We are reiterating our Outperform recommendation on The Chubb Corp. (CB), reflecting third quarter earnings beat, in which the company threw a positive earnings surprise of 12%. Over the last four quarters the company has delivered a positive earnings surprise of 49.5%. Chubb carries a Zacks Rank #2 (Buy)
On Oct 24, Chubb reported third-quarter operating earnings of $2.06 per share, way ahead of the Zacks Consensus Estimate of $1.84 per share. Earnings also increased 4% year over year.
Chubb boosts of a diversified product profile and has a niche market presence in the property and casualty industry.
Chubb’s Commercial insurance segment has been consistently reporting favorable earnings results. The segment has been witnessing low-single-digits increase in average renewal rates for the past several quarters. Retention ratio stands at a stable level.
Chubb’s Personal Insurance segment is also witnessing a gradual market improvement. The segment has been witnessing an increase in net premium written from the past several quarters, led by strong premium increases from international business
Chubb’s international business is also performing strongly and is an arsenal to its future growth.
Strong capital management witnessed by regular share repurchases and a continuous dividend increase for the past several years makes the stock a favorite among investors.
However, exposure to cat losses and low interest rate environment are some of the headwinds.
Chubb has been also witnessing rising earnings estimates. Over the last 60 days, the Zacks Consensus Estimate for 2013 moved up by 5.2% to $7.95 as 13 of the 14 estimates moved north. The same for 2014 rose 2.2% to $7.42 as 10 of 14 estimates were raised over the same time frame. The expected long term earnings growth is 12%.
Other Stocks to Consider
Besides Chubb, Alleghany Corp. (Y), Cincinnati Financial Corp. (CINF) CNA Financial Corp. (CNA) all carrying Zacks Rank #1 (Strong Buy) look attractive at current level.