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Here's Why You Should Retain Chubb (CB) Stock Right Now
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Shares of Chubb Limited (CB - Free Report) gained 2.55% since the release of first-quarter 2017 results, outperforming the Zacks categorized Property and Casualty Insurance industry’s decline of 0.79%. Also, the company witnessed 2017 estimates moving north by nearly 0.7% and 2018 estimates increasing by a cent over the last 30 days. We expect the stock to retain the 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 such buyouts.
Furthermore, these 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 in turn, may lower its catastrophe exposure. This is being considered the primary reason for the revised guidance.
In addition, the company has invested in various strategic initiatives, to 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.
Moreover, the company has been experiencing higher net investment income since the last year and the first quarter was also no exception. Further, following the Federal Reserve’s announcement of an interest rate hike of 0.25% in Dec 2016 and another 1% in Mar 2016 (reflecting the Fed’s confidence in the improving U.S. economy) the P&C insurer anticipates better investment results in the near term. The quarterly investment income run rate is anticipated to remain in the range of $830–$840 million.
This apart, the Zacks Rank #3 (Hold) P&C insurer has been maintaining a robust capital and liquidity position, which allows it to engage in shareholder-friendly moves. Notably, the company has returned $460 million to investors in the first quarter through dividends and share buybacks.
However, the P&C insurer’s exposure to cat losses and escalating expenses raise concerns.
Nonetheless, Chubb’s stock seems to be undervalued. This is because the stock is trading at 1.34x price to book multiple over a period of one year, which compares favorably with the P&C industry’s multiple of 1.40x.
Further, Chubb has a trailing 12-month return on equity (ROE) of 10.1%, which is higher than the industry average of 6.5%.
CNA Financial offers commercial P&C insurance products primarily in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 12.45%.
First American provides financial services. The company delivered positive surprises in all of the last four quarters with an average beat of 14.12%.
ProAssurance Corporation offers P&C insurance, and reinsurance products in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 16.59%.
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Here's Why You Should Retain Chubb (CB) Stock Right Now
Shares of Chubb Limited (CB - Free Report) gained 2.55% since the release of first-quarter 2017 results, outperforming the Zacks categorized Property and Casualty Insurance industry’s decline of 0.79%. Also, the company witnessed 2017 estimates moving north by nearly 0.7% and 2018 estimates increasing by a cent over the last 30 days. We expect the stock to retain the 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 such buyouts.
Furthermore, these 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 in turn, may lower its catastrophe exposure. This is being considered the primary reason for the revised guidance.
In addition, the company has invested in various strategic initiatives, to 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.
Moreover, the company has been experiencing higher net investment income since the last year and the first quarter was also no exception. Further, following the Federal Reserve’s announcement of an interest rate hike of 0.25% in Dec 2016 and another 1% in Mar 2016 (reflecting the Fed’s confidence in the improving U.S. economy) the P&C insurer anticipates better investment results in the near term. The quarterly investment income run rate is anticipated to remain in the range of $830–$840 million.
This apart, the Zacks Rank #3 (Hold) P&C insurer has been maintaining a robust capital and liquidity position, which allows it to engage in shareholder-friendly moves. Notably, the company has returned $460 million to investors in the first quarter through dividends and share buybacks.
However, the P&C insurer’s exposure to cat losses and escalating expenses raise concerns.
Nonetheless, Chubb’s stock seems to be undervalued. This is because the stock is trading at 1.34x price to book multiple over a period of one year, which compares favorably with the P&C industry’s multiple of 1.40x.
Further, Chubb has a trailing 12-month return on equity (ROE) of 10.1%, which is higher than the industry average of 6.5%.
Stocks to Consider
Some better-ranked stocks from the same space include CNA Financial Corporation (CNA - Free Report) , First American Financial Corporation (FAF - Free Report) and ProAssurance Corporation (PRA - Free Report) . Each of these stocks holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CNA Financial offers commercial P&C insurance products primarily in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 12.45%.
First American provides financial services. The company delivered positive surprises in all of the last four quarters with an average beat of 14.12%.
ProAssurance Corporation offers P&C insurance, and reinsurance products in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 16.59%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>