Miscellaneous Earnings Call Notes 10.22.15

Advanced Micro Devices’ (AMD) CEO Lisa T. Su on Q3 2015 Results

Not anticipating that Windows 10 will drive PC refresh

“While we are not anticipating Windows 10 will drive a dramatic near-term PC refresh cycle the continued adoption of Windows 10 which has already been installed on more than 110 million PCs to date, provides a great opportunity for AMD over the coming year based on a semi-consumer and commercial refresh cycle environment”

Suntrust Banks’ (STI) CEO Bill Rogers on Q3 2015 Results

We’ve been in the lower for longer camp for a long time and think it stays that way in ’16

” We, as you know in our case, we have sort have been in the lower for longer camp for some time and set ourselves up appropriately for that type of an approach. As we look forward into ‘16, I think also lower for longer stays, I think if there are Fed increases, they will be very deliberate and the pace of rate rise will probably be slower now than the market had been thinking six months ago.”

Capital Markets activity should be better this quarter

“M&A had another really good quarter and pipelines are still good there. The volatility numbers are in sort of high yield bonds and the equity sales and trading and that’s better. Spreads have come in. I think things will get done more this quarter than they did last quarter if things stay stable. And based upon what I see in terms of our pipeline, I feel good about our pipeline”

CCAR has changed the way that the whole banking industry is thinking about risk

“I think one of the other benefits also that you see for SunTrust and perhaps for the industry overall is the benefit of CCAR. The CCAR has changed the way that companies think about their overall risk. They apply a stress test to all their portfolios now and think about how portfolios would behave during a stress test.”

Kansas City Southern’s (KSU) CEO David Starling on Q3 2015 Results

Volume continues to improve in October

“volume so far in October continue to improve. And subject to ongoing uncertainty in energy markets, we feel good about the trajectory of demand as we head into the end of 2015. Through the close of business, Wednesday, average daily carloads for October were running about 1% higher than September and 1% higher than October of last year as well.”

Business demand still feels very good to us

“business demand still feels very good to us, with the obvious caveat about the uncertainty in energy markets, which you have seen across the entire rail sector, have made it more difficult to forecast demand and provide guidance.”

Mexico is probably linked to the US, but they’ve done a good job managing their inflation and unemployment rates

“I think, Mexico ends up being fairly tightly linked with the U.S. economy, given the amount of goods that end up going north into the U.S. But they’ve done a really good job managing their overall inflation rate, which is now running below 2%, unemployment is below 5%.”

Hasbro’s (HAS) CEO Brian Goldner on Q3 2015 Results

Toy industry growth is strong ytd

“The trends that we see and the data that we have would indicate that the Toy industry year-to-date is up high-single digits, and we see that as boding well as we get into the holiday season and continues our trends.”

Labor is the biggest cost input to our COGS and it’s up in the double digit range

“The single biggest cost input to our cost of goods is labor. And we continue to see labor inflation rates in the double-digit range. We have seen a slight decrease in the cost of certain types of resins over the period since the end of 2014. But they tend to be more nominal and they run in arrears to whatever the petroleum or gasoline costs prices are out there as you know.”

Flextronics International’s (FLEX) Mike McNamara on Q2 2016 Results

Partnering with Nike for connected products

“Last week, during NIKE’s Investor Day, NIKE announced a partnership with Flex to accelerate the introduction of advanced innovation to NIKE’s manufacturing supply chain. Working together, NIKE and Flex will deliver innovation that enables product to reach consumers more quickly with customized solutions and increased performance innovations.”

There’s an electrification of the world going on and we can help mechanical companies adopt that

“the amount of electrification in the world, the amount of smart products in the world that are going into what’s not typically electronic products that are now moving forward, whether it’s anything from a shoe to a shirt to a door lock is tremendous. So you’re getting a tremendous amount of this electrification of the business. And as we look forward, the value to us is if we can create more value for these customers whether it’s automation or engineering or making a non-connected product connected or providing electrification where they’re more traditionally a mechanical type company”

Zions Bancorporation’s (ZION) CEO Harris Simmons on Q3 2015 Results

Energy chargeoffs are from borrowers that were already weak in the last cycle

“the charge-offs have fundamentally been borrowers that were weak in the last cycle, they’ve been kind of limping along, and for whatever reason, you know, we have not been able to get totally out, and this recent downturn was just kind of another very difficult blow to them.”

Restraining loan growth because concerned that we may find ourselves in another downturn before things get better

“I think that, you know, I for one have a concern that we may find ourselves set [ph] into another downturn before we see the economy strengthen a great deal again, I mean. So we’re trying to be very careful.”

