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Chubb (CB) Down 1.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Chubb (CB - Free Report) . Shares have lost about 1.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chubb due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Chubb's Q4 Earnings Miss Estimates on Higher Cat Loss

Chubb Limited reported fourth-quarter 2022 core operating income of $4.05 per share, which missed the Zacks Consensus Estimate by 4%. However, the bottom line improved 6.3% from the year-ago quarter.

Chubb's results reflected higher catastrophe losses, which were partially offset by higher net investment income and higher premiums in the company’s North America businesses.

Quarter in Detail

Net premiums written improved 11.9% year over year to $10.2 billion in the quarter. The figure was higher than our estimate of $10 billion. Net premiums earned rose 13.2% to $10.6 billion. The figure was higher than our estimate of $9.7 billion. Net investment income was $1 billion, increased 25%. The figure was higher than our estimate of $0.9 billion.

Property and casualty (P&C) underwriting income was $1.1 billion, down 11.4% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.2 billion, up 1.9%. Chubb incurred an after-tax catastrophe loss of $323 million in the fourth quarter, increased 31.8% year over year. The combined ratio deteriorated 250 basis points (bps) on a year-over-year basis to 88% in the quarter under review.

Segmental Update 

North America Commercial P&C Insurance: Net premiums written increased 8.9% year over year to $4.4 billion. The figure was lower than our estimate of $4.6 billion. The combined ratio deteriorated 750 bps to 84.3%.

North America Personal P&C Insurance: Net premiums written climbed 5.9% year over year to $1.3 billion. The figure matched our estimate. The combined ratio deteriorated 1700 bps to 89.3%.

North America Agricultural Insurance: Net premiums written climbed 37.9% from the year-ago quarter to $384 million. The figure was higher than our estimate of $353.7 million. The combined ratio deteriorated 2990 bps to 117.2%.

Overseas General Insurance: Net premiums written decreased 1.3% year over year to $2.6 billion. The figure was lower than our estimate of $2.8 billion. The combined ratio improved 140 bps to 79.6%.

Global Reinsurance: Net premiums written decreased 4.6% from the year-ago quarter to $163 million. The figure was lower than our estimate of $211.3 million. The combined ratio of 83.6% improved 4260 bps.

Life Insurance: Net premiums written surged 92% year over year to $1.2 billion. The figure was higher than our estimate of $0.6 billion.

Financial Update

The cash balance of $2 billion, as of Dec 31, 2022, increased 21.3% from the 2021-end level. Total shareholders’ equity decreased 15.4% from the level at 2021 end to $50.5 billion as of Dec 31, 2022. Book value per share, as of Dec 31, 2022, was $121.90, down 12.9% from the figure as of Dec 31, 2021.

Core operating return on equity expanded 30 bps year over year to 11.9%. Operating cash flow was $2.65 billion in the quarter under consideration.

Share Repurchase Update

In the quarter, CB bought back shares worth $199 million.

Full-Year Update

Core operating income for the year came in at $15.24 per share, up 21.3% year over year. P&C net premiums written were $38.1 billion, up 7.7% year over year. The combined ratio improved 150 bps on a year-over-year basis to 87.6% in 2022.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Chubb has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Chubb has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Chubb is part of the Zacks Insurance - Property and Casualty industry. Over the past month, RLI Corp. (RLI - Free Report) , a stock from the same industry, has gained 4.2%. The company reported its results for the quarter ended December 2022 more than a month ago.

RLI Corp. reported revenues of $329.46 million in the last reported quarter, representing a year-over-year change of +19.4%. EPS of $1.53 for the same period compares with $1.26 a year ago.

For the current quarter, RLI Corp. is expected to post earnings of $1.21 per share, indicating a change of -15.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for RLI Corp. Also, the stock has a VGM Score of D.


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