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Chubb (CB) Provides Q4 Catastrophe Loss Estimate of $430M

Zacks Equity Research

Chubb Limited CB estimates net catastrophe pre-tax loss of $430 million or $353 million after tax, primarily due to extreme weather-related events around the globe, which include tornadoes in Texas, wildfires in California, and Typhoon Hagibis in Japan, as well as civil unrest in Hong Kong and Chile.

The estimated losses comprise net of reinsurance, including reinstatement premiums and covers losses generated from the company's commercial and personal property and casualty insurance businesses as well as its reinsurance operations globally.

Additionally, Chubb estimates fourth-quarter underwriting loss of $23 million pre-tax, or $18 million after tax for North America Agricultural Insurance. These losses are due to crop yield shortfalls resulting from poor growing conditions.

While catastrophe risk modelling specialist, RMS, estimates industry losses between $7 billion and $11 billion owing to typhoon Hagibis, catastrophe risk modeling firm AIR Worldwide expects loss in the range of $8 billion to $16 billion.

The Zacks Consensus Estimate for Chubb’s fourth-quarter earnings is currently pegged at $2.53, indicating an improvement of 25.2% from the year-ago quarter reported figure.  However, we expect estimates to move south once analysts start incorporating loss estimates into their numbers.

Being a property and casualty insurer, Chubb’s exposure to natural disasters, man-made catastrophes and other catastrophic events induces volatility in underwriting results

However, the company’s cat loss in the first nine months of 2019 was $759 million, down 27% year over year, given a not-so-active cat environment. But its exposure to catastrophic events will always remain a concern as natural disasters can increase the company’s losses, keeping the combined ratio under pressure.

Recently another insurer, AXIS Capital Holdings Ltd. AXS also estimated fourth-quarter preliminary pre-tax loss between $90 million and $110 million, primarily due to Japanese typhoon Hagibis. The estimated loss comprises net of reinsurance recoveries, retrocessional covers and estimated reinstatement premiums.

Shares of this Zacks Rank #3 (Hold) property and casualty insurer underperformed the industry in the fourth quarter. The stock lost 1.9% against the industry’s growth of 6.4%. Nonetheless, the company’s policy to ramp up its growth profile and strong capital position should continue to drive shares higher.

Stocks to Consider

Some better-ranked stocks from the same space are W. R. Berkley Corporation WRB and Fidelity National Financial, Incorporation FNF, each sporting a Zacks Rank #1(Strong Buy), You can see the complete list of today’s Zacks #1 Rank stocks here.

W. R. Berkley is an insurance holding company. It operates as a commercial lines writer in the United States and internationally. The company delivered four-quarter positive surprise of 32.31% on average.

Fidelity National Financial offers various insurance products in the United States. It offers title insurance, escrow, other title related services and home warranty insurance. The company beat earnings estimates in three of the last four reported quarters, the average beat being 8.67%.

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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
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