Chubb (CB) Down 4.8% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Chubb (CB). Shares have lost about 4.8% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Chubb Q2 Earnings Surpass Estimates, Premiums Up Y/Y
Chubb reported second-quarter 2020 core operating loss of 56 cents per share, which is narrower than the Zacks Consensus Estimate of a loss of 66 cents per share. Notably, the company had reported core operating income of $2.60 per share in the prior-year quarter.
An after-tax charge related to the COVID-19 pandemic of $1.2 billion adversely impacted the quarterly results.
Quarter in Detail
Net premiums written inched up 0.1% year over year to nearly $8.4 billion in the quarter. Net premiums earned rose 3% year over year to $8.1 billion. The upside can primarily be attributed to rate increases in the company’s North America and international operations. However, growth in premiums has been partially offset by the pandemic, which impacted the company’s consumer business including accident and health, and travel and personal lines.
Net investment income was $827 million, down 3.7% year over year.
Property and casualty (P&C) reported underwriting loss of $929 million, against the year-ago underwriting income of $727 million. Global P&C underwriting loss excluding Agriculture was $960 million, which compares unfavorably with the year-ago underwriting income of $689 million.
Chubb incurred after-tax catastrophe loss of $1.5 billion in the second quarter, soaring 583.3% year over year.
North America Commercial P&C Insurance: Net premiums written increased 5.3% year over year to $3.7 billion. Combined ratio deteriorated 3080 basis points (bps) to 117.3%.
North America Personal P&C Insurance: Net premiums written climbed 1.4% year over year to $1.3 billion. Combined ratio improved 150 bps to 88.8%.
North America Agricultural Insurance: Net premiums written declined 1.1% from the year-ago quarter to $461 million. Combined ratio deteriorated 170 bps to 91.8%.
Overseas General Insurance: Net premiums written of $2.02 billion declined 10.5% year over year. The downside is primarily due to the negative impact of the pandemic on particular P&C personal lines coverages and A&H and travel insurance. Combined ratio deteriorated 1630 bps to 107.1%.
Global Reinsurance: Net premiums written advanced 4.6% from the year-ago quarter to $207 million, primarily due to positive rate increases and new business written. Combined ratio improved 1110 bps to 76.6%.
Life Insurance: Net premiums written were up 7% year over year to $619 million.
Cash balance of $1.6 billion as of Jun 30, 2020 inched up 1.3% from the 2019-end level.
Total shareholders’ equity decreased 1% from the level at 2019 end to $54.8 billion as of Jun 30, 2020.
As of Jun 30, 2020, book value per share of $121.32 was down 0.9% from the figure as of Dec 31, 2019.
Operating cash flow was nearly $2 billion.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
Currently, Chubb has a subpar Growth Score of D, a grade with the same score on the momentum front. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Chubb has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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