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

How do you want to split it? Actually, dinner's on me. Okay big money. Well, I got a Venmo balance that I can spend with my Venmo debit master card So well, I've been among you three times last week, so it's kind of on me actually. Yeah, you send it I spend it Did my money get like reincarnated? Yeah, it's chicken shorba. We want it back I can't believe you like ate my Venmo spend your balance instantly with the Venmo debit card No monthly fee or minimum balance Venmo balance account required to get a card and use a balance of Venmo master card is issued by the bank or bank NA Hey, this is Riley green and I'm here to warn you about the dangers of hey dude shoes With their easy on all day comfort you're bound to get addicted so try them at your own risk But when you can't wear anything else, don't say I didn't warn you Hi, this is Steve Iseman and welcome to another episode of the real Iseman 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 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 It's 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 PNC analyst at canter And we're going to do this very comprehensively And afterwards I'll be back with some lessons learned Hi, this is Steve Isman and welcome to another episode of the real Isman Playbook So today we have as a guest Ryan Tunis Proper and casualty insurance analyst of canter welcome Ryan Thanks Steve pleasure to be here 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 Well how many parts are there to the popping casualty sector and what are the dynamics of each Okay, yeah, so I'll try to take a It's a very broad view A broad view so yeah like you've got the company level and what I cover So PNC 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 that's companies purchasing insurance to protect risk of damage to property or liability Okay Personal lines which I think everyone's most familiar with like an all-state or progressive homeowners and I know what I know correct And you can get into some other Ancillary products like pet insurance or renters or whatever But there's that so that's so it's commercial lines Personal lines what else is there 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 but think about they're trying to protect themselves They're trying to scale down their risk or more commonly they're protecting themselves against Something catastrophic that's called reinsurance So an insurer will buy insurance from a reinsurance That's correct that's correct and then the last so those are the balance sheet businesses The last the last segment which is a little bit Yeah, I mean, it's a little more hybrid between you call it info services and And insurance is the insurance brokers. Okay, 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. So let me ask you a question on that so um Chup let's say What do I need a Insurance broker for like let's say there's a company call it IBM and IBM is looking to buy insurance on casualty and on all its properties the big thing Why does IBM hire an insurance broker or how does this work and why does why does it go directly to Chup So I think that this is definitely a really interesting question I think especially when we start talking about some of the AI disintermediation risk type chatter, but Let's first of all think about it What's it? Think about it from the point of view of the customer and then we'll think about it from the point of view of Chup Okay, let's start with Chup What do your shareholders want you to do they want you to grow your premium? And you're relying on a relatively small segment of brokers So what do you really have to gain to try to disintermediate a brokerage model by trying to go direct is that actually going to lead To better top line, right? I think the other thing that Chup might think about is they might say The heck with these brokerage commissions. I get this all the time this question of you know our brokers overly compensated Where Chup and where the industry does not where the carriers don't get a lot of Heat from shareholders is on their expense ratio. They all They run somewhat undifferentiated now Chup is a little bit better, but somewhat undifferentiated 30% expense ratios It shareholders are happy with define what's an expensive show is It's your general operating expenses and your commissions as a percentage of your premium Every quarter of a year yeah, right. So I'm saying that runs around 30% 30 and Yes, these aren't companies that are being pressed to try to push that lower So from Chup standpoint You really wouldn't benefit a lot if you tried to go direct I think you probably end up in a worse place and why do you think you'd end up in a worse place? I think that you would end up alienating the rest of the brokerage community all right around which you are like I said rely on A decent-sized panel, but well somewhat concentrated and Your shareholders are going to give you a small round in the plus for improving your your expense ratio Which isn't something you necessarily asked you to do So I think that that's one thing from the