Another Insurance Company Limits Sales
Climate issues are a factor, especially in Florida and California.
Good Morning!
Here are today’s highlights:
Inflation cooled sharply in June.
Spending on manufacturing construction is surpassing 20-year highs.
An AI startup is offering telemedicine for cars.
INSURANCE
Farmers is the latest insurance company to limit sales in Florida and California: “Rising costs for natural disasters, rebuilding, and lawsuits are prompting insurers to limit or even quit selling in markets with high underwriting losses. Fewer insurers offering policies can mean higher prices and fewer options for homeowners, consumer advocates say. In Florida, Farmers is ending sales of home, auto, and umbrella insurance policies under its own brand, representing about 30 percent of the policies it sells in the state, the company said. It will continue offering insurance through other brands, including those for high-risk drivers, according to the statement. The ending of Farmers-branded sales in Florida affects around 89,000 policies, a person familiar with the matter said.”
“In California, where rivals State Farm and Allstate decided recently to stop selling new home insurance policies, Farmers won’t fill the gap. Farmers said it was limiting new policies of one of its branded home-insurance products to around 7,000 policies a month, ‘consistent with the volume we projected to write each month before recent market changes.’ The insurer earlier this year stopped new sales of another of its Farmers-branded home policies, according to a person familiar with the matter.”
“Floridians are paying an average home insurance premium of $6,000, the highest in the U.S. and more than three times the U.S. average of $1,700, according to industry group the Insurance Information Institute.”
“The California Department of Insurance is later this week scheduled to hold a public workshop to address one of the insurers’ main beefs with the current system: the requirement their rate requests use historical claims data only, rather than predictions of future wildfire risks.” READ MORE
MANUFACTURING
Spending on American manufacturing construction is skyrocketing: “Reston, Virginia-based defense and technology firm Leidos Holdings is spending $31.7 million to build a new manufacturing hub for its security systems in North Charleston, South Carolina. The 150,000-square-foot facility is the third of its kind in the United States and built with the express goal of bringing the company’s manufacturing abilities back to the United States. It will produce items for the company’s infrastructure customers, including in aviation, shipping ports and border crossings, when it is completed in 2024. The Leidos project is among hundreds of manufacturing projects popping up across the country, partially the result of a series of massive spending bills passed under the Biden administration that has created the potential for what some experts are calling a manufacturing ‘supercycle’ and manufacturing resurgence.”
“Manufacturing construction spending across the United States continues to smash through 20-year highs, hitting a $194 billion annual rate in April, nearly double the $107 billion annual rate from a year ago, according to the St. Louis branch of the Federal Reserve.”
“Companies are scrambling to rethink and rebuild their global supply chains after the pandemic, and the U.S. has become the destination for foreign corporate investment, with the country drawing in 23 percent of total foreign direct investment, up from 15 percent one year ago. China’s share was a distant second, [Joseph Quinlan, head of Chief Investment Office Market Strategy for Bank of America] added.”
“‘We believe the U.S. is in the early stages of a manufacturing supercycle pivoting around renewable energy, electrical vehicles and batteries/charging stations, and semiconductors, in addition to rising spending in more traditional areas like ports, highways, grids, airports and the like,’ Quinlan said.” READ MORE
RETAIL
Two years of free rent revived a dying Main Street in the UK: “[Steven] Wyatt, 46, is among a handful of beneficiaries of an unusual experiment in real estate and urban renewal. His store, Restored Retro, is one of 10 businesses that were given two years of free rent for an empty storefront on a small shopping street in Poole called Kingland Crescent. The offer came from the property’s owner, Legal & General Investment Management, Britain’s largest asset manager, which had been struggling to revive a near-derelict shopping street next to a mall, in an uneasy economy still reeling from the pandemic.”
“The rent-free period, which ended in April, not only has changed the lives of Mr. Wyatt and several other small-business owners, but it has also transformed the street, which now has a constant flow of foot traffic in an area that many locals used to avoid. Even the adjacent shopping mall is bucking the national trend, with more visitors now than in 2019.”
