Chubb Limited CB has been witnessing downward revisions over the last 60 days. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 40.7% downward and for 2018, moved 0.5% south. Shares of Chubb have gained 17.5% in a year, lagging the industry’s growth of 24.6%.
The stock presently carries a Zacks Rank #4 (Sell) with an unimpressive Growth Score of F. Back-tested results show that stocks with a Growth Score of A or B, when combined with a bullish Zacks Rank #1 (Strong Buy) or #2 (Buy), comfortably outperform other stocks.
The underwriting profitability of non-life insurers in the third quarter will be hampered by a strings of catastrophes — Hurricanes Harvey, Irma, Maria and two Mexican earthquakes. Per the catastrophe modeler AIR Worldwide, the estimate for insured losses from Irma could range between $25 billion and $35 billion and between $40 billion and $85 billion from Maria. The Mexican tremors will cost the insurance industry billions, per the same catastrophe risk modeler.
Chubb being a property and casualty insurer will not escape the disaster caused by these catastrophe events. Chubb estimates $520 million post-tax cat loss from Harvey, between $640 million and $760 million from Irma and $200 million from Maria. With respect to Mexican tremors that struck in September, the company expects to incur insured losses of $24 million.
Chubb also anticipates to have incurred a catastrophe loss of about $86 million from all other damages which the company is yet to provide any estimates for. Through the first half of 2017, the company shelled out $316 million in catastrophe losses.
The Zacks Consensus Estimate for the third quarter is currently pegged at a loss of 30 cents per share, representing a year-over-year decline of 110.5%. Revenues for the quarter are also estimated to decrease 3.9%.
Chubb has also been witnessing increasing expenses, weighing on operating income expansion and thus inducing volatility to the bottom line. Operating return-on-equity, a measure of profitability, has also been declining over the last four years.
Notably, no hike was made in interest rate in the last Fed meeting held in September. This information did not come as a surprise though. Inflation rate is expected to remain at 1.6% — falling short of the 2% target that the Fed had benchmarked. Neverthetheless, Chubb expects quarterly investment income run rate to remain in the range of $830-$840 million.
Though increasing catastrophes will induce fluctuation in underwriting results, insurers have braced themselves with prudent underwriting practices to weather the loss to some extent.
Also, capital influx, conservative underwriting, an improving rate environment must pave the way for growth prospects.
Choosing the Stocks
There are other attractive stocks in non-life space that may not be as big a name as Chubb but promise greater returns.
We have boiled down to three favorable stocks with potential to enhance one’s portfolio. Our search is refined by using the solid Zacks Rank, northbound estimate revisions, Value Score of A or B and growth projections. Value Score of A or B coupled with Buy-ranked stocks are the best deals to offer.
Carmel, IN-based CNO Financial Group Inc. CNO administers and markets supplemental health insurance, annuity, individual life insurance and other insurance products. The company has a Zacks Rank #2 with a Value Score of A. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward and for 2018, moved 0.6% north, respectively, over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2017 reflects a year-over-year improvement of 10.2% on revenue growth of 3.0%.
Shares of CNO Financial have soared 50.5% year to date, substantially outperforming the industry average of 20.9% gain. Shares of the company are presently undervalued, reading at a P/B ratio of 0.8 compared with the industry’s 1.4 tally.
Stamford, CT-based The Navigators Group, Inc. NAVG underwrites ocean marine, property and casualty, professional liability, plus specialty insurance products and services in the United States as well as internationally. The company carries a Zacks Rank of 2 with a Value Score of B. The stock has been witnessing upward estimate revisions — up 2.4% for 2017 and 2.9% for 2018, respectively, — over the last 60 days.
The Zacks Consensus Estimate for 2017 reflects a year-over-year rise of 7.2% on revenue growth of 8.8%.
Shares of Navigators Group have rallied 22.1% in a year, thus underperforming the industry average of 24.6% increase. Shares of the company are presently undervalued, reading at a P/B ratio of 1.4 in comparison to the industry’s metric of 1.5.
Based in West Des Moines, IA, FBL Financial Group, Inc. FFG sells individual life insurance and annuity products. The company is Zacks #2 Ranked with a Value Score of B. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 4.7% upward and for 2018, the same moved 1.2% north, over the last 60 days.
The Zacks Consensus Estimate for 2017 reflects a year-over-year improvement of 4.7% on revenue growth of 2.2%.
Shares of FBL Financial have climbed 15.8% in a year compared with the industry average growth of 20.6%.
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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
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