carrier side not from the customer side I think it's important when you think about the insurance buying Experience from from if you're a customer. It's a It's a mission critical thing to get right It's a relatively small portion of your overall expenses, which is what what is overall the purchase of insurance? Right to protect against your ill. I'd be on buying insurance. I'd be on buying insurance, right So it's something really small you don't want to get wrong right from a cost standpoint So it's not the type of thing where you're going to be sitting there Criticizing okay, like what type of commissions we paying a brokerage something you want to make sure you get it right But then also ask the question if you did want to go to go direct How would you ever be Comfortable that you were getting the right price if you're only looking at one market Oh, okay, so direct works in one in one market within pnc and united states And we all know what it's personal auto with the guy going to progressive and I think that's a really unique Situation where the customer is satisfied with the price they're getting from one market Because both of those companies have spent tens of billions of dollars over the past two decades reminding you You could get it cheaper you can get it cheaper, right? Right. All right, so let's let's turn it up to since you brought it up Let's talk to the person lines business talk talk to us about there are two companies that go direct Tell us who they are everybody else as some combination of direct and indirect What's the dynamics of that business and one of the fundamentals like today Sure, so so the direct model to be clear is it's what Steve was just talking about. It's a carrier that goes Straight to the customer that's guy go that's progressive Those are the two doing it and Just as a reminder the personal lines market. It's it's it's big. It's probably half a trillion dollars a premium in North America Which is probably 80% auto 20% home The auto piece is the part where people go direct um And what you've seen over the past uh, I don't know 15 years or so is The the direct market has taken share of the You know agents right whether it's a captive agent like all state like an agent that will sell just the all state product or an independent agent that Can sell products from multiple carriers You've seen the direct the direct channel Take share take maybe a point and a half a share over time doesn't mean that the end a year a year Right, so what today What percentage of the market is direct I want to say it's a A little over 30% okay, and still increasing and still increasing thing. Correct. Okay. So, simple question. Yep. What? Why is that happened? Well, I think the biggest reason it's happened is, again, you have two really, really good carriers that even if you were to run through an independent agent, I think you'd still probably on balance be finding the coverage you need and the price you need, right? So, I think that's part of it. Some of it has to do with just, you know, auto as a product is what's called an involuntary product. It's something you're forced to buy. You'll just go out and you'll get the coverage you need. It's, you're not protecting an asset. So, when I contrast that too, it's homeowners, for instance, has, is a market that has been proven to be pretty impenetrable from a direct standpoint. That's when you're actually really protecting an asset. And that's when folks actually start that, you know, that's the standard where folks thus far have started to say, I want to know what coverage I actually need. So, it works in the auto space. That doesn't work so far yet in the home space. But progressive does sell homeowners insurance. Progressive sales homeowners insurance. I don't want to call it a loss leader, but they're in the wheels business. So, this is another big part of personalized distribution. Because I think another question could be, why do we still have agents? They're like, where does this direct market share get? Right. A lot of the personalized market is it's bundled. You bundle the home in auto. Right. And you need a real agent to usually put together that bundle the right way. Right. So, like, if you're leading with the sale of the home a lot of times, you'll be able to bundle on the auto. And that's why it works for, you know, that's why a company like a traveler or something like that is still doing well. For a progressive, they haven't had that much success. Believe it or not, Steve, selling, they've had trouble selling home beyond states where people don't want to sell home. So, broadly, I say that again, I like what you're saying. They say what that means. Where they have scale selling homeowners insurance are and has been largely on the coast. A lot of which was in Florida. It's a totally different game. Everyone would like to sell homeowners in Michigan. That's when you start to need those those deeper client relationships. So, that's where I would differentiate. Why it's a why it's progressive had such a hard time doing it outside of the coast? Because when you get to when you get to agent