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Will Chubb (CB) Q2 Earnings Suffer Due to Catastrophe Loss?
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Chubb Limited (CB - Free Report) is set to report second-quarter 2016 results on Jul 27, after market close. Last quarter, the company posted a positive earnings surprise of 3.20%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Underwriting results of Chubb suffered in the second quarter due to its exposure to various events including U.S. weather events, the Japanese and Ecuadorian earthquakes, the Fort McMurray wildfires and the European floods. Catastrophe loss is estimated at $315 million ($390 million pretax), higher than $280 million, pretax, expected earlier. The cat loss incurred will weigh on underwriting profitability and combined ratio.
However, this quarter marks the first full quarter post ACE Limited-Chubb Corp merger. The company expects an increase in net written premium. Strong organic and inorganic growth profiles lead to an upside. Strategic acquisitions too should have supported the improvement. Renewal retention rates are likely to improve. Management also expects second-quarter investment income between $820 million and $840 million.
With respect to the surprise trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 2.87%.
Our proven model does not conclusively show that Chubb is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Chubb has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.26.
Zacks Rank: Chubb carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 3.
Cigna Corp. (CI - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 4.
Manulife Financial Corporation (MFC - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 4.
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Will Chubb (CB) Q2 Earnings Suffer Due to Catastrophe Loss?
Chubb Limited (CB - Free Report) is set to report second-quarter 2016 results on Jul 27, after market close. Last quarter, the company posted a positive earnings surprise of 3.20%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Underwriting results of Chubb suffered in the second quarter due to its exposure to various events including U.S. weather events, the Japanese and Ecuadorian earthquakes, the Fort McMurray wildfires and the European floods. Catastrophe loss is estimated at $315 million ($390 million pretax), higher than $280 million, pretax, expected earlier. The cat loss incurred will weigh on underwriting profitability and combined ratio.
However, this quarter marks the first full quarter post ACE Limited-Chubb Corp merger. The company expects an increase in net written premium. Strong organic and inorganic growth profiles lead to an upside. Strategic acquisitions too should have supported the improvement. Renewal retention rates are likely to improve. Management also expects second-quarter investment income between $820 million and $840 million.
With respect to the surprise trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 2.87%.
CHUBB LTD Price and EPS Surprise
CHUBB LTD Price and EPS Surprise | CHUBB LTD Quote
Earnings Whispers
Our proven model does not conclusively show that Chubb is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Chubb has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.26.
Zacks Rank: Chubb carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 3.
Cigna Corp. (CI - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 4.
Manulife Financial Corporation (MFC - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report second-quarter earnings results on Aug 4.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report