Chubb (CB) Up 3.5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Chubb (CB). Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Chubb due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Chubb's Q4 Earnings Surpass on Underwriting Strength
Chubb Limited reported fourth-quarter 2023 core operating income of $8.30 per share, which outpaced the Zacks Consensus Estimate by 63.7%. The bottom line doubled year over year.
Chubb's results reflected record underwriting income, lower catastrophe loss, improved combined ratio across most of the segments and higher premium growth across all the segments.
Quarter in Detail
Net premiums written improved 13.4% year over year to $11.6 billion in the quarter, which matched our estimate, while the Zacks Consensus Estimate was pegged at $11.4 billion. Net premiums earned rose 12.8% to $11.9 billion. Our estimate was $10.8 billion.
Net investment income was $1.37 billion, up 30.2%. The Zacks Consensus Estimate was pegged at $1.3 billion, while our estimate was pinned at $1.2 billion. Property and casualty (P&C) underwriting income was $1.52 billion, which increased 35.2% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.5 billion, up 27.4%.
Chubb incurred a pre-tax P&C catastrophe loss, net of reinsurance and including reinstatement premiums, of $300 million, which was narrower than the year-ago catastrophe loss of $400 million. The P&C combined ratio improved 250 basis points (bps) on a year-over-year basis to 85.5% in the quarter under review. The Zacks Consensus Estimate for the combined ratio was pegged at 86, while our estimate was 81.7.
Segmental Update
North America Commercial P&C Insurance: Net premiums written increased 4.4% year over year to $4.7 billion, which matched our estimate. The Zacks Consensus Estimate was pegged at $4.8 million. The combined ratio improved 790 bps to 76.4%. The Zacks Consensus Estimate was pegged at 83.
North America Personal P&C Insurance: Net premiums written climbed 12.1% year over year to $1.5 billion. Our estimate was $1.4 billion. The combined ratio improved 310 bps to 86.2%. The Zacks Consensus Estimate was pegged at 87.
North America Agricultural Insurance: Net premiums written increased 58.2% from the year-ago quarter to $607 million. Our estimate was $418.4 million, while the Zacks Consensus Estimate was pegged at $386 million. The combined ratio improved 1,140 bps to 105.8%. The Zacks Consensus Estimate was pegged at 94.
Overseas General Insurance: Net premiums written jumped 19.3% year over year to $3.2 billion, which matched our estimate. The combined ratio deteriorated 630 bps to 85.9%, representing lower favorable prior period development and higher catastrophe losses.
Life Insurance: Net premiums written soared 20.3% year over year to $1.45 billion. Our estimate was $1.6 billion.
The Life Insurance segment income was $263 million, up 43.5%. The increase was principally driven by growth in International life, which grew $102 million, representing earnings from Huatai and higher net investment income.
Financial Update
The cash balance of $2.6 billion, as of Dec 31, 2023, increased 23.2% from the 2022-end level. Total shareholders’ equity grew 26% from the level at 2022 end to $63.7 billion as of Dec 31, 2023. Book value per share, as of Dec 31, 2023, was $146.83, up 20.5% from the figure as of Dec 31, 2022.
Core operating return on tangible equity expanded 1,710 bps year over year to 35.3%. Operating cash flow was $3.19 billion in the quarter under consideration.
Capital Deployment
In the quarter, Chubb bought back shares worth $720 million and paid $351 million in dividends.
Full-Year Update
Core operating income for the year came in at $22.54 per share, up 48.5% year over year. P&C net premiums written were $41.8 billion, up 9.9% year over year. The combined ratio improved 110 bps on a year-over-year basis to 86.5% in 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Chubb has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Chubb has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Chubb belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, RLI Corp. (RLI), has gained 8.7% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.
RLI Corp. reported revenues of $378.44 million in the last reported quarter, representing a year-over-year change of +14.9%. EPS of $1.54 for the same period compares with $1.53 a year ago.
For the current quarter, RLI Corp. is expected to post earnings of $1.61 per share, indicating a change of -1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +1.4% over the last 30 days.
RLI Corp. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Chubb Limited (CB) : Free Stock Analysis Report
RLI Corp. (RLI) : Free Stock Analysis Report