independent agent based business, this is true with personal lines. This is true at agency commercial lines as well. The relationships between these, you know, call it main street brokers and the carriers are formed over a long, long period of time. There's some profit sharing commissions. There's things like that. It's just not easy to burn your way in to that part of the market as an underwriter, like the relationships matter a ton. In Florida, from time to time, obviously, there've been well documented capacity issues and things like that. Progressives are not going to have such a difficult time. We're trying to move beyond that. It's complicated. So, let's dig down to some stocks. You're not recommending progressive. I'm not. But one could argue it may be the best insurance company in the world or it's totally up there. So, what's going on in the personal lines, businesses today that gets you to have a neutral rating as opposed to a buyer? Yeah. So, that's the bigger issue. I mean, a little bit of it is the bigger issue is the personal line subgroup, which I've not been more negative on in my career. And there's a few dynamics here that really give me pause. I think, first of all, all those rating creases that we all know we got in our auto policies. We're all probably paying 60% more than we were three or four years ago. It turns out these auto insurance probably only needed to increase your rate by about 40%. They got 16%. So, they got greedy. I don't think they got greedy. They overestimated how much inflation, how much price. So, they pushed price more than they needed to. And what that leads to. In retrospect. Okay. Everyone's over earning. Everyone with the exception of progressive for multiple years wasn't growing. And now everyone's piling back into grow. So, what you have is sort of a once in a generation personal line soft market for. And this is not really a product personal auto that tends to be that cyclical. But the last time we saw something like this happen was in 2006 where you get you get a market where carriers are actually taking rate decreases. Like that on average is what everyone is getting from a progressive or an all-state is lower rates. So, you got this deflationary component. Tons and tons of competition. And we're still in a situation where yeah, we're actually nowhere close to being in a situation where these companies are no longer over earning. They're still over earning. I think we'll probably be having the conversation just like this to the end of 2027 if I had to guess. Okay. And any other issue I have with the personal lines is it's more of a structural one. But it does come back to this whole issue you have with deflation. Look, the good thing about the personal line is market. It's a gigantic tam. It doesn't really grow though. I don't have three, four hundred billion dollars. So, it's a great tam company like progressive. Why they were a winner is over time they took market shaking market share. That's a can be a really good business. But what if you start calling into question the size of that market? And there's some and this is where I just get a little bit. Yeah, I try to put on my generalist's talent a little bit. I get a little bit concerned. So, what we've we've had over the past couple of years are declines in the frequency of automobile collisions. We've had decline. We've had pretty sharp decline. Why? A lot of it is it's attributable to something called ADAS which is automatic driver assisted devices. Okay. So, the car stops stops if you go about to hit somebody. The level two level three stuff. It kind of does a little bit more than just break. It kind of pushes you back into whatever. You know, that's on like I don't know 40% of new vehicle sales nowadays which I understand and three or four years ago was 15 and that's just rising. So, we've always kind of had this like this threat of the autonomous car and what that means for the the personal auto liability risk on the horizon. My point is to a certain extent it's here it's here today, right? Because the reason you have that $350 premium addressable market is that it's a measure of exposure units in the auto industry. Fewer exposure units means you just don't have that tam. So, I'm worried about how that theme is going to develop over the next several years. Okay. Let's switch gears. Let's go to commercial ones. So, the big names here would be travelers, job, AIG, hyperscalers, hyperscalers. Right. Hyperscalers, Bob and Cassidy. It's not fair that some other group got to come up with this really cool name. It's a very nice. So, we already spoke about the brokers. Tell us what the cycle is like generally in commercial insurance and then let's let's dig. I mean, these are big companies. Travelers, AIG, I mean AIG used to be a lot bigger market now. Yeah. But what's going on? What are the fundamentals like these days and you know, right now you're recommending travelers, you're not recommending job, I think you are recommending AIG. I am recommending AIG. So, and full disclosure everybody, I own AIG. He owns AIG. Okay. So, I'm hoping. I'm hoping you know. I