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A month has gone by since the last earnings report for Chubb (CB). Shares have added about 1.3% in that time frame, outperforming 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's Q1 Earnings Top Estimates, Premiums Rise Y/Y
Chubb Limited reported first-quarter 2021 core operating income of $2.52 per share, which surpassed the Zacks Consensus Estimate by 2.9% on the back of improved premium revenues. However, the bottom line plunged 6% from the year-ago quarter.
The company’s results benefited from uptick in global premium revenues and double-digit renewal rate change across its commercial property and casualty (P&C) lines, and higher net investment income. However, the upside was partly offset by dip in premiums across the company’s consumer lines and increased catastrophe losses stemming from storm losses across the United States.
Quarter in Detail
Net premiums written climbed 8.6% year over year to $8.7 billion in the quarter. Net premiums earned improved 5.5% to $8.2 billion. Net investment income amounted to $863 million, which inched up 0.2% year over year.
In the first quarter, P&C underwriting income declined 20% year over to $622 million. Global P&C’s underwriting income excluding Agriculture was $612 million, which slumped 19.8% year over year.
Chubb incurred $570 million of after-tax catastrophe losses, net of reinsurance and including reinstatement premiums in the first quarter, which increased to nearly three-fold from the prior-year quarter. Combined ratio deteriorated 270 basis points (bps) year over year to 91.8% in the quarter under review.
North America Commercial P&C Insurance: Net premiums written grew 12.7% year over year to $3.7 billion. Combined ratio deteriorated 380 bps to 90.6%.
North America Personal P&C Insurance: Net premiums written inched down 0.8% from the prior-year quarter to $1.1 billion. Combined ratio deteriorated 1210 bps to 95.1%.
North America Agricultural Insurance: Net premiums written improved 16.5% year over year to $183 million. Combined ratio deteriorated 610 bps to 90.9%.
Overseas General Insurance: Net premiums written advanced 11.2% from the year-ago quarter to $2.9 billion. Combined ratio improved 480 bps to 88.7%.
Global Reinsurance: Net premiums written plunged 5.1% year over year to $207 million. Combined ratio deteriorated 2030 bps to 96.4%.
Life Insurance: Net premiums written dipped 3.8% year over year to $620 million.
As of Mar 31, 2021, cash balance of $1.7 billion plunged 3.6% from the figure at 2020 end. Total shareholders’ equity inched down 0.6% from the level at 2020 end to $59.1 billion as of Mar 31, 2021. Book value per share as of Mar 31, 2021 was $131.37, down 0.4% from the figure as of Dec 31, 2020.
Core operating return on equity (ROE) came in at 8.2% in the quarter under consideration. During the quarter, operating cash flow totaled $2.1 billion.
Share Repurchase Update
In the quarter, the company bought back shares worth $519 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
At this time, Chubb has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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.
Estimates have been 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.
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