 00:10:24,800 Speaker 5: at a major leak from the Office of Budget Responsibility 173 00:10:24,840 --> 00:10:28,040 Speaker 5: when they posted their entire comic analysis about half an 174 00:10:28,040 --> 00:10:30,720 Speaker 5: hour before Red spoke, and that kind of honestly had 175 00:10:30,760 --> 00:10:33,920 Speaker 5: a lot of the journalists reeling. And but now things 176 00:10:33,960 --> 00:10:36,080 Speaker 5: are settling. Like you said, you talked about the Mail, 177 00:10:36,160 --> 00:10:39,960 Speaker 5: the ft talks about smashing tax records the Times high welfare, 178 00:10:40,040 --> 00:10:43,720 Speaker 5: high tax. The I quotes the ifs is summary of 179 00:10:43,720 --> 00:10:47,960 Speaker 5: the budget saying it's spend now, pay later, budget shambles 180 00:10:48,000 --> 00:10:48,800 Speaker 5: your mail line. 181 00:10:48,800 --> 00:10:49,040 Speaker 3: There. 182 00:10:49,240 --> 00:10:51,440 Speaker 5: There is this broad acceptance that the way this has 183 00:10:51,480 --> 00:10:53,679 Speaker 5: settled amongst sort of the at least the press is 184 00:10:54,080 --> 00:10:56,360 Speaker 5: people are going to be paying more and that money 185 00:10:56,400 --> 00:10:58,960 Speaker 5: is going to be going towards welfare. I think the 186 00:10:59,040 --> 00:11:01,120 Speaker 5: question for the Rachel uses now, how does she then 187 00:11:01,200 --> 00:11:03,360 Speaker 5: sell that message to the public, as the rest of the 188 00:11:03,400 --> 00:11:06,640 Speaker 5: Labor government do of this is going to generate a 189 00:11:06,679 --> 00:11:11,360 Speaker 5: better society, better people, better public services. That will be 190 00:11:11,720 --> 00:11:14,480 Speaker 5: sort of in the weeks to come, how the political 191 00:11:14,480 --> 00:11:16,920 Speaker 5: reaction shapes out. I think it's worth also pointing to 192 00:11:17,360 --> 00:11:19,680 Speaker 5: we are yet to see really the full sort of 193 00:11:19,720 --> 00:11:22,079 Speaker 5: market reaction as this budget gets digested. That's what we're 194 00:11:22,080 --> 00:11:23,960 Speaker 5: looking for today, in and sort of the coming weeks. 195 00:11:24,280 --> 00:11:26,960 Speaker 2: Yes, and the issue, as you've sort of alluded to, 196 00:11:27,280 --> 00:11:30,040 Speaker 2: is that a lot of the measures are also backloaded 197 00:11:30,120 --> 00:11:34,360 Speaker 2: to the end of the parliament that could present some risks. 198 00:11:34,640 --> 00:11:37,680 Speaker 5: Yeah, this isn't your first budget, I see, Caroline. Look, 199 00:11:38,200 --> 00:11:41,040 Speaker 5: this is a trick that Jeremy Hunt used towards the 200 00:11:41,160 --> 00:11:43,920 Speaker 5: end of the Conservative government and is a bit sneaky. 201 00:11:44,480 --> 00:11:46,920 Speaker 5: It's politically expedient because what you do is you front 202 00:11:46,920 --> 00:11:49,000 Speaker 5: load all the spending into now, so now as the 203 00:11:49,000 --> 00:11:51,280 Speaker 5: good times, and you say the cuts will come four 204 00:11:51,400 --> 00:11:55,200 Speaker 5: or five years down the road. The problem is politically 205 00:11:55,440 --> 00:11:58,480 Speaker 5: this year, this labor government failed to get through key 206 00:11:58,640 --> 00:12:01,880 Speaker 5: cuts to welfare and so their question for their market 207 00:12:01,960 --> 00:12:06,000 Speaker 5: and economic credibility is can they change that narrative and 208 00:12:06,040 --> 00:12:08,439 Speaker 5: get those cuts in or And this is where the 209 00:12:08,520 --> 00:12:10,160 Speaker 5: risks start to come. And for them, do the market 210 00:12:10,240 --> 00:12:12,600 Speaker 5: judge that these cuts are never coming, There'll always be 211 00:12:12,679 --> 00:12:15,680 Speaker 5: five years into the future, and that's where things start 212 00:12:15,760 --> 00:12:18,000 Speaker 5: to get a bit jittery for the government. And just 213 00:12:18,240 --> 00:12:21,360 Speaker 5: one final note, as well as the cuts, one other 214 00:12:21,400 --> 00:12:23,120 Speaker 5: thing that came out and sort of the back pages 215 00:12:23,160 --> 00:12:26,160 Speaker 5: of this budget and the OBR analysis is welfare spending, 216 00:12:26,240 --> 00:12:30,000 Speaker 5: pension spending. Some of these big ticket items are forecast 217 00:12:30,080 --> 00:12:32,640 Speaker 5: to spiral and spiral out in the four or five 218 00:12:32,720 --> 00:12:36,439 Speaker 5: year forecast mark with a welfare spending is already sixteen 219 00:12:36,480 --> 00:12:39,760 Speaker 5: billion higher than forecast in March due to high benefit caseloads. 