won't hit with things. I have great, I have great, great, great things. But let's first talk more general like what's the dynamics now of the commercialized businesses? Yeah. So, I think this is probably a good time to just kind of talk about what makes PNC cyclical and why it's different than AIG. A lot of companies out there are cyclical because they know their cost of goods sold. They don't really know what revenue they're going to get off or whatever they're producing. That's different as you know, Stephen Financial Services. Right. We have the opposite. We know what the revenue is. We know the revenue. We don't know what the cost of goods sold are. So, you have this dynamic and property casualty and that dynamic naturally creates cycles whenever you have one of those two that are unknown and property casualty insurance. So, just for the viewers when we say cost of goods sold, we mean losses. So, tell me if you would agree with the problem with let's say a commercial ized business is you've written underwritten business to a certain level of losses. Yep. And then something really bad happens that you didn't realize. A hurricane, a plane crash, whatever. Yeah. And the losses are much higher. Yeah. I think even a better way to do it is more continuously that if you have a million dollars of premium and you estimate a day one, it's going to be $700,000 of claims and you write that policy. If the next year you only collect that million dollars, but there's inflation, then you're going to expect more than $700,000 of claims. Correct. And you're going to have margin deterioration. Correct. That's the part that causes the cycle. I see. Okay. So, where are we now? Hi, Steve Eisman here. If you're After hiring, you want a candidate who's passionate about your role, but you can't get that insight from a resume unless you post your job on Zippercruder. And now, you can try it for free at zippercruder.com/iseman. Zippercruder's powerful matching technology finds qualified candidates quickly. And Zippercruder has a new feature that shows you the most interested qualified candidates first. 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It's self-paced so you can work it around your own schedule, but it never feels like you're doing it alone. There's live office hours and opportunities for real-time collaboration with your cohort. You walk away with a certificate in eight weeks plus lifelong access to materials and a network of more than 5,000 Wharton online graduates. You're also invited to an in-person ceremony in New York where you can actually meet your cohort and instructors, use code Heisman to save $300 on tuition and Roman closes October 5th. If you want to sharpen how you forecast budget and defend the numbers, start there. So where we are now, by the way, so the two big parts of the business are property. The property. You're ensuring a moment to this building? A little more intuitive and casualty, which would be liability. And I've never actually looked at numbers like this, but I a very, very large percentage of, you know, legal private plaintiff settlements are probably paid by insurance companies. Yes. So think about that. Think about it like that. Like, for example, the Johnson and Johnson talk about a settlement that just took place. That type of thing. Almost certainly was paid for by insurance. That's right. So where we are now is, PNC is different than banks, I think, because these cycles you tend to see a hardness soft market, at least once during a decade. It can take a little bit longer than other financials. It's not, the difference is the bank cycle is economically driven. In other words, if the country goes into a recession, there could be more losses. The PNC's loss cycle is sort of a world onto itself. It's a world onto itself. That's correct. So what we're coming out of for what we had was kind of a historically long hard market. Define hard market. What it is when carriers are able to push for rate, whether or not that means you're getting excess rate, meaning you're expanding your margins, or just catching up. It means that it's a seller's market in insurance, and we could get to, they're able to basically raise price at will. They're able to raise price at will. I don't know. Usually maybe two or three years out of ten or a hard market in the rest are soft. We've been in a seven-year hard market, right? So a very, very long time. The market started to transition about a year ago, which was soft to soft. At this juncture, we're seeing softening, and it is looking like what you'd expect in a classic type of market where what I'd call a capacity line, large ticket property. Things that are easier to get on where you don't need that agent relationship. You need capital on a checkbook and a typewriter. I mean, I'm exaggerating, but you can burn your weight. That's softening, and you're no longer having the same level of uncertainty that you did around inflation of those claims. Right. So now it's starting to naturally leak, companies are having a harder time growing. Right. It's starting to leak its way into casualty lines, so I