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Chubb (CB) to Report Q4 Earnings: What's in the Offing?

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Chubb Limited CB is scheduled to report fourth-quarter earnings on Feb 4, after market close. Earnings are expected to have improved while revenues are likely to have declined.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 2.27% due to increase in premiums, partly offset by catastrophes losses.

Factors at Play

We expect the results to reflect overall growth owing to improved pricing and underwriting environment where insurance rates and terms are likely to have firmed up in major areas of business. The company’s products, customer and distribution-related growth initiatives around the globe, particularly in the United States, Asia and Latin America, are likely to have aided premium growth. The Zacks Consensus Estimate for Net Premium Written stands at $7.9 billion, indicating an increase of 17% year over year.

Chubb’s net catastrophe loss estimates for the fourth quarter of 2019 stands at $430 million pre-tax, or $353 million after-tax. This is, however, lower than pre-tax and after-tax catastrophe losses of $585 million and $506 million, incurred in the year-ago quarter. The losses in the to-be-reported quarter are primarily attributable to severe weather-related events around the globe including tornadoes in Texas, wildfires in California, and Typhoon Hagibis in Japan, as well as civil unrest in Hong Kong and Chile.

In addition, for North America Agricultural Insurance, the company estimates for the fourth quarter an underwriting loss of $23 million pre-tax, or $18 million after-tax, primarily attributable to crop yield shortfalls resulting from poor growing conditions. For Agriculture, the combined ratios for the fourth quarter and full-year 2019 are expected to be 105.4% and 95.1%, respectively. Per the Zacks Consensus Estimate, the underwriting income for Agricultural Insurance stands at a loss of $23.18 million, compared with $161 million reported in the year-ago quarter.

Nevertheless, share repurchases made by the company in the quarter under review will likely aid the bottom line.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimates in the trailing four quarters, the positive surprise being 2.43%, on average. This is depicted in the chart below:

Chubb Limited Price and EPS Surprise

 

 

Here is what our quantitative model predicts:

Our proven model does not predict an earnings beat for Chubb this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Chubb is 0.00%.

Zacks Rank: Allstate currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +18.32% and a Zacks Rank of 2.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Lincoln National Corporation (LNC - Free Report) has an Earnings ESP of +0.54% and a Zacks Rank of 2.

MetLife, Inc. MET has an Earnings ESP of +0.57% and a Zacks Rank of 2.

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