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Chubb (CB) Up 4.9% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Chubb (CB). Shares have added about 4.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Chubb due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Chubb Q3 Earnings Top Estimates on Higher Earned Premium

Chubb Limited reported third-quarter 2022 core operating income of $3.17 per share, which outpaced the Zacks Consensus Estimate by about 4.9% but missed our estimate of $5.11. The bottom line also improved 20.1% from the year-ago quarter.

Chubb's results reflect record investment results, underwriting income and premium revenue growth across all the segments.

Quarter in Detail

Net premiums written improved 14.4% year over year to $12 billion in the quarter. The figure was higher than our estimate of $11.6 billion. Net premiums earned rose 15.3% to $11.5 billion. The figure was higher than our estimate of $11.1 billion.

Adjusted net investment income was a record $1.05 billion, up 12.1%. The figure was higher than our estimate of $986.1 million.

Property and casualty (P&C) underwriting income was a record $710 million, up 15% from the year-ago quarter. The figure was lower than our estimate of $1.5 billion. Chubb incurred pre-tax catastrophe losses of $1.2 billion, with $975 million from Hurricane Ian.

The combined ratio improved 30 basis points (bps) on a year-over-year basis to a record 93.1% in the quarter under review.

Segmental Update

North America Commercial P&C Insurance: Net premiums written increased 8.1% year over year to $4.7 billion. The figure matched our estimate. The combined ratio deteriorated 80 bps to 90.9%.

North America Personal P&C Insurance: Net premiums written climbed 7.1% year over year to $1.4 billion. The figure was higher than our estimate of $1.3 billion. The combined ratio improved 420 bps to 90.1%.

North America Agricultural Insurance: Net premiums written increased 21.8% from the year-ago quarter to $1.7 billion. The figure matched our estimate. The combined ratio deteriorated 70 bps to 90.6%.

Overseas General Insurance: Net premiums written rose 1.9% year over year to $2.6 billion. The figure was lower than our estimate of $2.9 billion. The combined ratio improved 370 bps to 88.5%.

Global Reinsurance: Net premiums written increased 19.5% from the year-ago quarter to $265 million. The figure was higher than our estimate of $263.7 million. The combined ratio of 148.4% deteriorated 2700 bps.

Life Insurance: Net premiums written more than doubled year over year to $1.3 billion. The figure was higher than our estimate of $627.8 million.

Financial Update

The cash balance of $2.1 billion, as of Sep 30, 2022, increased 28.3% from the 2021-end level. Total shareholders’ equity decreased 20.2% from the level at 2021 end to $47.6 billion as of Sep 30, 2022.

Book value per share, as of Sep 30, 2022, was $114.79, down 18% from the figure as of Dec 31, 2021. Core operating return on equity expanded 120 bps year over year to 9.4%. Operating cash flow was $3.43 billion in the quarter under consideration.

Capital Deployment

In the quarter, CB bought back shares worth $685 million and paid $346 million in dividends. It returned $1.03 billion in capital to shareholders.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Chubb has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Chubb has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Chubb belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Progressive (PGR), has gained 6.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

Progressive reported revenues of $13 billion in the last reported quarter, representing a year-over-year change of +9.9%. EPS of $0.49 for the same period compares with $0.14 a year ago.

Progressive is expected to post earnings of $1.47 per share for the current quarter, representing a year-over-year change of +40%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.5%.

Progressive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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