Will Chubb Corp (CB) Beat Q4 Earnings on Top-Line Growth?

We expect property and casualty insurer The Chubb Corporation (CB) to beat expectations when it reports fourth-quarter and full-year 2014 results after the market close on Jan 29.

Why a Likely Positive Surprise?

Our proven model shows that Chubb is likely to beat earnings when it reports on Jan 29 because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.39%. This is a meaningful and leading indicator of a positive earnings surprise.

Zacks Rank: Chubb carries a Zacks Rank #1 (Strong Buy). Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

What is Driving the Better-than-Expected Earnings?

A low-growth competitive pricing environment plus Chubb's focus on protecting its underwriting profitability and returning capital to shareholders would drive earnings in the to-be reported quarter.

The company writes premium through three segments – Commercial, Personal and Specialty Insurance. The commercial segment is expected to see top-line growth from higher pricing as well as increased renewals and new business.

In the other two segments, growth will come from higher prices that continue to exceed loss costs. The Professional Liability portion of Chubb’s specialty insurance business, which represents the majority of the portfolio, is positioned to steadilyincrease its profitability.

We also expect the insurers’ bottomline to benefit from the minimal impact of catastrophe losses, which are expected to lower the combined ratio for the fourth quarter as well as full year.

Chubb’s earnings are also expected to benefit from its prudent capital management including continued share repurchases.

The positive trend is evident in the trailing four-quarter average earnings beat of 0.68%.

Chubb expects 2014 per share operating earnings in the range of $7.35–7.45 (up from the prior guidance of $6.75–6.95). Operating earnings for the fourth quarter is projected between $2.00–2.10per share.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Arch Capital Group Ltd. (ACGL), Earnings ESP of +1.92% and a Zacks Rank #1.

The Allstate Corporation (ALL), Earnings ESP of +1.81% and a Zacks Rank #1.

PartnerRe Ltd. (PRE), Earnings ESP of +4.95% and a Zacks Rank #2 (Buy).