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Chubb Limited (CB) Banks on Solid Premiums, Cost Woes Stay

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Chubb Limited (CB - Free Report) has been showing a consistent operating performance over the past many quarters on the back of its commercial businesses, strong renewal retentions and improved underwriting returns.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $11.41 and $12.60, indicating year-over-year increase of 56% and 10.3%, respectively.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 3.2% and 1.4% north, respectively in the past 30 days. This should instill investors' confidence in the stock.

Earnings Surprise History

Chubb has a decent earnings surprise history. It beat estimates in three of the last four quarters and missed in one, with the average being 5.35%.

Zacks Rank & Price Performance

Chubb currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 38.9% compared with the industry’s increase of 42.1%.

Style Score

The company has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Being the world’s largest publicly traded property and casualty (P&C) insurer, Chubb continues to witness a robust premium revenue growth globally. We expect the momentum to continue driven by its commercial businesses, double-digit commercial P&C rate increases and expanding underwriting margins, new business and strong renewal retentions.

Chubb expects to witness solid commercial P&C pricing environment and capitalize on favorable underwriting conditions in the long run.

Adjusted pre-tax investment income will continue to gain from increased corporate bond call activities. Quarterly run rate is expected to be nearly $900 million.

Though the P&C insurer witnessed an active quarter for natural catastrophes due to winter storm losses, it remains focused on delivering a good combined ratio on the back of improved risk adjusted underwriting returns.

This insurer is highly rated by the rating agencies for financial strength. Its capital position was $74 billion at first-quarter end. In the first quarter of 2021, operating cash flow remained strong at $2.1 billion. In its effort to manage risk on both sides of its balance sheet it maintains underwriting discipline, manage exposure accumulations and invests assets conservatively.

In May 2021, its board of directors hiked its quarterly cash dividend by 2.6%, reflecting the 28th consecutive year of dividend increase at Chubb. Its current dividend yield of 1.8% is higher than the industry average of 0.3%.

However, expenses escalated over the last several years due to higher loss expenses, administrative expenses and policy benefits. A persistent elevation of expenses might weigh on its margins.

Stocks to Consider

Some better-ranked insurance stocks from the same space are HCI Group, Inc. (HCI - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and Alleghany Corporation . While HCI Group sports a Zacks Rank #1 (Strong Buy), Cincinnati Financial and Alleghany carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of HCI Group surpassed estimates in three of the last four quarters and missed in the other one, the average being 42.91%.

Cincinnati Financial surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 17.63%.

Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.

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