220 00:12:39,800 --> 00:12:42,840 Speaker 5: So that is also some real headaches that we're starting 221 00:12:42,840 --> 00:12:44,240 Speaker 5: to see in the looming horizon. 222 00:12:44,480 --> 00:12:47,760 Speaker 2: Yeah. Absolutely, and I also not on the markets that 223 00:12:47,840 --> 00:12:53,240 Speaker 2: Morgan Stanly's closed their bullish position bullish recommendation on sterling 224 00:12:54,080 --> 00:12:57,080 Speaker 2: as also markets are kind of thinking about the impact 225 00:12:57,280 --> 00:13:00,319 Speaker 2: on the currency and on bonds here in the UK. James, 226 00:13:00,320 --> 00:13:02,720 Speaker 2: thank you so much for being with me this morning. 227 00:13:02,720 --> 00:13:08,160 Speaker 2: That is our UK politics reporter James Wilcock. Stay with us. 228 00:13:08,360 --> 00:13:12,679 Speaker 2: More from Bloomberg Daybaquob coming up after this. Now to 229 00:13:12,720 --> 00:13:16,280 Speaker 2: another story. Private equity firms have been snapping up life 230 00:13:16,320 --> 00:13:19,560 Speaker 2: insurers in the US, but in Europe they're running into 231 00:13:19,600 --> 00:13:24,560 Speaker 2: pushback after failures like Italy's Eurovita, which raised fears about 232 00:13:24,600 --> 00:13:28,160 Speaker 2: risky investments and also long term stability. Our European asset 233 00:13:28,160 --> 00:13:32,320 Speaker 2: management reporter Leo Kensherper has been looking into this and 234 00:13:32,440 --> 00:13:35,160 Speaker 2: joins me now, Lea, good morning. Why is Europe so 235 00:13:35,320 --> 00:13:39,520 Speaker 2: wary of private equity firms buying life insurers? What's the 236 00:13:39,600 --> 00:13:40,240 Speaker 2: issue here? 237 00:13:40,679 --> 00:13:43,440 Speaker 6: Yes, good morning, Caroline. So, as you mentioned, the big 238 00:13:43,559 --> 00:13:47,439 Speaker 6: wake up call for regulators in Europe really was Eurovita 239 00:13:48,000 --> 00:13:51,439 Speaker 6: Italian Life insurred with three hundred and fifty thousand customers 240 00:13:51,440 --> 00:13:54,559 Speaker 6: that went into administration two years ago. And what happened 241 00:13:54,559 --> 00:13:57,480 Speaker 6: there is that a lot of clients surrendered their policies 242 00:13:57,559 --> 00:14:01,680 Speaker 6: after interest rates had risen, and that sort of made 243 00:14:01,760 --> 00:14:06,600 Speaker 6: look made other savings products look more attractive really, and 244 00:14:06,640 --> 00:14:09,920 Speaker 6: that led to a capital shortfall which Eurovita's owner at 245 00:14:09,960 --> 00:14:13,880 Speaker 6: the time, the British buyout firm Sinvin, wasn't immediately prepared 246 00:14:13,920 --> 00:14:17,520 Speaker 6: to plug, and so Eurovita's customers effectively had to be 247 00:14:17,600 --> 00:14:20,760 Speaker 6: bailed out by a group of insurers and banks. And 248 00:14:20,880 --> 00:14:24,600 Speaker 6: regulator's key concern now is that the perceived that there's 249 00:14:24,720 --> 00:14:27,840 Speaker 6: essentially a perceived mismatch of a PE fund that owns 250 00:14:27,840 --> 00:14:30,560 Speaker 6: a life insurer. PE funds need to return capital to 251 00:14:30,600 --> 00:14:33,320 Speaker 6: investors of the as soon as after five years, and 252 00:14:33,400 --> 00:14:36,720 Speaker 6: life insurance policies, on the other hand, run for twenty 253 00:14:36,960 --> 00:14:39,600 Speaker 6: thirty years and they just need more long term backing. 254 00:14:39,680 --> 00:14:42,480 Speaker 6: So there's this mismatch that our regulators are worried about. 