Chubb Limited CB is well-poised for growth banking on a compelling suite of products and services, inorganic growth, solid global presence, sturdy capital position and prudent capital deployment.
Estimates for Chubb have been revised upward over the past 60 days, indicating investor optimism on the stock. The Zacks Consensus Estimate for 2019 earnings per share has moved 0.1% north in the said time frame. The company also has a decent history of beating estimates in the last four quarters with the average being 2.72%.
Shares of Chubb have rallied 22.9% year to date, outperforming the industry’s increase of 6.2%.
Chubb’s return on equity was 8.5% in the trailing 12-month period, higher than the industry average of 6.8%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
Chubb boasts a strong portfolio of products and services that in turn leads to premium growth. Further, strategic acquisitions have paved the way for international and domestic expansions apart from helping it to gain a competitive edge in terms of scale, efficiencies and balance sheet size.
As part of the strategic initiatives, Chubb focuses on 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 traction. Also, Chubb’s other distribution agreements help in enhancing its market presence.
Higher invested assets and solid cash flow continue to fuel net investment income. The company expects adjusted net investment income run rate to be between $890 million and $900 million going forward.
This Zacks Rank #3 (Hold) property and casualty insurer has a healthy capital position. Its cash generating capability helps it to lower the debt burden and improve debt-to-capital ratio.
Chubb effectively deploys capital to enhance shareholders value. In May 2019, the company hiked its dividend by 2.5%, which marks the 26th straight dividend hike. Chubb’s dividend yield of 1.9% betters the industry average of 0.4%, making it an attractive pick for yield-seeking investors.
However, some of the challenges faced by the insurer are exposure to catastrophe losses and natural disasters that induce volatility in underwriting profitability.
The Zacks Consensus Estimate for 2019 and 2020 earnings per share is pegged at $10.40 and $11.09, indicating increase of nearly 10.2% and 6.7%, respectively from the year-ago reported figure. The expected long-term earnings growth rate is pegged at 10%.
Stocks to Consider
Some better-ranked stocks from the insurance industry include Hallmark Financial Services HALL, Palomar Holdings PLMR, and RenaissanceRe Holdings RNR each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hallmark Financial underwrites markets, distributes and services property and casualty insurance products in the United States. The company came up with average four-quarter positive surprise of 97.50%.
Palomar Holdings provides personal and commercial specialty property insurance products. The company delivered average four-quarter positive surprise of 25.00%.
RenaissanceRe Holdings provides insurance and reinsurance products in the United States and internationally. The company pulled off an average four-quarter positive surprise of 141.77%.
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Hallmark Financial Services, Inc. (HALL) : Free Stock Analysis Report
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