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Chubb (CB) Down 1.5% 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 1.5% in that time frame, underperforming 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 drivers.

Chubb Q1 Earnings Beat Estimates, Premiums up Y/Y

Chubb Limited reported first-quarter 2020 core operating income of $2.68 per share, which outpaced the Zacks Consensus Estimate by 2.6%. The bottom line also improved 5.5% from the prior-year quarter. This upside can primarily be attributed to high premium revenues and strong net investment income.

Quarter in Detail

Net premiums written improved 9.1% year over year to nearly $8 billion in the quarter. Net premiums earned rose 9.2% to $7.8 billion.

Net investment income was $861 million, up 3% year over year.

Property and casualty (P&C) underwriting income was $778 million, up 9.3% from the year-ago quarter. Global P&C underwriting income excluding Agriculture was $764 million, up 19.5% year over year.

Chubb incurred after-tax catastrophe loss of $199 million in the first quarter, down 1% year over year.

Segmental Update  

North America Commercial P&C Insurance: Net premiums written increased 10.2% year over year to $3.3 billion. Combined ratio deteriorated 20 bps to 86.8%.

North America Personal P&C Insurance: Net premiums written climbed 4.8% year over year to $1.1 billion. Combined ratio improved 850 bps to 83%.

North America Agricultural Insurance: Net premiums written improved 21.2% from the year-ago quarter to $157 million. Combined ratio came in at 84.8%.

Overseas General Insurance: Net premiums written rose 8.5% year over year to $2.6 billion. Combined ratio deteriorated 120 bps to 93.5%.

Global Reinsurance: Net premiums written advanced 8.4% from the year-ago quarter to $218 million. Combined ratio improved 70 bps to 76.1%.

Life Insurance: Net premiums written were up 11.4% year over year to $645 million on the back of growth in the Asian international life operations.

Financial Update

Cash balance of $1.5 billion as of Mar 31, 2020 declined 1.6% from the 2019-end level.

Total shareholders’ equity plunged 5.7% from the level at 2019 end to $52.2 billion as of Mar 31, 2020.

Book value per share as of Mar 31, 2020 was down 5.5% from the figure as of Dec 31, 2019.

Core operating ROE was 9.4%.

Operating cash flow was $1.7 billion.

Share Repurchase Update

In the quarter, the company bought back shares worth $326 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -20.51% due to these changes.

VGM Scores

At this time, Chubb has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Chubb has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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