J. Paul Newsome is a Managing Director and the Senior Insurance Analyst in the Research Department of Sandler O’Neill + Partners, L.P. Previously, he was Vice President and the senior property-casualty insurance company research analyst at A.G. Edwards and at Lehman Brothers. Mr. Newsome has worked in or covered the insurance industry for over 20 years. Prior to Lehman Brothers, he worked at Dain in Minneapolis, and Oppenheimer and Company. Mr. Newsome has B.A. degrees in mathematics and economics from St. Olaf College in Northfield, Minnesota, and an M.S. degree in economics from Iowa State College. In his exclusive interview with the Wall Street Transcript, this award winning analyst makes a case for auto insurers.
“At the moment, we’re pretty bulled up on the auto insurers, Progressive (NYSE:PGR) and Allstate (NYSE:ALL). I think that’s where the market is improving the most. I think there are some companies like those that are very well-positioned. We had a fairly significant change in the underlying dynamic of claims inflation three years ago, and there are companies that are ahead of that claim frequency trend, and there are companies that are behind. I think those companies that are ahead of that trend will benefit more than the others, and that benefit will probably come through this year and maybe next for those companies. We’ve already seen a pretty darn strong quarter for the first quarter of 2018 for Progressive, and so it looks like the auto insurers that are ahead of the game on claim frequency trends will do very well.”
J. Paul Newsome also details his opinion on the results of the Fed tightening interest rates:
“To the interest rate environment, most of the companies I cover have been pretty conservative with respect to how they’ve set up their portfolios and are relatively short in duration in their portfolios. The typical duration is about four years. It’s actually up a little bit; at one point, interest rates were so low that insurers were capitulating on any investment income and just keeping their portfolio extremely short because there just wasn’t much difference between a one-year bond and a three-year bond. That’s changed a little bit with rising interest rates, and you’ve seen companies extend a little bit, but they’re still relatively short-duration portfolios.”
To get all the details on J. Paul Newsome’s current insurance company stock picks, read the entire interview in the Wall Street Transcript.