The board of directors of Chubb LimitedCB recently authorized a share buyback program for returning more value to investors. This latest authorization will allow the company to spend up to $1.5 billion for repurchasing its common stock. The new buyback program will be effective Dec 1, 2018 and expire on Dec 31, 2019.
The company's previously authorized share repurchase plan, approved on Dec 21, 2017, enabled it to buy back shares worth $1 billion. Of this, the company utilized $703 million to repurchase 5.2 million shares through Sep 30, 2018 and another 0.8 million shares for $94 million in October. The company currently has $203 million left under its earlier share buyback program.
The P&C insurer is committed to boosting shareholder value through such share repurchases and dividend hikes. A solid financial position over the years has enabled the company to take part in such endeavors, which in turn, raises optimism among investors as well.
At the end of the third quarter, the company had cash worth $1.1 billion, up 44.6% from the 2017-end level. Operating cash flow in the first nine months of 2018 was approximately $3.9 billion, which improved 14.2% from the figure recorded in the same period of 2017. Hence, we remain optimistic about Chubb's efforts in further improving its capital and liquidity position that will not only capacitate the company to return more value to investors but also accelerate its growth in the near term.
Moreover, the company is focused on deploying capital prudently, which in turn, will not only aid the insurer to enhance shareholder value but also invest in strategic initiatives.
Share repurchases benefit the company's earnings per share, book value and shareholder equity as shares outstanding trim down. Therefore, share buyback programs buoy hope among investors and increase their confidence in the stock.
Additionally, the insurer's board of directors approved a dividend of 73 cents per share, payable Jan 11, 2019 to shareholders of record at the close of business on Dec 21, 2018. The company's current dividend yield is 2.29%, noticeably better than the industry average of 1.40%.
Other insurers, who also aim for enhancing the shareholder value via share buybacks, dividend hikes and special payouts, recently engaged in such shareholder-friendly moves. In a bid to share more profits with stockholders, board members of RLI Corp. RLI and W.R. Berkley Corporation WRB approved special dividends of $1 per share and 50 cents, respectively.
Also, Everest Group, Ltd.'s RE board of directors has approved an 8% hike in its quarterly dividend. The company will now make a quarterly payout of $1.40 per share compared with $1.30 paid on Sep 19, 2018.
Zacks Rank and Share Price Movement
Currently, Chubb carries a Zacks Rank #3 (Hold). Shares of the company have underperformed the industry year to date. The stock has lost 11% against the industry's increase of 5.5%. We expect higher premiums, strategic initiatives, better investment results and a solid capital position to turn the stock around in the near term.
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