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Chubb (CB) Gains 9% in a Year: More Room for Upside Left?
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Shares of Chubb Limited (CB - Free Report) have gained 9.1% in a year against the industry’s decrease of 5.6%. The Finance sector and the Zacks S&P 500 composite declined 10.4% and 12.4%, respectively, in the same time frame. With a market capitalization of $80.2 billion, the average volume of shares traded in the last three months was about 1.6 million.
Image Source: Zacks Investment Research
A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and solid capital position continue to drive this Zacks Rank #2 (Buy) insurer.
Being one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance, and the largest publicly traded P&C insurer based on market capitalization, Chubb has a decent history of delivering positive surprises in the last six reported quarters. The Zacks Consensus Estimate for 2022 and 2023 moved 6.1% and 3.4% north, respectively in the past 60 days, reflecting analyst optimism.
CB has a VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.
Can CB Retain the Momentum?
The Zacks Consensus Estimate for Chubb’s 2022 earnings is pegged at $15.75, indicating an increase of 25.4% on 3.8% higher revenues of $43.5 billion. The consensus estimate for 2023 earnings is pegged at $17.13, indicating an increase of 8.8% on 9.3% higher revenues of $9.3 billion.
The long-term earnings growth rate is currently pegged at 10%.
Premiums should continue benefiting from strong commercial businesses, commercial P&C rate increases, improving underwriting margins, new business and strong renewal retention. Increased focus on capitalizing on the potential of middle-market businesses, both domestic and international, along with the traditional core package as well as specialty products, bodes well for Chubb’s growth.
Chubb expects continued growth and margin improvement in 2022 as it capitalizes on favorable underwriting conditions for commercial P&C businesses globally.
Chubb intends to expand its presence in the Asia-Pacific region. The pending acquisition of the life and non-life insurance companies of Cigna Corporation in seven Asia-Pacific markets testifies this strategic effort. The addition of Cigna’s business will boost Chubb’s A&H business as well as expand its Asia-based life insurance presence. Upon closing, Chubb’s Asia-Pacific portfolio will increase to $7 billion in premiums from $4 billion at present. Chubb expects to realize in excess of $80 million of expense savings with one-time integration costs of about $100 million.
Also, the insurer agreed to purchase an additional ownership interest in Huatai Group in China.
With an improving rate environment, a solid investment portfolio and positive operating cash flow, investment income should rise. Chubb estimates investment income in the range of $980 million to $1 billion in the third quarter of 2022.
Chubb has a strong capital position with sufficient cash generation capabilities. This has helped the insurer increase dividends for the last 29 years. The dividend yield is 1.6%, better than the industry average of 0.3%. CB has $2.2 billion remaining under its share buyback authorization.
CB has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 14.4% and 5.9% year-over-year growth, respectively. The average four-quarter surprise is 17.55%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 7.6% and 8.8% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 6.7%.
American Financial’s earnings surpassed estimates in the last four quarters, the average earnings surprise being 37.09%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 1% north each in the past 30 days. Year to date, shares of AFG have lost 5.2%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings implies 29.6% and 18.1% year-over-year growth, respectively. The average four-quarter surprise is 33.64%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 9.2% and 7.2% north in the past 60 days, respectively. Year to date, shares of ACGL have increased 6.8%.
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Chubb (CB) Gains 9% in a Year: More Room for Upside Left?
Shares of Chubb Limited (CB - Free Report) have gained 9.1% in a year against the industry’s decrease of 5.6%. The Finance sector and the Zacks S&P 500 composite declined 10.4% and 12.4%, respectively, in the same time frame. With a market capitalization of $80.2 billion, the average volume of shares traded in the last three months was about 1.6 million.
Image Source: Zacks Investment Research
A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and solid capital position continue to drive this Zacks Rank #2 (Buy) insurer.
Being one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance, and the largest publicly traded P&C insurer based on market capitalization, Chubb has a decent history of delivering positive surprises in the last six reported quarters. The Zacks Consensus Estimate for 2022 and 2023 moved 6.1% and 3.4% north, respectively in the past 60 days, reflecting analyst optimism.
CB has a VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.
Can CB Retain the Momentum?
The Zacks Consensus Estimate for Chubb’s 2022 earnings is pegged at $15.75, indicating an increase of 25.4% on 3.8% higher revenues of $43.5 billion. The consensus estimate for 2023 earnings is pegged at $17.13, indicating an increase of 8.8% on 9.3% higher revenues of $9.3 billion.
The long-term earnings growth rate is currently pegged at 10%.
Premiums should continue benefiting from strong commercial businesses, commercial P&C rate increases, improving underwriting margins, new business and strong renewal retention. Increased focus on capitalizing on the potential of middle-market businesses, both domestic and international, along with the traditional core package as well as specialty products, bodes well for Chubb’s growth.
Chubb expects continued growth and margin improvement in 2022 as it capitalizes on favorable underwriting conditions for commercial P&C businesses globally.
Chubb intends to expand its presence in the Asia-Pacific region. The pending acquisition of the life and non-life insurance companies of Cigna Corporation in seven Asia-Pacific markets testifies this strategic effort. The addition of Cigna’s business will boost Chubb’s A&H business as well as expand its Asia-based life insurance presence. Upon closing, Chubb’s Asia-Pacific portfolio will increase to $7 billion in premiums from $4 billion at present. Chubb expects to realize in excess of $80 million of expense savings with one-time integration costs of about $100 million.
Also, the insurer agreed to purchase an additional ownership interest in Huatai Group in China.
With an improving rate environment, a solid investment portfolio and positive operating cash flow, investment income should rise. Chubb estimates investment income in the range of $980 million to $1 billion in the third quarter of 2022.
Chubb has a strong capital position with sufficient cash generation capabilities. This has helped the insurer increase dividends for the last 29 years. The dividend yield is 1.6%, better than the industry average of 0.3%. CB has $2.2 billion remaining under its share buyback authorization.
CB has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Berkshire Hathaway (BRK.B - Free Report) , American Financial Group (AFG - Free Report) and Arch Capital Group (ACGL - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 14.4% and 5.9% year-over-year growth, respectively. The average four-quarter surprise is 17.55%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 7.6% and 8.8% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 6.7%.
American Financial’s earnings surpassed estimates in the last four quarters, the average earnings surprise being 37.09%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 1% north each in the past 30 days. Year to date, shares of AFG have lost 5.2%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings implies 29.6% and 18.1% year-over-year growth, respectively. The average four-quarter surprise is 33.64%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 9.2% and 7.2% north in the past 60 days, respectively. Year to date, shares of ACGL have increased 6.8%.