think there's sort of two real questions everyone's grappling with where we are, at least, on a commercial side. I think number one, how do you think about investing in the group now that the market's soft, and it hasn't been a long time? And number two, what's a reasonable expectation for how long it could be like this? Because it sounds like it's just a beginning. Yeah. It seems like it's not a whole lot of fun, so I think that those are the two things folks are reckoning with. So why are the big three that you cover? You're recommending travelers, you're recommending AIG, let's take that last, because it's kind of a bizarre world, and you're not recommending chub, which I would argue is probably the best popping casualty company on the commercial side. Wouldn't disagree. Okay. So you wouldn't disagree, and yet you're not recommending it. So why are you recommending travelers, which is run by a great, very good CEO, and you're not recommending chub, which is also run by a very good CEO? Yeah. So there's a few things to this. I think that the early soft market playbook, the companies that are the least, the first kind of blush thing that matters, companies that are the least exposed, I think, to a softening rate environment are those that have that main street agent-based exposure. It's the middle market part of commercial and the small pricing just, it's hard to burn your way into that. It's easier to kind of manage the cycle in the middle market. In the middle market. So trough market meeting middle-sized companies. Yeah. Rather than large global corporates, et cetera. So that's travelers' footprint. Chubb is, I don't want to take away from chub, they have a good-sized business there as well. But they also have a good amount of that large account type stuff. And that is the stuff that ends up facing kind of the most competition, right? So I think that that's one distinguishing factor between the two is relative, small relative preference for business mix travelers versus chub. The other thing that I think is, soft markets, I think, are easier for stockpicking because the one thing that happens in a hard market is it becomes difficult for companies to make mistakes. Right. Because you're just doing right. You're just doing right. So you're just doing right. And I think all these underwriters, Steve, are good underwriters. That's not to say that any of them aren't. But what happens in a soft market is the other thing that matters other than your business mix, which kind of dictates how much your rates do you sell or rate, is how conservatively are you reserved and like going into that market because that actually allows you to absorb a lot of that rate pressure early on. Right. Travelers reserve position impresses me quite a bit more than the other commercial lines underwriters. Okay. So I feel better about the type of product that they're able to use. I get it. You like the business of travelers. Not to say that your chub is not well reserved, but I think the travel is better. Is a little bit better. Okay. They're both, the knock on both of them is they're both probably a little bit too expensive. Now, we're talking 12, 12 and a half times PE. Yeah. And there have been a lot of travelers downgrades recently that I haven't really agreed with. I don't love the valuation of these names, but what I'm saying is what's the price to book of the two? Travel is about two four and chub is about two. All right. And they're doing for banks, not expensive, but it's okay with deterioration, nothing steep. So let's, let's change yours to AIG. So one of my favorite charts in the whole world is to look at the chart of AIG. I know. I know. You're just before the failure of an issue. I know. So most people don't understand. The market cap, right? Right. So AIG obviously had problems during the great financial crisis. They had to completely recapitalize. Today the stock is 80, something like that, 78, 80, and it's peak before the great financial crisis. The stock price was 1,200. Now I am very confident that when I die, the AIG stock price will not be back to 1,200. I think I can be very safe on that one. You concur. I definitely concur. Yeah. I definitely concur. So here's my question. Why don't you tell, because this has been a very complicated story, you're recommending it out. Yeah. Why you're recommending it? What's, I read one of the things that you wrote where you said it's a self-help story. Like, it's a cheap stock, like let's start with evaluation. Yeah. What's evaluation like? Why do you like it? Why is a self-help story? So I think that's the first thing is, well, I'm not saying, I'm not prepared to downgrade travelers simply because value evaluation is a little bit rich. I also think we are at a point in a year in the soft market where you've got to start getting a little bit creative, right? I mean, that thesis of just buying things based on business mixes largely played out. part of this video. pushed out onto the curve of like, okay, like, is there something that really hasn't worked? AIG checks that box, it really hasn't worked, and it's hasn't it worked. I