On Apr 3, 2013, shares of
The Chubb Corporation
) reached a 52-week high of $88.70.
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At the end of February, the board of directors of Chubb approved
a 7.3% increase in quarterly dividend. With the increased
dividend of 44 cents, its dividend yield comes to 2.01%, better
than the sector average of 1.69%. The board also approved a new
$1.3 billion share repurchase program
Given a superior franchise and a significant presence in its
niche market, Chubb 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 segments. Its International business is growing rapidly and
we expect it to fuel the long-term earnings. The long-term
expected earnings growth rate for this stock is 9.3%.
Chubb reported positive earnings surprise for all 4 quarters in
2012, with an average beat of 49.4%. Further, our proven model
shows that this property and casualty insurer is likely to beat
earnings in the first quarter of 2013 because it has a right
combination of Positive Zacks ESP (Read:
Zacks Earnings ESP: A Better Method
) and Zacks Rank #2 (Buy). ESP or Earnings Surprise Prediction,
which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is 8.28%. Chubb is
scheduled to release its first-quarter results on Apr 25 after
the market closes. The Zacks Consensus Estimate for the first
quarter of 2013 is currently pegged at 77 cents.
However, the valuation of Chubb looks stretched. The shares are
trading at a premium to peer group average both on a forward
price-to-earnings basis, and on a price-to-book value basis.
Moreover, return on equity of 8.9% is lower than the peer group
average. The 1-year return from the stock is 26.5%, much above
S&P's return of 10.3%.
Chubb presently carries a Zacks Rank #2 (Buy). Property and
casualty insurers like
AXIS Capital Holdings Ltd
Montpelier Re Holdings Ltd
Arch Capital Group Ltd.
), among others, carry a Zacks Rank #1 (Strong Buy) and appear