Chubb Looks Good on High Premiums, Strong Capital Position
We issued an updated research report on The Chubb CorporationCB on Sep 25, 2015.
In Jul 2015, Chubb entered into an agreement with ACE Limited ACE , pursuant to which the company is slated to be acquired by the latter in a cash-stock consideration. The combination of the two companies, with complementary products and services, will position the new entity as a leader in P&C space in terms of P&C underwriting income. The new company will also be the second-largest U.S. public P&C insurer in terms of market capitalization, the second-largest in U.S. commercial lines with regard to direct written premiums, and the second-largest public global multi line insurance company by book value and operating income.
In terms of segmental performance, Chubb's Commercial Insurance and Personal Insurance segments are showing impressive results. The Commercial Insurance segment has been persistently reporting favorable earnings results. The segment has also been consistently witnessing an increase in average renewal rates over the past 16 quarters with retention ratio at a stable level. Coming to Personal Insurance segment, Chubb's increase in net premiums written over the past several quarters is noteworthy. Gradual market improvement and strong premium increases from international business are responsible in this regard.
Chubb also boasts a solid balance sheet, which is reflected by its robust risk adjusted capitalization, adequate reserves, modest financial leverage, conservative investment portfolio and sufficient liquidity.
However, a weak investment performance leading to lower yields raise caution. Also, exposure to catastrophe losses and low interest rates are some headwinds. Moreover, being a geographically diverse company, Chubb is vulnerable to foreign exchange fluctuations.
In Jul 2015, the company reported second quarter earnings that surpassed the Zacks Consensus Estimate. Earnings also improved year over year on higher premiums written in its Personal and Commercial lines of business, as well as lower share count.
Chubb presently carries a Zacks Rank #2 (Buy). Some other stocks from the property and casualty insurance space that warrant a look are The Travelers Companies, Inc. TRV and Hallmark Financial Services, Inc. HALL . Both stocks sport a Zacks Rank #1 (Strong Buy).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.