Hawaiian Holdings’ (HA) CEO Mark Dunkerley on Q3 2015 Results

Hawaiian airlines has had a tough time getting flights in on schedule

“It’s been a poor summer operationally as reflected in our having recently posted our worst monthly punctuality in over a decade. The culprits have been several; the combination of a burgeoning flight schedule of Honolulu and airport construction has meant that during the peak hours of the day there have been insufficient gates. This has been exacerbated by congestion in customs, resulting in our not being permitted to de-plane arriving international passengers promptly. And lastly, an abrupt change in the traffic control procedures at Honolulu gave us no opportunity to make schedule changes to address the lengthen block times that have resulted.”

Yahoo! (YHOO) Marissa A. Mayer on Q3 2015 Results

Experiencing continued revenue headwinds

“our Q4 outlook, which Ken will return to later, is not indicative of the performance we want. While there are some well-known headwinds, year over year and even quarter over quarter like the loss of the Alibaba TIPLA, we are also experiencing continued revenue headwinds in our core business, especially in the legacy portions”

ACE’s (ACE) CEO Evan Greenberg on Q3 2015 Results

Underwriting environment continued to grow more competitive

“I want to now say a few words about current commercial P&C market conditions. The underwriting environment continued to grow more competitive in the quarter for our commercial P&C business globally. With some exceptions, price declines accelerated modestly. They were varied by class of business and geography.’

Large account more competitive, wholesale and property

“Large account business, particularly shared and layered is more competitive than midsized. Wholesale is more competitive than retail and property more so than casualty related”

Kimberly-Clark’s (KMB) CEO Tom Falk on Q3 2015 Results

The rate of currency deterioration hasn’t been as severe as it was

“The rate of currency deterioration hasn’t been as severe as it was, say, a year ago. On the other hand, there’s still some opportunity for price in some markets.”

Not seeing trade down in EM

“so far we are not seeing as much as a trade down as you would think. And we are still seeing — we launched boy/girl diaper pants in some of the super premium kind of tiers. We are seeing good response and growth there… particularly the economies that are in recession like Brazil and Russia, we are watching that see how the consumer performs and make sure we got the right offer, but we are also seeing really good innovation. Mom still wants the best for her baby.”

Texas Instruments, Incorporated. (TXN) Q3 2015 Results

It’s a weak environment but some segments were stronger than we expected

“our revenue declined 2% from a year ago, and we obviously would describe that as a weak demand. That’s actually similar to what we saw last quarter. But, inside of that, certainly it was stronger than what we had expected. There were a couple of areas that were stronger than we had expected. Wireless infrastructure and industrial were both stronger than what we had expected. ”

Kinder Morgan’s (KMI) CEO Steve Kean on Q3 2015 Results

By 2030 gas should be 39% of electric generation mix

“Its projected increase from today’s level of 76 Bcf a day to about 110 Bcf a day by 2025, that’s an increase of 40%.”

” If you look at the 15 mix of generating output and this is according to the EIA, 32% is gas and 33% coal. For those of you who have been in this industry a long time or followed it you know that that represents a dramatic shift to the positive for natural gas. If you flash ahead again these are EIA numbers to 2030 their projection of the mix of generation is 39% gas, 18% coal’

Renewable energy will need natural gas facilities as backup

” reliable flexible natural gas facilities are absolutely necessary to back up wind and solar. So to sum up the idea that we could move directly from coal to renewables without increasing natural gas usage for electronic generation is an unrealistic pipe dream with the substance and the pipe being legal only in Colorado and Washington State.”

Danaher (DHR) Thomas Patrick Joyce on Q3 2015 Results

Seen some incremental slowing, but in pockets

“Overall, we have seen some incremental slowing in the macro. That being said, it’s in pockets. There’s some pockets regionally where we’ve seen some of that slowing, clearly, and in some of the more industrially oriented markets.”

China is still one of our better markets

“we’ve actually seen China, while slowing incrementally, it’s still one of the better markets where we play today. Our growth rates continue to be very good in a number of our businesses. ”

ACE 2Q15 Earnings Call Notes

The underwriting environment continued to soften this quarter

“I want to now say a few more words about current commercial P&C insurance market conditions. The underwriting environment continued to soften in the quarter for our commercial P&C business globally. As I have been saying, the underlying pattern we have seen over the last few quarters is that large account business is more competitive than midsized, wholesale is more competitive than retail, and property more so than casualty-related.”

Folding Chubb international operations into ACE’s

“There will be a lot of efficiency we will gain between the two operations, because they are a duplication. Our plan is to integrate Chubb’s international business into ACE’s. So, we will have only one statutory entity in the geographies and the vast, vast majority of those will be ACE entities. Canada is an exception. We will integrate ACE into Chubb up in Canada.”

I guarantee that we will covet Chubb’s claims capability and service

“For agents and brokers, they want to know that we are going to behave in the similar way. They want to know that we are going to covet Chubb’s claims capability and service, which is simply renowned. And I can guarantee you we are going to do that. And they will be leading those efforts.”

