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Chubb's Prospects Look Good: Should You Hold the Stock?
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Shares of Chubb Limited (CB - Free Report) gained 5.26% since Jan 31, when the property and casualty (P&C) insurer reported better-than-expected earnings for fourth-quarter 2016. It outperformed the Zacks categorized Property and Casualty industry’s growth of 4.08%. We expect the stock to retain its momentum on the back of a number of positives.
The P&C insurer regularly undertakes strategic acquisitions for inorganic growth and global expansion. Chubb has diversified its international and domestic footprint alongside developing a superior portfolio of products and services through prudent buyouts.
Furthermore, such deals have improved premium writings and enabled the company to deliver better overall results. However, Chubb has lowered its 2017 guidance for net premiums written in a few portfolios. The company believes that it might not be able to generate sufficient underwriting returns, which might lower the company’s catastrophe-related exposure. This is being considered to be the primary reason behind the revised guidance.
In addition, the company has invested in various strategic initiatives. These, in turn, will pave the way for long-term growth. Thus, Chubb stands a good chance of gaining leadership in the P&C space on the back of complementary products and services. Also, the company remains focused on cyber insurance, which currently has immense room for growth.
A strong capital position helps the Zacks Rank #3 (Hold) P&C insurer to engage in shareholder-friendly moves. Recently the insurer announced its intention to propose for a 2.9% dividend hike. If approved, this would be the company’s 24th straight dividend increase. Notably, Chubb has more than doubled its quarterly dividend since 2010 and aims dividend payout ratio of 30% of its operating earnings. Also, on Nov 17, 2016, the company’s board of directors approved a $1 billion share buyback program. All these together make the stock an attractive pick.
However, the P&C insurer’s exposure to cat losses and escalating expenses remain concerns.
Nonetheless, valuation at the current level is attractive as the stock is trading at a forward P/E ratio of 13.4, a whopping 49.6% discount to the industry average of 26.6. Further, Chubb has a trailing 12-month return on equity (ROE) of 9.9%, which is higher than the industry average of 6.9%.
American Financial offers P&C insurance products in the U.S. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Everest Re offers reinsurance and insurance products. The company delivered positive surprises in three of the last four quarters with an average beat of 43.49%.
Selective Insurance provides insurance products and services in the U.S. The company delivered a positive surprise in one of the last four quarters, but with an average negative surprise of 4.53%.
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Chubb's Prospects Look Good: Should You Hold the Stock?
Shares of Chubb Limited (CB - Free Report) gained 5.26% since Jan 31, when the property and casualty (P&C) insurer reported better-than-expected earnings for fourth-quarter 2016. It outperformed the Zacks categorized Property and Casualty industry’s growth of 4.08%. We expect the stock to retain its momentum on the back of a number of positives.
The P&C insurer regularly undertakes strategic acquisitions for inorganic growth and global expansion. Chubb has diversified its international and domestic footprint alongside developing a superior portfolio of products and services through prudent buyouts.
Furthermore, such deals have improved premium writings and enabled the company to deliver better overall results. However, Chubb has lowered its 2017 guidance for net premiums written in a few portfolios. The company believes that it might not be able to generate sufficient underwriting returns, which might lower the company’s catastrophe-related exposure. This is being considered to be the primary reason behind the revised guidance.
In addition, the company has invested in various strategic initiatives. These, in turn, will pave the way for long-term growth. Thus, Chubb stands a good chance of gaining leadership in the P&C space on the back of complementary products and services. Also, the company remains focused on cyber insurance, which currently has immense room for growth.
A strong capital position helps the Zacks Rank #3 (Hold) P&C insurer to engage in shareholder-friendly moves. Recently the insurer announced its intention to propose for a 2.9% dividend hike. If approved, this would be the company’s 24th straight dividend increase. Notably, Chubb has more than doubled its quarterly dividend since 2010 and aims dividend payout ratio of 30% of its operating earnings. Also, on Nov 17, 2016, the company’s board of directors approved a $1 billion share buyback program. All these together make the stock an attractive pick.
However, the P&C insurer’s exposure to cat losses and escalating expenses remain concerns.
Nonetheless, valuation at the current level is attractive as the stock is trading at a forward P/E ratio of 13.4, a whopping 49.6% discount to the industry average of 26.6. Further, Chubb has a trailing 12-month return on equity (ROE) of 9.9%, which is higher than the industry average of 6.9%.
Stocks to Consider
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Everest Re Group, Ltd. and Selective Insurance Group, Inc. (SIGI - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers P&C insurance products in the U.S. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Everest Re offers reinsurance and insurance products. The company delivered positive surprises in three of the last four quarters with an average beat of 43.49%.
Selective Insurance provides insurance products and services in the U.S. The company delivered a positive surprise in one of the last four quarters, but with an average negative surprise of 4.53%.
A Full-Blown Technological Breakthrough in the Making
Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>