On Dec 15, Zacks Investment Research upgraded Chubb Corporation CB to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Chubb has been witnessing a rise in earnings estimates on the back of strong third-quarter 2015 results, rollout of complementary risk management services and approval of its merger with ACE Limited ACE. Moreover, this well-known property and casualty recorded positive earnings surprises in the last four quarters with an average beat of 9.88%. The long-term expected earnings growth rate for this stock is 9.70%
Investors’ confidence in the stock was cemented by its strong third quarter earnings of $2.37, which surpassed the Zacks Consensus Estimate by 20.3% and the year-ago earnings by 9.2%. The better-than-expected earnings came on the back of higher underwriting income that rose almost 19.6% year over year primarily due to lower operating costs and expenses. Additionally, lower catastrophes led to improvement in combined ratio for this P&C insurer. Book value per share, which is a measure of net worth, was up almost 3% year over year.
Earlier this month, the company’s unit – Chubb Personal Insurance – introduced four new complimentary risk management services for its clients in the field of fine art. These services are aimed at protecting artwork from damage caused by natural disasters, home renovation and household staff and to ensure that the collections remain sufficiently insured. These services are add-ons to the existing suite of services meant for fine art clients. This should enhance the company’s risk management capacities, which should draw in more clients going ahead.
Chubb is almost at the final stage of its merger with ACE Limited (expected to close in the first quarter of 2016) and has received shareholders’ approval. On closing of the deal, Chubb shareholders will receive $62.93 per share in cash and 0.6019 shares of ACE common stock per Chubb common stock.
The Zacks Consensus Estimate for 2015 increased 3.8% to $7.92 per share as most of the estimates were revised higher over the last 60 days. For 2016, more than half of the estimates were moved north over the same time frame, thereby raising the Zacks Consensus Estimate by 0.7% to $7.73 per share.
Other Stocks to Consider
Investors interested in the P&C insurance industry may also consider stocks like Cincinnati Financial Corp. CINF and Hallmark Financial Services Inc. HALL. Both stocks sport the same Zacks Rank as Chubb.
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