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Chubb (CB) Stock Up 8% YTD: Will the Bull Run Continue?

Shares of Chubb Limited CB have gained 8.1% year to date compared with the industry’s increase of 3.8%. The Finance sector and the Zacks S&P 500 composite declined 13.6% and 18.1%, respectively, in the same time frame. With a market capitalization of $86.7 billion, the average volume of shares traded in the last three months was about 1.6 million.

A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and solid capital position continue to drive this Zacks Rank #3 (Hold) insurer. Chubb has a decent history of delivering positive surprises in the last seven reported quarters.

The Zacks Consensus Estimate for 2022 and 2023 has moved 1.8% and 1.3% north, respectively in the past 30 days, reflecting analyst optimism.

Chubb has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.

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Can CB Retain the Momentum?

The Zacks Consensus Estimate for Chubb’s 2022 earnings is pegged at $15.41, indicating an increase of 22.7% on 5.6% higher revenues of $44.3 billion. The consensus estimate for 2023 earnings is pegged at $17.35, indicating an increase of 12.6% on 10.5% higher revenues of $48.9 billion.  The long-term earnings growth rate is currently pegged at 10%.

Chubb is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance, and the largest publicly traded P&C insurer based on market capitalization. Increased focus on capitalizing on the potential of middle-market businesses, both domestic and international, along with the traditional core package as well as specialty products, bodes well for CB’s growth.

A solid commercial business, continued commercial P&C rate increases, improving underwriting margins, new business and strong renewal retention should continue to support premium growth.

Chubb expects continued growth and margin improvement in 2022 as it capitalizes on favorable underwriting conditions for commercial P&C businesses globally.

Chubb intends to expand its presence in the Asia-Pacific region. The acquisition of the life and non-life insurance companies of Cigna Corporation in seven Asia-Pacific markets testifies this strategic effort. Chubb’s Asia-Pacific portfolio will increase to $7 billion in premiums from $4 billion at present. Chubb expects to realize in excess of $80 million of expense savings with one-time integration costs of about $100 million. Also, the insurer agreed to purchase an additional ownership interest in Huatai Group in China.

With an improving rate environment, a solid investment portfolio and positive operating cash flow, investment income should rise. Chubb estimates investment income in the range of $1.4 million to $1.6 billion in the fourth quarter of 2022.

Chubb’s strong capital position with sufficient cash generation capabilities supports effective capital deployment.  This, in turn, has helped the insurer increase dividends for the last 29 years. The dividend yield is 1.6%, better than the industry average of 0.3%. CB has $1.8 billion remaining under its share buyback authorization through Jun 30, 2023.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are W.R. Berkley Corporation WRB, Berkshire Hathaway (BRK.B) and American Financial Group, Inc. AFG. While W.R. Berkley sports a Zacks Rank #1 (Strong Buy), Berkshire Hathaway and American Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of W.R. Berkley surpassed earnings estimates in each of the last four quarters, the average beat being 25.63%. In the past year, the insurer has gained 26.9%.

The Zacks Consensus Estimate for W.R. Berkley’s 2022 and 2023 earnings has moved 5.1% and 2.4% north, respectively, in the past 30 days.

Berkshire Hathaway delivered a four-quarter average earnings surprise of 22.18%.  In the past year, Berkshire Hathaway has gained 9%.

The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings implies a respective increase of 15% and 6.2% from the year-ago reported number.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 28.16%. In the past year, American Financial has lost 0.4%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 0.6% and 1.8% north, respectively, in the past seven days.


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