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Chubb (CB) to Acquire an Additional 15.3% Stake in Huatai

Zacks Equity Research

Chubb Limited CB recently announced an agreement to acquire an additional 15.3% of Huatai Insurance Group Company Limited. Following the share purchase completion, Chubb will own 46.2% stake in the Huatai Insurance Group. The deal is subject to regulatory approvals and other important conditions.

Notably, Chubb had increased its ownership in Huatai Insurance Group from 20% to 26.2% in March 2019. Recently, the China Banking and Insurance Regulatory Commission (CBIRC) approved other unrelated share purchases, which upon closing increased Chubb’s stake to 30.9%.

Huatai Insurance Group Company Limited, founded in 1996, is the first nationwide joint-stock property insurance company in China. It provides a range of insurances including health, personal accident, motor, cargo and directors’ and officers’ liability. The company's 53 shareholders engage in 24 industries including petroleum, power, metallurgy, chemicals, aviation, shipping, most of which are powerful and profitable enterprises or enterprise groups, with total assets are exceeding RMB 2 trillion. Currently, the company has formed a nationwide network by establishing branches in 35 cities. It is the holding company of Huatai P&C Insurance Company, Huatai Life Insurance Company, and Huatai Asset Management Company, among other subsidiaries.

Chubb is set to purchase the 15.3% share from the Inner Mongolia Junzheng Energy and Chemical Group Co., Ltd. and one of its wholly owned subsidiaries. Further, the parties have agreed upon a subsequent purchase of 7.1% of the latter on successful completion this deal. Together the deals are valued at around $1.53 billion.

This move of Chubb is in line with its strategy of penetrating the vast Chinese insurance market. With the increased ownership, the company intends to provide support to Huatai and cater to the growing protection needs of Chinese consumers and businesses. The ownership provides them with the opportunity to build a great Chinese insurance company.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer have outperformed the industry year to date. The stock has gained 16.1% compared with the industry’s growth of 9%.

Stocks to Consider

Some better-ranked stocks from the same space are Donegal Group Incorporation DGICA, RLI Corporation RLI and Cincinnati Financial Corporation CINF. While Donegal Group Incorporation and RLI Corporation sports a Zacks Rank #1 (Strong Buy), Cincinnati Financial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Donegal Group Incorporation provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. The company beat estimates in the trailing four quarters by 248.34%, on average.
RLI Corporation underwrites property and casualty insurance in the United States and internationally. The company beat estimates in the trailing four quarters by 154.89%, on average.

Cincinnati Financial Corporation provides property casualty insurance products in the United States and offers coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. The company beat estimates in the trailing four quarters by 20.79%, on average.

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