P&C Stocks Worth Owning: The AI Hedge with Ryan Tunis | The Real Eisman Playbook Episode 74

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Steve Eisman (1:04)

Hi, this is Steve Eisman, and welcome to another episode of The Real Eisman Playbook. So every group has within it subsectors, and every group within the subsectors has growth. Some are cyclical, some are stable. So if you were to divide up the entire financial services sectors, you would have divided this way. The big banks, the regional banks, some of the trading companies like NASDAQ and ICE, asset managers, alternative asset managers, specialty finance. And then you would get life insurance and property and casualty insurance. Of all the sectors within financials, property and casualty insurance is unique in a world unto itself. Yes, it is cyclical, but it's not cyclical with the economy. Its pricing cycles go according to its own rhythm. And so, as a result, during periods where people want a lot of growth in their portfolios, they're not going to own property and casualty stocks. But in periods where you're looking for something more stable, people are going to own property and casualty stocks. So we're going to explore all this with Ryan Tunis, who is the P&C analyst at Cantor. And we're going to do this very comprehensively.

And afterwards, I'll be back with some lessons learned.

Hi, this is Steve Eisman, and welcome to another episode of The Real Eisman Playbook. So today, we have as a guest, Ryan Tunis, property and casualty insurance analyst of Cantor. Welcome, Ryan.

Ryan Tunis (2:43)

Thanks, Steve. Pleasure to be here.

Steve Eisman (2:45)

Thank you. So we've never done anything in the property and casualty sector, so I'm going to take this as an opportunity really to do a deep dive with you. So before we even get to any specific companies and what you like and what you don't like, and we'll get to that, why don't you divide up the sector into its component parts?

How many parts are there to the property and casualty sector, and what are the dynamics of each?

Ryan Tunis (3:09)

Okay. Yeah, so I'll try to take a...

SPEAKER_5 (3:12)

It's a very broad view.

Ryan Tunis (3:13)

A broad view. So yeah, like you've got the company level and what I cover. So P&C is anything not related to life insurance. It's kind of risk in its purest form.

But there's a subsector kind of tilt to it. So you've got, first of all, commercial lines insurance, that's companies purchasing insurance to protect risk of damage to property or liability.

Steve Eisman (3:38)

Okay.

Ryan Tunis (3:38)

Personal lines, which I think everyone's most familiar with, like an Allstate or a Progressive. Homeowners and auto insurance, correct. And you could get into some other ancillary products like pet insurance or renters or whatever. But there's that.

Steve Eisman (3:52)

So it's commercial lines, personal lines. What else is there?

Ryan Tunis (3:56)

Big part of it is that. Reinsurance. So this is a little bit, this is where it gets a little bit abstract, but believe it or not, insurance companies purchase insurance themselves, largely to its balance sheet protection. Think about it, they're trying to protect themselves.

They're either trying to scale down their risk, or more commonly, they're protecting themselves against something catastrophic. That's called reinsurance.

Steve Eisman (4:22)

So an insurer will buy insurance from a reinsurer.

Ryan Tunis (4:27)

That's correct. That's correct. Then the last, so those are the balance sheet businesses.

The last segment, which is a little bit, I mean, it's a little more hybrid between, you call it info services and insurance, is the insurance brokers.

Steve Eisman (4:42)

OK.

Ryan Tunis (4:42)

And when we talk about the insurance brokers, we're talking about, not so much on the personal line side, we're talking about the brokers that sit between the commercial customer and commercial lines and the commercial lines underwriter or insurer.