We are reiterating our 'Neutral' recommendation on
), following its second quarter earnings release. The company
significantly outperformed the Zacks Consensus Estimate during the
quarter, but the ongoing soft property and casualty market, along
with the competitive market pressures, keep us on the
Though Chubb faced a sluggish top-line growth in the past
several years, it has recently witnessed a slowly improving market.
Its CCI segment has been reporting a reversal of trend or
stabilization after declining continuously since the fourth quarter
of 2008. The segment has also been witnessing
low-single-digits increases in average renewal rates since the
second quarter of 2011.
Chubb's Personal Insurance segment is also enjoying a gradual
market improvement. In the second quarter, the segment recorded a
4% increase in net premium written. This represented the eleventh
consecutive quarter of growth, primarily led by strong premium
increases from the international business.
Chubb also has significant international operations, as
approximately 27% of its revenues in 2011 were generated from
operations outside the U.S. The company's international business
benefits from better pricing conditions compared to its domestic
operations. We believe that Chubb's strategy to expand
internationally will position it comfortably for long-term
However, Chubb's Specialty insurance business has been suffering
from rate reductions over the past several years. The company's
surety, professional liability and personal lines of businesses are
also expected to experience some pressure.
Chubb has been reporting favorable loss reserves since 2004,
which have formed a significant component of earnings. However
going forward, the pace of reserve release is expected to decline,
eroding the benefit it added to earnings.
Nevertheless, Chubb remains well capitalized at the insurance
company level in reference to the minimum risk-based capital
requirement. Its debt-to-total capitalization ratio also stands low
at 20.1%. Moreover, Chubb is known as a dividend aristocrat because
of its policy to continuously increase dividend payments.
Based in Warren, New Jersey, Chubb closely competes with the
The Travelers Companies Inc.
W.R. Berkley Corp.
). The stock currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating.
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
BERKLEY (WR) CP (WRB): Free Stock Analysis
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