Reasons Why Investors Should Retain Chubb Limited (CB) Stock
Chubb Limited CB is well-poised for growth on the back of new business, strong renewal retention, expanding underwriting margins, strategic acquisitions and effective capital deployment.
Growth Projections
The consensus estimate for 2023 and 2024 earnings is pegged at $17.67 and $19.50, indicating 15.9% and 10.3% increase from the year-ago reported figure, driven by 6.5% and 5.8% higher revenues of $47.30 billion and $50.08 billion, respectively.
Northbound Estimate Revision
The Zacks Consensus Estimate for Chubb’s 2023 and 2024 earnings has moved 0.2% and 0.5% north, respectively, in the past seven days. This should instill investors' confidence in the stock.
Earnings Surprise History
Chubb has a decent earnings surprise history, beating estimates in three of the last four quarters and missing in one, the average being 4.71%.
Zacks Rank & Price Performance
CB currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 0.8% against the industry’s rise of 15.3%.
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Style Score
Chubb Limited has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Business Tailwinds
Chubb continues to witness robust premium revenue growth globally. We expect the momentum to continue, driven by its commercial business, consumer property and casualty (P&C) business and International Life business.
Continued commercial P&C rate increases, improving underwriting margins, new business and strong renewal retention should continue to support premium growth.
Chubb Limited, the world’s largest publicly traded P&C insurer, has always considered acquisition as an effective strategy for inorganic growth and global expansion. It closed 17 acquisitions over the past 15 years. The company has acquired the life and non-life insurance companies of Cigna Corporation in seven Asia-Pacific markets. This addition helped the Life Insurance segment to double its premium revenues and will continue to aid margins in the future.
With this addition, Asia-Pacific's share of Chubb's global portfolio will grow to nearly $7.3 billion, representing about 23% of the company’s total premiums.
Riding on increasing interest rates and widening spreads, investment income should continue to rise. CB expects adjusted net investment income on a recurring basis to rise from this quarter's 1.16 to 1.2 to 1.22 next quarter and it expects adjusted net investment income to continue to rise from there for the remainder of the year given its positive cash flows, portfolio turnover and the current reinvestment rate environment.
CB’s solid underlying performance should continue to produce strong operating cash flow. This P&C insurer’s financial position remained strong with $67.7 billion in total capital. The insurer continues to remain liquid with cash and short-term investments of $6 billion at the quarter's end.
Chubb’s strong capital position and sufficient cash generation capabilities support effective capital deployment. This, in turn, has helped the insurer increase dividends for the last 29 years. The dividend yield is 1.7%, better than the industry average of 0.3%. It bought back shares worth $428 million in the first quarter. At present, CB is left with $1.2 billion under its authorization.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Kinsale Capital Group, Inc. KNSL, RLI Corp. RLI and Root, Inc. ROOT. While Kinsale Capital and RLI Corp. sport a Zacks Rank #1 (Strong Buy), Root caries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 14.77%. In the past year, KNSL has gained 58.4%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $10.62 and $12.89, indicating a year-over-year increase of 36.1% and 21.3%, respectively.
RLI Corp. beat estimates in each of the last four quarters, the average being 43.50%. In the past year, RLI has gained 15.4%.
The Zacks Consensus Estimate for RLI’s 2023 and 2024 earnings has moved 3.6% and 10.9% north, respectively, in the past seven days.
Root beat estimates in each of the last four quarters, the average being 18.24%. In the past year, the insurer has lost 54.4%.
The Zacks Consensus Estimate for ROOT’s 2023 and 2024 earnings per share indicates a year-over-year increase of 43.8% and 42.5%, respectively.
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