Estimates for Chubb Limited (CB - Free Report) have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 1.7% and 0.8% to $10.42 and $11.21, respectively.
Chubb is one of the world’s largest providers of property and casualty insurance and reinsurance, providing specialized insurance products such as personal accident, supplemental health and life insurance. Shares of this Zacks Rank #3 (Hold) property and casualty insurer have lost 6.8% in a year against the industry’s 12.5% rally.
Let’s focus on the factors that make Chubb a stock to hold on to for greater returns.
Growth Initiatives: Chubb has been identifying and investing in various strategic initiatives that paved the way for its long-term growth. Chubb has grown to become a leader in cyber risk assessment and underwriting. To capitalize on cyber insurance, which currently has immense room for growth, the company introduced Chubb Cyber Index, an enhanced interactive platform. The company has been consolidating its Asian presence as well as shored up Australian base.
Improving Top Line: The top line at Chubb soared by nearly 80% over the last five years, driven by increased net premium earned and higher investment income. A compelling product portfolio, heightened scale, efficiencies plus strategic initiatives undertaken in the United States, Latin America and Asia should continue to drive premiums and in turn, revenues for the company.
Increasing Investment Income: Investment income has been improving over the last couple of years, courtesy of a rising interest rate environment. With the Fed’s intention of two more rate raises in 2018 and some more in the near future on the back of a strengthening economy, the company expects its quarterly investment income run rate in the $885-$885 million range. This in turn should aid its top-line growth.
Effective Capital Management: Chubb boasts a healthy balance sheet with solid cash position and an improving debt-to-capital ratio. A low reliance on debt provides adequate financial flexibility to the company. This in turn bolstered the company to double its quarterly dividend since 2010. The latest increase marks the 25th straight year of payout hikes. The company’s dividend yield of 2.2% betters the industry average of 0.6%, making the stock an attractive pick for yield-seeking investors.
Chubb also has a $1-billion worth share buyback program under its authorization.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $10.42, representing a year-over-year increase of 29.76%. For 2019, the consensus mark for the bottom line stands at $11.21, up 7.65% year over year.
Chubb has an expected long-term earnings per share growth rate of 10%.
Positive Earnings Surprise History: The company flaunts a stellar earnings surprise history, exceeding the Zacks Consensus Estimate over the last several quarters. This outperformance in turn underscores the company’s operational excellence. The average four-quarter positive earnings surprise is 23.02%.
Underpriced: Shares of the company are trading lower than the industry average. Considering the company’s price-to-book ratio, the trailing 12-month P/B ratio of 1.21 falls below the industry average of 1.42.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Alleghany Corporation (Y - Free Report) , Markel Corporation (MKL - Free Report) and RLI Corp. (RLI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It pulled off an average four-quarter positive surprise of 17.61%.
Markel markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada and globally. The company came up with positive surprises in the last four quarters, the average beat being 15.54%.
RLI Corp. underwrites property and casualty insurance in the United States and internationally. The company delivered an average four-quarter positive earnings surprise of 33.65%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>