Chubb Corp. Balances Risk, Reward


 On June 10, we issued an updated research report on property and casualty insurer The Chubb Corp. (CB). The company’s first-quarter 2014 earnings of $1.50 per share were in line with the Zacks Consensus Estimate. Earnings, however, declined 30% year over year due to catastrophe losses of $199 million incurred during the quarter. In the year-ago quarter, the company had incurred a cat loss of only $18 million.

Excluding the last reported quarter, the company has been delivering positive earnings surprise over the last several quarters. Chubb boasts a diversified product profile and has a niche presence in the property and casualty industry.

Chubb’s Commercial insurance segment has consistently impressed with its earnings. The segment has been witnessing low single-digit increase in average renewal rates for the past several quarters. Retention ratio stands at a stable level.

Chubb’s Personal Insurance is also witnessing a gradual market improvement. Net premium written in this segment has been increasing over past several quarters, led by strong premium increases from international business.

Chubb’s international business is also performing strongly and is an arsenal for its future growth.

Strong capital management witnessed by regular share repurchases and continuous dividend increase over several years makes the stock a favorite among investors.

However, exposure to cat losses and low interest rate environment are some of the headwinds. The company’s underperforming Specialty business has been a drag on its overall growth.

Chubb has been also witnessing rising earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for 2014 moved up 1.4% to $7.31 as 9 of the 13 estimates moved north. For 2015 6 of 13 estimates moved up, pushing the Zacks Consensus Estimate by a slight 0.3%. The expected long-term earnings growth is 9.7%.

Other Stocks to Consider

While Chubb carries a Zacks Rank # 3 (Hold), better-ranked stocks include Allied World Assurance Company Holdings, AG (AWH), AmTrust Financial Services, Inc. (AFSI) and Aspen Insurance Holdings Ltd. (AHL). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CB
Read the Full Research Report on AFSI
Read the Full Research Report on AWH
Read the Full Research Report on AHL

Zacks Investment Research

View Comments (0)