Property and casualty insurer,
) expects a loss in the range of $200 million to $240 million on
account of catastrophes during the second quarter. On a per-share
basis, the loss will come in the range of 48 cents to 57 cents
Severe hail and wind storms from 13 catastrophic events in the
United States during the quarter are expected to result in the cat
In the corresponding prior-year period, Chubb incurred $329
million of pre-tax or 72 cents per share in cat losses, primarily
stemming from the winter storms in the U.S. Despite a record number
of catastrophic events in the second quarter of 2011 in the U.S.,
Chubb continued to post excellent underwriting results, generating
a combined ratio of 94.9%.
Compared with 2011, 2012 has been benign in terms of
catastrophes, year to date. The year 2011 saw record cat losses and
the property and casualty industry incurred approximately $20
billion of cat losses. Hurricane Irene, widespread tornadoes,
wildfires in Texas and an autumn snowstorm in the Northeast all
added up to it. Despite $1 billion of catastrophic losses, Chubb
earned $1.7 billion in net income in 2011.
Chubb has a business mix, which continues to perform
exceptionally well, protecting it from external factors like bad
weather that pushed many of its peers into losses. We respect the
company for its ability to maintain shareholders' return by
deploying excess capital for stock buybacks and dividend payments
in a weak market environment over the past several years.
Given a superior franchise, the company is adequately poised to
benefit from the expected turn in the insurance pricing cycle. The
company has already started to witness growth in its Commercial and
Personal lines. Its International business is on a growth track and
we expect the segment to fuel long-term earnings growth.
We will get further insight into the company's catastrophic
losses during the second quarter earnings release, scheduled after
the market closes on July, 26. The Zacks Consensus Estimate for
second quarter earnings is pegged at $1.41 per share, reflecting a
year-over-year growth of 11.2%.
Chubb currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on its shares. Its competitors
W.R. Berkley Corp.
Travelers Companies, Inc.
), all carry a Zacks #3 Rank and a long-term Neutral rating.
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