Chubb Limited CB is well poised for growth, given its strong portfolio of products and services, strategic acquisitions, improvement in net investment income, solid capital position and prudent capital deployment.
Chubb boasts a strong portfolio of products and services that in turn leads to improvement in premium growth. Further, strategic acquisitions have paved the way for international and domestic expansions, apart from supporting competitive edge in terms of scale, efficiencies and balance sheet size.
Chubb invests in cyber insurance and capitalizes on opportunities in domestic and international middle market business with its core package as well as specialty products. Its accident and health (A&H) and the personal lines businesses are also well poised for growth. The U.S. small commercial business has also gained momentum.
In 2019, adjusted net investment income increased 1.5% year over year. Investment results should continue to benefit from growth in invested assets and solid cash flows. However, the current low interest rate environment is likely to keep investment yields under pressure, which would consequently weigh on its overall investment income.
Banking on solid capital and liquidity position, the property and casualty insurer effectively deploys capital via share buyback and dividend payouts to enhance shareholders value. In May 2019, the company hiked its dividend by 2.5%, which marked the 26th straight dividend hike. In the first quarter of 2020, the company proposed a dividend hike of 4%, which will be paid out in April 2020.
Chubb has consistently hiked its dividend with the metric witnessing a five-year CAGR (2014-2019) of 8.45%. Apart from continuous dividend increases, Chubb aggressively buys back shares to boost its bottom line. In 2019, the company returned $2.9 billion to shareholders, including $1.4 billion in dividend and over $1.5 billion in share repurchases. Its dividend yield of 3.2% betters the industry average of 0.5%, which makes it an attractive pick for yield-seeking investors.
Shares of Chubb have lost 31.1% in the past year compared to the industry’s decline of 22.2%.
Chubb’s return on equity was 8.5% in the trailing 12-month period, higher than the industry average of 6.4%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
The company has a decent earnings surprise history. It beat estimates in each of the trailing four quarters, with the average beat being 3.41%.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $10.93 and $11.50, indicating increase of nearly 8.1% and 5.2%, respectively from the year-ago reported figure. The expected long-term earnings growth rate is 10%, which compares favorably with the industry growth rate of 8.5%.
Chubb carries a Zacks Rank #3 (Hold) and has a favorable Growth Score of B. This style score identifies growth prospects of a company.
Stocks to Consider
Some better-ranked stocks from the insurance industry include Donegal Group Incorporation DGICA, RLI Corporation RLI and First American Financial Corporation FAF, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Donegal Group, RLI and First American surpassed estimates in each of the last four quarters, with the average positive surprise being 271.06%, 20.36% and 17.68%, respectively.
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RLI Corp. (RLI) : Free Stock Analysis Report
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