We are reiterating our Outperform recommendation on the shares of The Chubb Corp.
(CB - Analyst Report
), following the solid second quarter earnings results, which included a 28% positive earnings surprise. Over the past four quarters, this property and casualty insurer delivered positive surprise with an average beat of 54%. Chubb carries a Zacks Rank #2 (Buy).
Why a Reiteration?
On Jul 25, Chubb reported second-quarter operating earnings of $1.77 per share, significantly ahead of the Zacks Consensus Estimate of $1.38 per share. Earnings also increased 29% year over year. The earnings increase came on the back of higher premium which was up across all the business segments.
Chubb has been witnessing rising earnings estimates. Over the last 30 days, the Zacks Consensus Estimate for 2013 moved up by 7.7% to $7.42 as all the estimates moved north. The same for 2014 rose 3.7% to $7.26 as 12 of 16 estimates were raised over the same time frame. The expected long term earnings growth is 10.5%.
Chubb is continuously witnessing improving business conditions in Commercial and Personal lines insurance business. It is experiencing a favorable rate increase along with a stable retention rate.
Chubb’s international business is also performing strongly and is an arsenal to its future growth.
Strong capital management witnessed by regular share repurchases and a continuous dividend increase for the past several years makes the stock a favorite among investors.
However, exposure to cat losses and low interest rate environment are some of the headwinds.
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