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Why Should Chubb Limited (CB) Remain in Your Portfolio?

Zacks Equity Research

Chubb Limited CB dwells on growth prospects like strategic initiatives, improvement of investment income and shareholder rewards. The Zacks Rank #3 (Hold) property and casualty insurer holds immense potential owing to a few good growth drivers.

Growth Projections: The Zacks Consensus Estimate for earnings per share is $10.30 for 2017 and $10.62 for 2018, reflecting a year-over-year improvement of 1.2% and 3.1%, respectively.

The estimated long term earnings growth is currently pegged at 10%.

Share Price Performance: Shares of Chubb have gained 9.0% year to date, underperforming the industry’s increase of 10.7% as well as the S&P 500’s 11.9% gain over the same time frame.

Positive Earnings Surprise History: Chubb has surpassed the Zacks Consensus Estimate in the last four quarters with an average beat of 5.77%.

Shares Undervalued: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from a quarter to the next — shares are undervalued at the current level. The company has a trailing 12-month P/B ratio of 1.3, falling below the industry average of 1.5. Undervalued shares with growth prospects are the best investment bets. Chubb also has a Value Score of B.

Growth Drivers in Place

Chubb has been pursuing strategic initiatives — both organic and inorganic — to accelerate growth profile. Measures undertaken in the United States, Latin America and Asia should drive improvement. Organic initiatives include cyber insurance, capitalization of middle-market businesses with potential, discard of businesses failing to meet the company’s risk appetite and lower net premium generation.

Chubb’s net investment income, an important component of topline, has been improving with the support of gradual increase in interest rates. The company expects a quarterly investment income run rate to remain in the range of $830-$840 million.

Chubb has remained focused on enhancing shareholders’ value via effective capital deployment. While its dividend more than doubled since 2010, the company has raised dividend for straight 24 quarters. Chubb intends to achieve a 30% dividend payout ratio of its operating earnings. With respect to share buybacks, Chubb has a $1 billion share repurchase program in place for 2017.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc. AFH, Markel Corp. MKL and Mercury General Corp. MCY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive surprises in two of the last four quarters with an average beat of 57.94%

Markel markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises in two of the last four quarters with an average beat of 21.06%.

Mercury General engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the trailing four quarters with an average beat of 1.06%.

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D/B/A Chubb Limited New (CB) : Free Stock Analysis Report
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