Can Chubb (CB) Beat on Earnings with Underwriting Acumen? - Analyst Blog


We expect property and casualty insurer The Chubb Corporation ( CB ) to beat expectations when it reports second-quarter 2014 results on Jul 24.

Why a Likely Positive Surprise?

Our proven model shows that Chubb is likely to beat earnings this quarter because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.53%. This is a meaningful an leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: Chubb carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of Chubb's Zacks Rank #3 and +0.53% ESP makes us confident of a positive earnings beat on Jul 24.

What is Driving the Better-than-Expected Earnings?

A low-growth competitive pricing environment and the company's focus on protecting its underwriting profitability and returning capital to shareholders will be the key drivers of earnings in the to-be reported quarter.

The company writes premium through three segments - Commercial, Personal and Specialty Insurance. As far as premium growth is concerned, the Commercial segment is expected to give a weak performance, with higher contribution expected only from its workers' compensation line of business.  Personal insurance is expected to drive top-line growth as its rate environment was healthy. Premium growth in the Specialty Insurance segment which provides professional liability and surety insurance is expected to disappoint, as Chubb was conservative in writing new business in this space.

However, a benign catastrophe season will provide an extra cover to the company's earnings.

Chubb's earnings are also expected to benefit from its disciplined capital management strategy which includes share buyback and dividend payment. The positive trend is seen in the trailing four-quarter average earnings beat of 14.1%.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Everest Re Group Ltd. ( RE ), Earnings ESP of +6.01% and a Zacks Rank #2 (Buy).

Arch Capital Group Ltd. ( ACGL ), Earnings ESP of +5.10% and a Zacks Rank #2.

Allied World Assurance Company Holdings, AG ( AWH ), Earnings ESP of +3.8% and a Zacks Rank #3.

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CHUBB CORP (CB): Free Stock Analysis Report

EVEREST RE LTD (RE): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CB , RE , ACGL , AWH

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