think that's actually a reasonably good question. It trades it around book value. The business mix is not the right type of business mix for a soft market. Like that's something I'll can see. What do you mean? It's a hard-market business mix, it tends to be more large account stuff, where I said travelers is very much all AIG's very large account. Very large account. So that's kind of. That's a negative. That's a negative. That's a negative. You're being compensated quite a bit on the fact that one it's cheap, and I think the other thing too, and just in terms of self-help story, like the metrics, they have a new CEO coming in. This will be his first quarter. He's already blessed the metrics that the old CEO put in place for 2027, and when you kind of go through the numbers, there's not a lot in those notes, and the numbers are getting you at that are really that cyclical dependent. I mean, it's a handful of things. It's expense saves, it's re-insurance synergies, and buying now re-insurance. What's the RWA of the company right now? Low double digits. It's low double digits. Probably 11%, that's not terrible. See, the company is, here what you're saying, it's been, it's very uncomplicated. I think they got rid of their last piece of core bridge in just a quarter, just a pure play P&C company. Pure play P&C. Pure play P&C. Yeah. So it's as simple as it's been. I'll tell you a funny story, but AIG, a couple years after the financial crisis, I was out to dinner with some friends, and they brought along another couple, who subsequently we've become very friendly with, no names. And so I'm talking to the guy, so like, you know, what do you do? He's a management consultant, you know, like, for what? He says mostly financial, so I thought to pay attention, so he says he's doing management consulting for AIG. So I think, okay, now I got a talk to this guy. So we're talking, and we're just talking about all the problems AIG had, this is just after the financial crisis, and he says to me, you know, Hank Greenberg, when he ran the company, basically ran in a completely decentralized way. Like he would say to you, to Ryan, go start a business to do X, and you would go out, and you would create an entire business from scratch, including your systems. And so he says, because of that, did you know that AIG has 200 operating systems in the company? I said, I didn't know that. I said, I said, what's that like for you? Because it's like a full employment act. It took AIG, like 10 years to work through all of this. That's how badly run they used to be. Yeah. Maybe even a little longer than 10 years. I think they're in a pretty good place now, I mean, where they are now is, the underwriting was also really bad for it took a long time to reverse the culture and to be in a good underwriting company. We got there. Maybe overshot a little bit. How it's about getting the company to be able to underrate well and to grow. And to grow? Okay. I got it. Let's turn to reinsurance. Yeah. It seems to me, correct me if I'm wrong, the reinsurance is not great business. Like there's no, what's the franchise value? It's just a balance sheet. You know, job is buying reinsurance from somebody, and you know, pricing could be good. But a long time, I just don't get the, what's the franchise value to ever owning a reinsurance stock? What do you think? Sort of that question and believe me, I've had this, this thought plenty, I think there's more franchise value now than there's been because there's been so much consolidation. And I don't know if that makes them better invest. There used to be many, many, many reinsurance. Many, many, many. And maybe there were better investments when there are many because they could cycle manage. And now it's like Munich, Everest, Hanover, Swiss Re, Brennery, Arch, they're less nimble, but because they're bigger, because they're bigger, but I think that they're more reliable, stable, longer-term, capital partners, right? So I think there's a little bit more for, I don't know exactly what that's worth, right? I mean, the bigger issue is, it certainly isn't even in that scenario is much of a franchise-type business is what you get insurance broker or commercialize or personalize, right? So I hear your point. The bigger issue is, we've seen this industry willing to accept returns that are unacceptable and currently returns are okay, but yeah, I think that there's real reason to question the discipline there. So it's a TBD on the reinsurance, I think fortunately there's a lot of negativity priced in terms of where things are in the soft market and from a pricing standpoint, but I totally hear your point. Okay. Let's go on to insurance brokers. Do you like any? And if you do, I mean, it's a soft market, so that hurts. What's going on? Do you like anything? So reinsurance broker is definitely my top subgroup without a doubt. You know those pieces in your closet that you find yourself wearing on repeat, the sweater that goes with everything, the perfect pair of pants or the t-shirt you somehow always reach for first, those are the pieces that make getting dressed easy and that's what Quinn's does best. 