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Chubb (CB) Stock Surges 49.1% in a Year: More Room to Run?
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Shares of Chubb Limited (CB - Free Report) have gained 49.1% in a year compared with the industry's increase of 28.9%. The Zacks S&P 500 composite has rallied 34.4% in the said time frame. With a market capitalization of $81 billion, average volume of shares traded in the last three months was 1.93 million.
The rally was largely driven by new business, positive rate increases, sufficient liquidity and prudent capital deployment.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $12.49 and $13.86, indicating year-over-year increase of nearly 70.8% and 11%, respectively.
It has a decent earnings surprise history. Its bottom line beat estimates in three of the last four quarters, the average being 7.14%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 moved up nearly 8.8% and 9.6%, respectively, in the past 30 days that reflects investors’ optimism.
The world’s largest publicly traded property and casualty (P&C) insurer has averaged double-digit commercial P&C growth over the past 10 quarters. We expect the premium revenue growth to continue driven by its commercial P&C businesses, new business, positive rate increases across most lines and regions as well as strong renewal retention.
By virtue of increased corporate bond call activity, higher private equity distributions and increased dividends on public equities, adjusted pre-tax net investment income will likely improve in the long term. Moreover, quarterly run rate is expected to be nearly $900 million.
The company’s underwriting results have outperformed the average of its peers over the last 10 years (2011-2020). Chubb delivered a good combined ratio in the reported quarter on the back of improved loss and loss expense ratio, primarily due to lower catastrophe losses.
It boasts a solid financial position with more than $75 billion in capital and a AA-rated portfolio of cash and invested assets that exceeds $123 billion. Riding on solid underwriting and investment performance it produced strong positive operating cash flow of $3.1 billion in the second quarter.
The size of its investment portfolio increased by $2.4 billion in the quarter after buybacks on strong operating cash flow and high portfolio returns.
In the third quarter of 2021, Chubb authorized a new one-time incremental share buyback program, which marked the second authorization this year. It allowed to spend up to $5 billion to repurchase its common stock through Jun 30, 2022.
Not only share buybacks, Chubb also remains committed toward boosting shareholder value via dividend hikes. It has increased dividends at a seven-year (2014 – 2021) CAGR of 6.9%. In May 2021, its board of directors hiked its quarterly cash dividend by 2.6%, reflecting the 28th consecutive year of dividend increase at Chubb. Its current dividend yield of 1.7% is higher than the industry average of 0.4%. Such initiatives make the stock attractive to yield-seeking investors.
Furthermore, its 8.7% return on equity (ROE) is better than the industry average of 5.7%, reflecting its efficiency in utilizing shareholders’ funds.
Chubb currently sports a Zacks Rank #1 (Strong Buy) and has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the value investing space.
Image: Bigstock
Chubb (CB) Stock Surges 49.1% in a Year: More Room to Run?
Shares of Chubb Limited (CB - Free Report) have gained 49.1% in a year compared with the industry's increase of 28.9%. The Zacks S&P 500 composite has rallied 34.4% in the said time frame. With a market capitalization of $81 billion, average volume of shares traded in the last three months was 1.93 million.
The rally was largely driven by new business, positive rate increases, sufficient liquidity and prudent capital deployment.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $12.49 and $13.86, indicating year-over-year increase of nearly 70.8% and 11%, respectively.
It has a decent earnings surprise history. Its bottom line beat estimates in three of the last four quarters, the average being 7.14%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 moved up nearly 8.8% and 9.6%, respectively, in the past 30 days that reflects investors’ optimism.
The world’s largest publicly traded property and casualty (P&C) insurer has averaged double-digit commercial P&C growth over the past 10 quarters. We expect the premium revenue growth to continue driven by its commercial P&C businesses, new business, positive rate increases across most lines and regions as well as strong renewal retention.
By virtue of increased corporate bond call activity, higher private equity distributions and increased dividends on public equities, adjusted pre-tax net investment income will likely improve in the long term. Moreover, quarterly run rate is expected to be nearly $900 million.
The company’s underwriting results have outperformed the average of its peers over the last 10 years (2011-2020). Chubb delivered a good combined ratio in the reported quarter on the back of improved loss and loss expense ratio, primarily due to lower catastrophe losses.
It boasts a solid financial position with more than $75 billion in capital and a AA-rated portfolio of cash and invested assets that exceeds $123 billion. Riding on solid underwriting and investment performance it produced strong positive operating cash flow of $3.1 billion in the second quarter.
The size of its investment portfolio increased by $2.4 billion in the quarter after buybacks on strong operating cash flow and high portfolio returns.
In the third quarter of 2021, Chubb authorized a new one-time incremental share buyback program, which marked the second authorization this year. It allowed to spend up to $5 billion to repurchase its common stock through Jun 30, 2022.
Not only share buybacks, Chubb also remains committed toward boosting shareholder value via dividend hikes. It has increased dividends at a seven-year (2014 – 2021) CAGR of 6.9%. In May 2021, its board of directors hiked its quarterly cash dividend by 2.6%, reflecting the 28th consecutive year of dividend increase at Chubb. Its current dividend yield of 1.7% is higher than the industry average of 0.4%. Such initiatives make the stock attractive to yield-seeking investors.
Furthermore, its 8.7% return on equity (ROE) is better than the industry average of 5.7%, reflecting its efficiency in utilizing shareholders’ funds.
Chubb currently sports a Zacks Rank #1 (Strong Buy) and has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy) offer the best opportunities in the value investing space.
Other Stocks to Consider
Some other top-ranked stocks from the same space include Cincinnati Financial Corporation (CINF - Free Report) , Everest Re Group, Ltd. and Fidelity National Financial, Inc. (FNF - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cincinnati Financial surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 36.01%.
The bottom line of Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average being 20.33%.
Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average being 37.32%.