Chubb: fat growth in a lean market

Recent Price $217
Dividend $3.32
Yield 1.5%
P/E Ratio 14
Shares (millions) 427.0
Long-Term Debt as % of Capital 21%
52-Week Price Range $218.99 - $173.78

 

Chubb ($217; CB), a property-and-casualty insurer that helps customers deal with catastrophes, has become a haven for investors trying to ride out a stormy stock market.

Returning 10% including dividends in 2022, Chubb has been one of few bright spots in the S&P 1500. Only 30% of index stocks have posted a positive total return this year, and just 20% returned 10% or more.

Chubb also looks attractive in Quadrix® from virtually every angle, a rare feat in our quantitative system. The stock earns an Overall rank of 87, with six of seven categories scoring above 64. The same can be said of just 41 other S&P 1500 stocks. Yielding 1.5%, Chubb is a Focus List Buy.

Profits withstand Hurricane Ian

Favorable pricing trends support Chubb’s growth, even in the face of massive destruction caused by Hurricane Ian in Florida and South Carolina in late September. For the September quarter, Chubb grew core per-share profits 20% and revenue 9%; both metrics comfortably topped consensus estimates. Core earnings exclude investments gains or losses and merger related costs. Net written premiums increased 9%. Commercial pricing increased 8.5% in North America and 11% internationally. Damage from Hurricane Ian accounted for about $1 billion of the company’s $1.2 billion in total catastrophe losses — but catastrophe losses rose less than 5% from the same quarter last year.

Chubb’s $5.36 billion acquisition of some Cigna ($320; CI) operations in Asia-Pacific, completed on July 1, contributed to last quarter’s growth. With the deal, the Asia-Pacific market accounts for about 18% Chubb’s premiums, up from 10%.

Chubb has now grown per-share profits more than 15% in five straight quarters and revenue more than 5% in each of the past nine quarters. For the 12 months ended September, Chubb increased earnings per share 25%, revenue 9%, and operating cash flow 1%. Following the report, the consensus profit estimate for the December quarter rose to $4.27 per share, good for 12% growth.

Chubb operates six segments: North American commercial P&C (44% of sales for the 12 months ended September), overseas general insurance (27%), North American personal P&C (13%), life insurance (8%), North American agricultural (6%), and global reinsurance (3%).

Chubb has raised its dividend for 29 straight years. Recent dividend growth has been modest, with the hikes ranging from 3% to 4% over the past eight years. Still, Chubb devotes just 22% of profits to its dividend, suggesting flexibility for future consistent growth. Stock repurchases have shrunk the share count 4% in the past year and 10% over the past five years.

Conclusion

Over the past 90 days, analyst profit estimates for 2023 have steadily climbed, with the current consensus of $17.95 implying 16% growth. Sales are projected to rise 7.5% next year.

The stock trades below 12 times estimated 2023 earnings, a 20% discount to the median P&C insurer in the S&P 1500.

Chubb Ltd., 1133 Avenue of the Americas, New York, NY 10036, (212) 827-4400, www.chubb.com.

 

 

Quarter Per-Share Earnings* Sales Change Quarterly Price Range P/E Ratio
Range
Sep '22 $3.17 vs. 2.64 9% $202.73 - $173.78 14 - 12
Jun '22 4.20 vs. 3.62 9% 218.47 - 185.10 16 - 13
Mar '22 3.82 vs. 2.52 7% 218.99 - 187.81 17 - 15
Dec '21 3.81 vs. 3.18 10% 197.92 - 171.96 17 - 14

 

Year
(Dec.)
Sales
(Bil.)
Per-Share Earnings* Per-Share
Dividend
52-Week Price Range P/E Ratio
Range
2021 $35.4 $12.56 $3.16 $197.92 - $144.00 16 - 11
2020 31.3 7.31 3.06 167.74 - 87.35 23 - 12
2019 29.9 10.11 2.96 162.44 - 124.45 16 - 12
2018 28.3 9.44 2.88 157.50 - 119.54 17 - 13

 

Quadrix Scores
Overall Momen-
tum
Value Quality Financial
Strength
Earnings
Estimates
Perform-
ance
Reversion
87 80 64 69 72 85 67 26

 

* Earnings exclude special items.
NA Not Available.
Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.