255 00:14:42,760 --> 00:14:45,480 Speaker 2: Okay, that's interesting. So what are the differences then between 256 00:14:45,480 --> 00:14:48,400 Speaker 2: Europe and the US Because in the US private equity 257 00:14:48,480 --> 00:14:50,600 Speaker 2: controlling life insurance is actually a big. 258 00:14:50,480 --> 00:14:55,400 Speaker 6: Theme, yes exactly, so globally pe control of life insurance 259 00:14:55,640 --> 00:14:58,720 Speaker 6: as it has risen by more than one trillion dollars 260 00:14:59,040 --> 00:15:02,120 Speaker 6: from very low level in two thousand and nine, and 261 00:15:02,240 --> 00:15:04,720 Speaker 6: most of that has actually, as you said, happened in 262 00:15:04,760 --> 00:15:08,640 Speaker 6: the US. Another key concern that really came to light 263 00:15:08,680 --> 00:15:12,320 Speaker 6: this year is the possibility of ratings shopping, you know, 264 00:15:12,400 --> 00:15:16,400 Speaker 6: insurers getting easy credit ratings for assets, which of course 265 00:15:16,400 --> 00:15:19,400 Speaker 6: has the potential to hide poor quality. And this has 266 00:15:19,400 --> 00:15:23,200 Speaker 6: reminded some very prominent voices, including the UBS chair Colin 267 00:15:23,280 --> 00:15:26,240 Speaker 6: kellaher of the run up to the Great Financial Crisis. 268 00:15:26,240 --> 00:15:27,080 Speaker 2: Actually, so. 269 00:15:29,240 --> 00:15:31,960 Speaker 6: It's really important to point out that in Europe insurers 270 00:15:31,960 --> 00:15:35,080 Speaker 6: actually get little, very little capital benefit from investing in 271 00:15:35,280 --> 00:15:39,160 Speaker 6: securitized assets, and they can also use their own internal 272 00:15:39,240 --> 00:15:42,000 Speaker 6: ratings which have been approved by regulators. So there's just 273 00:15:42,160 --> 00:15:45,360 Speaker 6: less of an incentive here to go ratings shopping. 274 00:15:45,600 --> 00:15:48,400 Speaker 2: I see. And so in terms of what this means 275 00:15:48,400 --> 00:15:51,360 Speaker 2: for the cost and reliability of a life insurance products, 276 00:15:51,600 --> 00:15:53,840 Speaker 2: I think that also might be interesting to listeners. 277 00:15:54,120 --> 00:15:56,800 Speaker 6: Is it is a good question. I think generally, I 278 00:15:56,800 --> 00:15:59,120 Speaker 6: think it's fair to assume that actually competition is good 279 00:15:59,120 --> 00:16:03,200 Speaker 6: for pricing. But when it comes to reliability, there is 280 00:16:03,320 --> 00:16:07,360 Speaker 6: another key concern regulators here have and it's really it's 281 00:16:07,360 --> 00:16:11,920 Speaker 6: really prominent in the US where essentially insurers use offshore 282 00:16:11,960 --> 00:16:15,280 Speaker 6: reinsurance the offload parts of the of the risks they 283 00:16:15,360 --> 00:16:20,480 Speaker 6: take to more lightly regulated jurisdictions like Bermuda and the 284 00:16:20,520 --> 00:16:23,880 Speaker 6: Bank of England this week actually published results of a 285 00:16:23,880 --> 00:16:28,080 Speaker 6: stress test where where they tested UK Insure us exactly 286 00:16:28,080 --> 00:16:29,000 Speaker 6: for for that reason. 287 00:16:30,320 --> 00:16:33,040 Speaker 7: This is Bloomberg Daybreak Europe, your morning brief on the 288 00:16:33,120 --> 00:16:36,160 Speaker 7: stories making news from London to Wall Street and beyond. 289 00:16:36,480 --> 00:16:39,680 Speaker 2: Look for us on your podcast feed every morning, on Apple, 290 00:16:39,800 --> 00:16:42,600 Speaker 2: Spotify and anywhere else you get your podcasts. 291 00:16:42,680 --> 00:16:45,720 Speaker 7: You can also listen live each morning on London DAB Radio, 292 00:16:45,760 --> 00:16:48,440 Speaker 7: the Bloomberg Business app, and Bloomberg dot Com. 293 00:16:48,480 --> 00:16:51,240 Speaker 2: Our flagship New York station is also available on your 294 00:16:51,280 --> 00:16:56,000 Speaker 2: Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty. 295 00:16:56,240 --> 00:16:57,640 Speaker 2: I'm Caroline Hepka. 296 00:16:57,400 --> 00:16:59,800 Speaker 7: And I'm Stephen Carroll. Join us again tomorrow morning for 297 00:17:00,120 --> 00:17:02,360 Speaker 7: all the news you need to start your day right 298 00:17:02,360 --> 00:17:05,840 Speaker 7: here on Bloomberg Daybreak Europe.