“Half of the original 10 businesses offered space on Kingland Crescent are still there, and those that left were quickly replaced by new local businesses ready to pay rent. There is a sense that momentum is building in Poole’s transformation. ‘Poole is becoming a destination again,’ Mr. Wyatt said.”
“Three doors down from Mr. Wyatt is Wild Roots, a plant store owned by Hope Dean, 29, who was laid off from her events management job early in the pandemic. A few months later, she secured a space on Kingland Crescent, which is now a calming haven of greenery. She employs six people, and her company has three branches: the retail store, a plant design service for businesses and plant care services. ‘It feels like a proper business now,’ Ms. Dean said.” READ MORE
ARTIFICIAL INTELLIGENCE
The AI revolution in health care is already here: “Predictive AI can look at the experiences of millions of patients and their illnesses to help answer a simple question: ‘What can we do to ensure that you have the best journey possible with the fewest potholes along the way?’ For instance, let’s say someone is diagnosed with Type 2 diabetes. Instead of giving generic recommendations for anyone with the condition, an algorithm can predict the best care plan for that patient using their age, geography, racial and ethnic background, existing medical conditions and nutritional habits.”
“Predictive AI can also augment diagnoses. For example, to detect colon cancer, standard practice is for gastroenterologists to perform a colonoscopy and manually identify and remove precancerous polyps. But some studies estimate that 1 in 4 cancerous lesions are missed during screening colonoscopies.”
“Predictive AI can dramatically improve detection. The software has been ‘trained’ to identify polyps by looking at many pictures of them, and when it detects one during the colonoscopy, it alerts the physician to take a closer look.”
“One randomized controlled trial at eight centers in the United States, Britain and Italy found that using such AI reduced the miss rate of potentially cancerous lesions by more than half, from 32.4 percent to 15.5 percent.” READ MORE
An AI startup is offering telemedicine for cars: “[Michael] Petersen is co-founder of Raise a Hood, which offers ‘telemechanics,’ a service much like telemedicine. A person can plug in their vehicle information and reach a seasoned mechanic through a virtual visit to understand the severity of the problem, how much it should cost, and whether it’s a fix simple enough that any old Joe could do it. That feeds the other side of Raise a Hood: Those meetings teach an artificial intelligence engine called GUS (Generative Uniform Syntactics), which is learning similarly to a junior mechanic and can answer those same questions. Petersen said the average person who calls in to Raise a Hood saves $1,000 for any meaningfully sized repair.”
“Petersen said the goal is to make car ownership simpler and less expensive. The browser-based application will also disrupt an industry that’s hardly changed for generations and is facing a workforce crisis. A 2022 report from TechForce Foundation estimates that demand for new auto/diesel/collision repair technicians will exceed 900,000 through 2026.”
“As some mechanics age out of the profession, Petersen said Raise a Hood gives them the opportunity to share their expertise without the need to bend over an engine bay for a whole workday. ‘They love the idea because it gives them a second career that allows them to retire earlier and allows them to monetize what they know.’" READ MORE
Regrow Ag, a startup focused on both decarbonizing and renewing agriculture, is helping General Mills make Cheerios greener: “It takes satellite imagery, weather data, government soil maps and on-the-ground observations on specific farms and feeds it all into a computer model that knows how soils and crops behave based on different conditions. Regrow Ag also works with farm management partners, including John Deere, to directly import crop, yield and management data into its platform.”
“We monitor 1.2 billion acres on which we observe the adoption of the agricultural practices so we can inform both private and public sectors how to act around it,’ said co-founder and CEO Anastasia Volkova. ‘Is it good for the environment, good for the water, good for soil health? Is it sustainable? Is it bringing resilience to the farm and the community?”
“The model also offers ways to improve. Regrow Ag then sells all that information to customers such as General Mills, which has pledged to advance regenerative agriculture on one million acres of farmland by 2030.” READ MORE
THE ECONOMY
Inflation cooled sharply in June: “U.S. inflation eased last month to its slowest pace in more than two years as underlying price pressures moderated more than expected. The consumer-price index climbed 3 percent in June from a year earlier, the Labor Department said Wednesday, sharply lower than the recent peak of 9.1 percent in June 2022 and down from 4 percent in May. Inflation was last close to 3 percent in March 2021.”
