Chubb (CB) Up 3.5% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Chubb
(CB). Shares have added about 3.5% 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 its most recent earnings report in order to get a
better handle on the important drivers.

Chubb's Q4 Earnings Surpass on Underwriting
Strength

Chubb Limited reported fourth-quarter 2023 core operating
income of $8.30 per share, which outpaced the Zacks Consensus
Estimate by 63.7%. The bottom line doubled year over year.

Chubb's results reflected record underwriting income, lower
catastrophe loss, improved combined ratio across most of the
segments and higher premium growth across all the segments.

Quarter in Detail

Net premiums written improved 13.4%
year over year to $11.6 billion in the quarter, which matched our
estimate, while the Zacks Consensus Estimate was pegged at $11.4
billion. Net premiums earned rose 12.8% to $11.9 billion. Our
estimate was $10.8 billion.

Net investment income was $1.37 billion, up 30.2%. The Zacks
Consensus Estimate was pegged at $1.3 billion, while our estimate
was pinned at $1.2 billion. Property and casualty (P&C)
underwriting income was $1.52 billion, which increased 35.2% from
the year-ago quarter. Global P&C underwriting income, excluding
Agriculture, was $1.5 billion, up 27.4%.

Chubb incurred a pre-tax P&C catastrophe loss, net of
reinsurance and including reinstatement premiums, of $300 million,
which was narrower than the year-ago catastrophe loss of $400
million. The P&C combined ratio improved 250 basis points (bps)
on a year-over-year basis to 85.5% in the quarter under review. The
Zacks Consensus Estimate for the combined ratio was pegged at 86,
while our estimate was 81.7.

Segmental Update

North America Commercial P&C Insurance: Net
premiums written increased 4.4% year over year to $4.7 billion,
which matched our estimate. The Zacks Consensus Estimate was pegged
at $4.8 million. The combined ratio improved 790 bps to 76.4%. The
Zacks Consensus Estimate was pegged at 83.

North America Personal P&C Insurance: Net
premiums written climbed 12.1% year over year to $1.5 billion. Our
estimate was $1.4 billion. The combined ratio improved 310 bps to
86.2%. The Zacks Consensus Estimate was pegged at 87.

North America Agricultural Insurance: Net premiums
written increased 58.2% from the year-ago quarter to $607 million.
Our estimate was $418.4 million, while the Zacks Consensus Estimate
was pegged at $386 million. The combined ratio improved 1,140 bps
to 105.8%. The Zacks Consensus Estimate was pegged at 94.

Overseas General Insurance: Net premiums written
jumped 19.3% year over year to $3.2 billion, which matched our
estimate. The combined ratio deteriorated 630 bps to 85.9%,
representing lower favorable prior period development and higher
catastrophe losses.

Life Insurance: Net premiums written soared 20.3%
year over year to $1.45 billion. Our estimate was $1.6 billion.

The Life Insurance segment income was $263 million, up 43.5%.
The increase was principally driven by growth in International
life, which grew $102 million, representing earnings from Huatai
and higher net investment income.

Financial Update

The cash balance of $2.6 billion,
as of Dec 31, 2023, increased 23.2% from the 2022-end level. Total
shareholders' equity grew 26% from the level at 2022 end to $63.7
billion as of Dec 31, 2023. Book value per share, as of Dec 31,
2023, was $146.83, up 20.5% from the figure as of Dec 31, 2022.

Core operating return on tangible equity expanded 1,710 bps
year over year to 35.3%. Operating cash flow was $3.19 billion in
the quarter under consideration.

Capital Deployment

In the quarter, Chubb bought back
shares worth $720 million and paid $351 million in dividends.

Full-Year Update

Core operating income for the year
came in at $22.54 per share, up 48.5% year over year. P&C net
premiums written were $41.8 billion, up 9.9% year over year. The
combined ratio improved 110 bps on a year-over-year basis to 86.5%
in 2023.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the
past month.

VGM Scores

At this time, Chubb has an average Growth Score of C, however
its Momentum Score is doing a bit better with a B. Following the
exact same course, the stock was allocated a grade of B on the
value side, putting it in the second 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. It comes with
little surprise Chubb has a Zacks Rank #2 (Buy). We expect an above
average 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, RLI Corp. (RLI),
has gained 8.7% over the past month. More than a month has passed
since the company reported results for the quarter ended December
2023.

RLI Corp. reported revenues of $378.44 million in the last
reported quarter, representing a year-over-year change of +14.9%.
EPS of $1.54 for the same period compares with $1.53 a year
ago.

For the current quarter, RLI Corp. is expected to post earnings
of $1.61 per share, indicating a change of -1.2% from the year-ago
quarter. The Zacks Consensus Estimate has changed +1.4% over the
last 30 days.

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

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