Chubb Holds Niche in Market with Rising Insurance Rates

Zacks Equity Research

On Sep 3 we issued an updated research report on property and casualty insurer The Chubb Corp. ( CB). The company’s second-quarter 2014 earnings of $1.70 per share widely missed the Zacks Consensus Estimate of $1.90. Earnings also declined 4% year over year.

 

Chubb’s second-quarter results were affected by catastrophe and non-catastrophe losses related to severe weather in the United States. An unusually high level of Homeowners' and Commercial fire losses added to the company’s woes.

 

Nonetheless, 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 rate increases 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 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 continued dividend increase over several years makes the stock a favorite among investors. 

 

However, exposure to cat losses and a low interest rate environment are some of the headwinds. 

 

Chubb has been witnessing a decline in earnings estimates following a weak second quarter results. Over the last 60 days, the Zacks Consensus Estimate for 2014 has moved down 4.2% to $6.99 as 12 of the 13 estimates were revised downward. For 2015, 9 of 13 estimates moved down, lowering the Zacks Consensus Estimate by 0.8% to $7.74 per share. 

 

Stocks to Consider

 

Chubb carries a Zacks Rank # 3 (Hold). Better-ranked stocks include Endurance Specialty Holdings Ltd. ( ENH), AmTrust Financial Services, Inc. ( AFSI) and Federated National Holding Co. ( FNHC). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on CB
Read the Full Research Report on FNHC
Read the Full Research Report on AFSI
Read the Full Research Report on ENH


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