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The Zacks Analyst Blog Highlights: Chubb, Travelers Companies, Allstate, United Technologies and Boeing

Zacks Equity Research

For Immediate Release

Chicago, IL – December 13, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Chubb Corp. (CB), The Travelers Companies Inc. (TRV), The Allstate Corp. (ALL), United Technologies Corporation (UTX) and Boeing (BA).

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Here are highlights from Wednesday’s Analyst Blog:

Sandy to Mar Chubb's 4Q Earnings

The U.S. property and casualty insurer Chubb Corp. (CB) fears that Hurricane Sandy will damage its fourth quarter earnings by approximately $880 million before tax or $570 million after tax ($2.14 per share after tax). New York and New Jersey – the areas most affected by Sandy – are two of the five states where the company has largest exposure.

These loss estimates are net of reinsurance. Chubb’s significant reinsurance protection has reduced the net loss position. Under its reinsurance programs Chubb retains losses up to $500 million. Its North American catastrophe treaty, supplemental catastrophe reinsurance, and catastrophe bond provide coverage for roughly 65% of losses between $500 million and $1.65 billion for each occurrence.

Prior to reaching the rough estimates for the cat loss, Chubb had ceased its share repurchase program to pay for claims. Since the company has a fair idea of the amount of loss it will incur from Sandy it has resumed the share buyback program. Chubb will be unable to complete the targeted buyback of $1.2 billion worth of shares by January 2013, as earlier scheduled.

Despite being subjected to cat loss volatility, Chubb remains one of our favored stocks in the property and casualty insurance coverage. Its strong balance sheet, potential for solid book value growth, and better-than-average underwriting performance has shielded its earnings.

Sandy, one of the top-10 most expensive U.S. hurricanes for insurers, has also hit The Travelers Companies Inc. (TRV), having a significant homeowners and commercial property exposures throughout the East Coast. Furthermore, The Allstate Corp. (ALL), the second largest homeowners’ insurance underwriter, has substantial exposure to Sandy. 

Despite causing huge insured losses, Superstorm Sandy will not be able to change the industry pricing trend. Losses caused by it are not large enough to reduce the huge surplus capital base of the industry. Although the event will increase insurance pricing for the affected lines in the impacted areas, a broad-based hardening of rates is nowhere to be seen.

Additional details on the impacts of losses due to Sandy and consequent update on share repurchase will be provided by the company during its fourth quarter earnings release. Till then, we maintain our long-term Neutral recommendation on the shares. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

UTX Arm Services Navy Contract

UTC Aerospace Systems, a unit of United Technologies Corporation (UTX), obtained an aftermarket contract worth $70 million from the U.S. Navy. The contract involves Constant Frequency Generator (:CFG) repairs and retrofits and delivery of upgraded spares for the U.S. Navy’s V-22 program.

The V-22’s design incorporates mature technology deployed in XV-15 tiltrotor demonstrators, V-22 Full Scale Development (FSD) models and V-22 Engineering and Manufacturing Development (EMD) models. V 22 is primarily an American multi-mission, tiltrotor aircraft with both a vertical takeoff and landing (:VTOL) and short takeoff and landing (:STOL) capability. It is specially designed to combine the functionality of a conventional helicopter with the long-range, high-speed cruise performance of a turboprop aircraft.

United Technologies is the exclusive provider of CFG application for the V-22 program. This upgrade program is a result of the long-standing collaboration between NAVAIR, Boeing (BA), Bell, NAVSUP Weapon Systems Support and UTC Aerospace Systems. The upgrade program is expected to enhance the product and deliver a higher ROI for the Naval Supply Systems Command (:NAVSUP).

The V-22 CFG is a combination of three products, namely, Constant Speed Drive, Generator and Generator Control Unit. V-22 is currently used by both the U.S. Navy/Marine Corps team and the U.S. Air Force. This upgrade will further improve the reliability of CFG and also improve the overall operational readiness of the aircraft.

As per the initial contract signed by the two companies earlier in September 2011, UTC Aerospace Systems supplied kits to NAVSUP Weapon Systems Support Philadelphia for a period of 20 months in support of the V-22 CFG Loss of Lube retrofit.

UTC Aerospace Systems is one of the world’s largest suppliers of technologically advanced aerospace and defense products. They design, manufacture and service systems and components. Additionally, they also provide integrated solutions for commercial, regional, business and military aircraft, helicopters and other platforms.

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