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Download the Quinn's app for app-exclusive offers or go to Quinn's.com/iseman, get free shipping on your order and 365-day returns now available in Canada and the UK too. That's Quinn's.com/iseman. And I think what I'd say about the, you know, the, if you think about how a re-insurance broker makes money, it's basically you latch onto a company, you have great retention and as the company grows, they buy more insurance premium and you get more commission, right? So it, the way it scales is sort of automatic. The pricing environment does impact the brokers. I think in particularly it has the past year, but there's an economic component to that. There's a real component to that. Which, what's been, what I think is, is important with the brokers is we've gotten to a place where I think we've seen the worst of what the pricing environment's going to do to them. In other words, I think there's evidence we've seen organic growth bottom and it's bottomed at a level that's higher than it did in the last soft market. So it results, called four or five percent is where it's bottoming. Last soft market, it was three. The stocks are trading at kind of multiples that were in line with where they were, the last soft market. We can get into the AI risk and things like that as well, but let's get into that. Is there AI risk? So just with viewers to know, a few months ago, there was like a, some report that AI was going to get it somehow into the insurance brokerage business and the insurance brokerage was rolled down 10% that day and then nothing basically happened. So I guess the question is, what's realistic here? I mean, honestly, I'm more curious what Steve has to say about that than me. But no, I could give you a little bit of color on why I don't think it's that big of a deal. I think, first of all, what I pointed to early on this conversation about the market structure and the role of the broker, a lot of folks that buy insurance, I think Marsher AI and other actual insurance company, there's been no work done to try to disintermediate that relationship, but you know, the brokerage remuneration has been pretty flat for the past two decades. It's not been a place where folks have really come after, I think another thing is, here's another good data point. A third of all claims that are filed are initially denied. Who do you want representing you, an AI bot or Marsher or a scale insurance? So when you get into the plumbing of it, like the process of placing a PNC brokerage is more complicated than, I think we've been led. Okay. So that's a big deal. Where there's risk, it's on the consulting side and you probably hear a consulting and go, oh, that's the bogeyman. Yes. I'm not going to totally rule that out where I can tell you it's different is these tend to be, to be clear, this is HR consulting, right? This is placement of health and benefits or, you know, consulting around benefit plans that are around compensation plans, defined, banished benefit, custodial pension, really boring stuff that I'm not saying there is no risk there, but it. It, to me, is in some way, I'm curious what you think. It's different than what you see it for instance, like an Accenture and IBM. And for what it's worth, we haven't results. And the outlooks for the second half of the year and unchanged. Yeah, it's not been like the, of the IBM or the extension. Right. Okay. Cool. Let's finish up with the two, some odd, I'd call oddballs. Sure. True patio. Yep. So at your former firm, you had a cell rating, you currently have a neutral rating. I've been short this thing for years. The true patio is an animal health insurance company. What do you think in these days about true patio? I think of these levels. It, I think, evaluation, I think is still the main thing that you have to fight. Steve, it's a billion dollar market cap. Just keep in mind, we've seen M&A in the space go off around these levels. There's been bids there. That's why I'd be nervous to get way too negative. I think on the, why don't you get more constructive side of things? Look, I mean, this is a company that's not a young company that over time has not been able to generate unit economics that have been acceptable. I mean, whatever. Like, I think that what they target is free cash flow. A billion dollar company free cash flow at two percent of revenues, which is like 30 or 40 million dollars. It's not cash flow. You're nothing. It's nothing. So it's a, it feels like a really good product for people. And maybe a pretty good nonprofit if they ever wanted to go that route. Yeah. I don't know about, I mean, we, we are customers. My wife and I, we have, it's dogs and it's a, they take care. I have no complaints about true patio as a company. They pay, they're honorable. Totally. I just think it's a bad business. It's a bad bit. Yeah, I think on the business side of things, you have this issue of it grows, but the tan is small. No one can afford the damn product anymore. It's a thousand dollars. And you know, you think about who actually needs