We will keep compensation structures in place too

“Agents want to know that we are going to maintain compensation structures and that by the way, that we are going to keep the agency, the independent agency system as a centerpiece of distribution here to the customers. And we are being loud and clear that that is without a doubt”

Opportunities to enhance Chubb’s offerings with ACE’s

“Chubb does a great job in traditional middle market products and some specialty products and towards industry verticals that they are such a great deep knowledge of and are great at. On the other hand, imagine the products that ACE sells, everything from environmental liability to farm and ranch to product recall, the construction and we could go on and on with a lot of product that will enhance the offerings to those verticals and also might help to expand into a few others as we go along. That’s middle market, and that is distinct from small commercial, which we have each been have sort of nascent efforts towards that we will endeavor to pursue in a far more meaningful way.”

Most of our competitors are good stewards of capital, they wont buy just to buy

“I have been reading lately that there will be more large acquisitions because of ACE and Chubb. When I think about it, I am not sure that’s right. I can’t speak with any certainty but first of all, most of my or many of my competitors are very thoughtful and they are good operators and they are good stewards. They attempt to be good stewards of shareholder money. And they have a good sense of strategy for their companies. Anybody who thinks that way, first of all is going to look at an acquisition not from a point of size, they are going to look at it at the intrinsic value due to the characteristics of that to be acquired holds. And whether it is truly value-creating in a transformative way, otherwise you don’t do something large.”

I don’t think you can really say that better data will ameliorate the cycle

“the question about cycle management and data and all of that, I think you can’t paint it with a broad brush. And I think those who do are simply, they are overly simplistic in either how they think or certainly in how they describe certain areas of the business where you have broad distribution reach to get the customer, where you have more homogeneous pools of risk, lower severity-related, higher frequency-related, I think that is where there is a bit more discipline at least at this time. So, you would say more smaller commercial, more middle-market commercial, I think that is less subject though hardly immune on one hand. I think as you get up to upper middle-market, larger risk, I think you have a lot of players with a lot less data. People are buying much bigger limits, so you have a lot piling on to the same risk who just have capital and an underwriter and a dog and are chasing some volume. And there I don’t see that same sort of well. The insights of analytics will ameliorate a market cycle.”

ACE is rebranding as Chubb

“Well, we haven’t said Corp., but it will be Chubb. It will be Chubb something. It might be Chubb Limited at the parent. We have ACE Group Holdings as intermediate holding company. It may be Chubb Group Holdings.”

ACE 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“ACE produced record quarterly earnings that were driven by excellent underwriting and investment results.”

“Book value in the quarter declined 2.3% due to rise in interest rates…Given we are fundamentally buy-and-hold fixed-income investors, this is, in essence, an accelerated recognition of a loss that would have amortized in overtime anyway, as our bonds mature.”

“The flip side, of course, is that our reinvestment rate has improved by about 60 basis points for a portfolio of similar distribution, and this will benefit our income over years to come.”

“Overall, North American pricing was up about 4%, while the rate of increase for property-related pricing is moderating. Casualty-related pricing, in fact, accelerated modestly the quarter, with many lines experiencing their strongest level of rate increase yet.”

“Internationally, the retail commercial P&C rate environment remains competitive but stable, with rate growth flat in the quarter overall.”

“in the quarter, we completed our acquisition of ABA Seguros, Mexico’s fourth largest personal lines company. And as we announced on last quarter’s call, we also completed Mexican surety company, Fianzas Monterrey.”

“our book yield still is above our market yield. So as the portfolio turns over into the whole yielding market rates, if market rates were to stay where they are, we think investment income would stay flat on that basis. Because new money would offset the decline in investment income that would result as the portfolio moves into the lower rate. I was just going to say, we are predicting or at least internally, that interest rates will rise.”

“there’s more capital chasing, to some degree, less business on the reinsurance side, and it always comes back in any market economy and with any industry. It’s that old supply-demand thing, and that’s what you got going on. And so you see particularly with a lot of visibility to investors is the CAT Re side. Though remember, over the overall reinsurance market, it’s a small thing that casts a big shadow. And there, you see alternate capital coming in capital markets, in addition to traditional players. And so — and you don’t see exposures growing that much, and so you got that pond with more drinking out of it on the CAT.”

“the large players. And they’re much better data over the years in the last cycle. And because of math and computer power, and technology has changed it that way, and given their insight, they’re making different kinds of decisions about how to hold retentions, how to think about exposure. And they retain much more, many do than they did in the past.”

“I remind you that CPI is not the indicator of insurance-related inflation. Medical inflation, while it’s down, still runs around 4%. You have legal inflation that continues. And by the way, on the short-tail side, you have more inflation around construction materials, and you get some hourly rate and all of that, particularly as housing starts, et cetera, pick up. ”

“anyone who’s has been in the casualty business for any reasonable length of time, it’s not a business for optimists, and you understand that the good news comes early and the bad news comes late, and so we continue to play it conservatively that way because you don’t know 2 or 3 years out.”