“So-called core consumer prices, which excludes volatile food and energy categories, rose 4.8 percent in June from a year earlier, the slowest pace since October 2021 and down from 5.3 percent in May. Economists had estimated that core prices rose 5 percent.”
“Fed officials are focused on cooling stubbornly high core inflation, and see core prices as a better predictor of future inflation than the overall inflation rate. Rising car prices, strong demand for labor-intensive services and an earlier surge in housing-rental prices have contributed to core inflation.” READ MORE
Businesses are cutting worker hours: “The number of people who worked part time, but want to work full time, rose by 452,000 in June, the biggest jump in more than three years, according to the Bureau of Labor Statistics. In all, 4.2 million people were employed part time for economic reasons beyond their control, a 12-percent increase from the month before. Economists warn against making too much of a single data point but say the latest spike in involuntary part-time work could be a harbinger of layoffs to come, especially when combined with other signs of slowing in the job market.”
“In interviews with nearly a dozen people whose employers recently shortened their hours, all said it was the result of slowing sales. Most worked in service jobs — fast-food joints, grocery stores, hair salons — where schedules can be easily redrawn to keep up with demand.”
“Many businesses have been forced to bump up pay and benefits, and offer perks to find and keep workers. That has led at least some employers to ‘hoard’ workers longer than necessary.”
“‘Instead of laying off 10 percent of your people, you can cut everybody’s hours by 10 percent,’ said Evermore of the Century Foundation. ‘It’s a less visible way of saving money.’” READ MORE
PROFILE
Jeffrey Hildebrand has built an empire by buying castoff wells from big oil companies under ESG pressure: “Climate activists and Wall Street are making it tougher for Big Oil to stay in the oil business. They’ve also helped make Jeffery Hildebrand a multibillionaire. Hildebrand, who is little known outside his hometown of Houston, has become one of America’s largest independent drillers by buying assets on the cheap, cutting costs, and then squeezing out both oil and profit from wells that others left for dead. ‘Smite the rocks with the rod of knowledge, and fountains of unstinted wealth will gush forth,’ Hildebrand said in a speech last year, sharing a quote from Ashbel Smith, who has been called the father of the University of Texas. He then offered to cut the university’s president a check to have the words inscribed on campus—if ‘this Green New Deal era that we live in’ would allow it.”
“Hildebrand’s company, Hilcorp Energy, aims to increase production nearly 40 percent to 500,000 barrels of oil and equivalent hydrocarbons a day by the end of 2026, according to Chief Executive Greg Lalicker.”
“That would likely turn Hilcorp into one of the 15 largest oil companies in the U.S. If the company hits the mark, Hildebrand will award his 3,000 employees hefty bonuses that have become a trademark, in this case, $75,000 toward a new car, and $25,000 to a charity of employees’ choice, company executives said.”
“It’s a business model that is growing from a niche into a juggernaut as the industry’s giants, facing mounting calls to cut their carbon emissions, dial back on drilling and shed assets. Hilcorp is privately held so it doesn’t face ESG demands—short for environmental, social and governance issues—from investors.” READ MORE
THE 21 HATS PODCAST
‘You’re in the Valley of Death’ This week, Shawn Busse, Jay Goltz, and Jennifer Kerhin talk about that difficult transition when the owner of a growing business can no longer handle all of the most important tasks herself but also can’t quite afford to hire the people she needs to lighten her load. It’s part of the reason Jennifer, as she’s told us in previous episodes, has been working 12-hour days, six days a week. It’s a challenging transition, and it has a name: It’s the “valley of death,” says Shawn, who compares it to crossing a desert. We also discuss how big the owners want their businesses to get, why important tools and processes seem to break with every $500,000 of revenue growth, and what constitutes the proper care and feeding of salespeople.
Plus: Jay has an idea for owners who are having a hard time selling their businesses. The idea involves selling the business to a key employee in a transaction Jay is calling a WE-SOP. Get it? It’s kind of like an ESOP, but it’s a lease-to-own version of an ESOP. A WE-SOP.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren