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Catastrophe Loss to Weigh on Chubb Limited (CB) Q2 Earnings

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Chubb Limited CB is slated to report second-quarter 2020 results on Jul 28, after market close. The company delivered earnings surprise of 2.68% in the last reported quarter.

Let’s see how things have shaped up for this announcement.

Factors to Consider

Premiums in the to-be reported quarter are likely to have benefited from better pricing, renewal retention, expanded product portfolio and increased scale. However, given the pandemic, the company expects reduced exposures in travel insurance, accident & health discretionary purchases, automobile insurance, and commercial lines of business. These may have impacted premium revenues. Premiums are likely to have been hampered in credit-related products such as trade, credit, surety, and other lines such as workers’ compensation.

Chubb estimates net written premiums to reduce by about $184 million due to exposure adjustments on its in-force policies.

Investment income is likely to have benefited from growth in invested assets and solid cash flows. Chubb estimates adjusted net investment income run rate to be in the range of $885 million to $895 million. The Zacks Consensus Estimate for investment income is pegged at $86 million, indicating an increase of 0.1% from the year-ago reported figure.

The Zacks Consensus Estimate for revenues is pegged at $9.1 billion, indicating an upside of nearly 1% from the year-ago reported figure.

Chubb Limited Price and EPS Surprise

 

Chubb Limited Price and EPS Surprise
Chubb Limited Price and EPS Surprise

Chubb Limited price-eps-surprise | Chubb Limited Quote

Expectations

Chubb estimates global net catastrophe loss of $1.15 billion for the to-be reported quarter. While COVID-19 pandemic losses are expected to amount to $1.157 billion, natural catastrophe losses are expected to total $249 million. Civil unrest-related losses are expected to be $104 million after tax.

North America Commercial P&C Insurance will account for about 71% of the COVID-19 estimated losses while the Overseas General Insurance segment will constitute 28%.

The losses stemming from the pandemic include short-tail losses of $605 million from entertainment and commercial property-related business interruption and accident and health products including travel insurance products. These apart, the company expects  losses of $553 million related to liability insurance products, including professional liability (directors and officers, employment practices, professional liability), workers' compensation and other liability-related product. The loss estimate also includes $107 million related to insurance credit exposure including surety, political risk and trade credit.

Total benefits and expenses are likely to have increased mainly due to loss and loss expenses, policy acquisition costs, administrative expenses and policy benefits. Chubb estimates increase in insurance claims from the COVID-19 pandemic to weigh on operating income.

The Zacks Consensus Estimate for second-quarter 2020 indicates a decline of 125.4% from the year-ago quarter reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Chubb this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case as you can see below.

Earnings ESP: Chubb has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of 66 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Chubb currently carries a Zacks Rank of 4 (Sell).

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

American Financial Group AFG has an Earnings ESP of +21.82% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinsale Capital Group KNSL has an Earnings ESP of +2.86% and a Zacks Rank #2.

Allstate Corporation ALL has an Earnings ESP of +10.64% and a Zacks Rank of 3.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
 
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
 
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