pet insurance. It's probably not you. It's people who have the income to a $4,000 a year policy, but they don't have the disposable income to pay a five-figure claim. Right. Not a lot of people, right? I mean, so you have that problem where it grows, but we're six billion dollar tan of which they have 20% in their losing share. They're having trouble growing pets. So it's a wait and see. I think they probably need to try to do something different. I think they need to do something to figure out. Okay, maybe we need to target a little bit of a higher underwriting margin and show that we can be profitable or whatever. But right now it's a company that's twisting in the wind a bit. At $50 a share, I might have had something different to say. Okay, last one, Ken Sill. Yep. Tell people what Ken Sill does. Yeah, yeah. So Ken Sill is a great one. It's a commercial line's insure, but where I want to distinguish it from the from the hyperscalers, right? The AIGs, the Chubs, the travelers, they write in the non-admitted market. So what basically happens is if you want to get an insurance policy, you go to a broker, the broker will call the admitted carriers and they have to call a certain number of them. And if they can't get a placement, then they can go to the non-admitted market. Ken Sill operates through that market. Now these don't just exist. This is small companies they basically deal with. They deal with a lot of small companies, which is very important. So let me just before you continue, yeah. So one thing that a friend of mine who's done research on this says is that the issue with Ken Sill is they took a page out of the old AIG playbook, which is Eurox more company. We give you insurance. Somebody slips and falls, you submit a claim. We tell you to go take a hike. They don't basically honor their own insurance policies. Yeah, so what I'll say is Ken Sill is without a doubt a savvy underwriter. I'd like to see a little more cyclical history of the company still somewhat young publicly. But I would call that good underwriting, Steve. That's good EMS underwriting, right? And it's special and it works in a hard market when that sounds dishonest. It's not that it's dishonest. And if you look at their loss ratios, their loss ratios are not a little bit lower than like a traveler, but relative to other EMS carriers, it's typical to find loss ratios in the mid 50s. So no, you're right. If you're looking at like Yelp reviews and things like that, it's a lot of negativity. Yes, I just don't want to over generalize it. But my point being is the point still stands. It's not just that. What I think is actually probably more interesting is Ken Sill tells a really, really low expense ratio. And one of the reasons why is they pride them. They think that brokerage renumeration is too much. So they don't pay super high brokerage fees. The thing to keep in mind is when the market transitions from hard to soft, business doesn't just stay in the not admitted market. The retail broker brings that back to the standard market. And that is most prevalent in the smaller part of the market, which is what Ken Sill underwrites. So they have real headwinds that they have to deal with from a cyclical standpoint. You have to ask yourself, if what you do is sort of, you know, pugnacious underwriting and underpaying, I don't want to say underpaying, but paying less, is that a, how good of a strategy? How does the soft market strategy is that? So that's, that's my view on it. They're, it's a good company. It's one where I have more questions about valuation that I do for travelers, for instance, but it's a good company. We'll see what they look like in a soft market. They've never really traded in a soft market before. Ryan, thank you. Thanks, Steve. That was great. Really great. Very comprehensive. Thank you. And we're back. So a couple of lessons here. The personal lines, he's, I think the way I heard him, he's pretty negative about it. We talked about progressive and he pointed out that the new technology and cars is causing accident rates to really collapse, which is causing pricing to go down. That may not change any time soon. So I walked away from this being more negative on personal lines than I thought. On the commercial lines, we're definitely going through a cycle of pricing weakness, which generally means you don't want to own the whole group, but he does like AIG because it's really a kind of a self-help story where the stock is really, really cheap. We talked about the insurance brokers. I didn't feel like there was much to do there, at least not yet. And then we touched on a couple of specialty names, like TruPanion, where I'm extremely negative. He's somewhat negative, but not as negative as me. And then we talked about a company called KinCell, which I think could be a problematic company, but Ryan actually thinks it's not a bad company as well. So I learned a lot from the interview. I think you did too, and we'll see you soon. This podcast is for informational purposes only, and does not constitute investment advice. 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