Chubb Lags Industry, Trades at a Premium: How to Play the Stock

Chubb Limited CB shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.69X is higher than the industry average of 1.44X.It also has a Value Score of B. Back-tested results have shown that stocks with a solid Value Score and a favorable Zacks Rank are the most attractive and their returns are better. With a capitalization of $115 billion, Chubb is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer.  Image Source: Zacks Investment ResearchCB shares are cheaper than those of other insurers, such as The Travelers Companies TRV and The Allstate Corporation ALL.Chubb stock has risen 2.8% year to date, underperforming the industry and the sector but outperforming the Zacks S&P 500 composite’s return in the same time frame.CB vs Industry, Sector & S&P 500 YTDImage Source: Zacks Investment ResearchCB shares are trading well above the 50-day moving average, indicating a bullish trend.Mixed Analyst Sentiment The Zacks Consensus Estimate for Chubb’s 2025 earnings implies a year-over-year decrease of 4.4%, while that for 2026 suggests a year-over-year increase of 16.8%. The consensus estimate for 2025 earnings has moved 1.6% south in the past 30 days, while that for 2026 has moved 0.2% north in the same time frame. CB’s Return on CapitalReturn on equity in the trailing 12 months was 13.6%, better than the industry average of 8.3%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.Also, return on invested capital (ROIC) has been increasing over the last few quarters amid capital investments made over the same time frame. This reflects CB’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 8.9%, better than the industry average of 7.3%.Factors Impacting CBChubb remains focused on capitalizing on the potential of middle-market businesses (both domestic and international) as well as enhancing traditional core packages and specialty products for long-term growth. In its efforts to accelerate growth, Chubb is also making strategic investments in various initiatives. Chubb pursues strategic mergers and acquisitions to diversify its portfolio, add capabilities and synergies and expand its geographic footprint. Recently, Chubb agreed to acquire the insurance businesses of Liberty Mutual in Thailand and Vietnam. Acquisitions have also improved premium revenues. Premiums should also benefit from commercial P&C rate increases, new business and strong renewal retention. An impressive inorganic growth story helps to achieve a higher long-term return on equity. Though the Fed has started lowering the interest rate, investment income should benefit from improving operating cash flow. Chubb expects quarterly adjusted net investment income to have a run rate between $1.67 billion and $1.75 billion over the next six months.Chubb has a strong capital position and sufficient cash-generation capabilities, which support wealth distribution to shareholders and growth initiatives. Being a P&C insurer, CB is exposed to catastrophe events, which induce volatility in underwriting profitability and affect the combined ratio. Given the uncertainty surrounding the magnitude of cat loss, higher losses could drain earnings. Also, Chubb’s leverage and times interest earned compare unfavorably with the industry.Average Target Price for CB Suggests an UpsideBased on short-term price targets offered by 22 analysts, the Zacks average price target is $302.77 per share. The average suggests a potential 6.6% upside from the last closing price.Parting ThoughtsChubb’s market-leading position, compelling portfolio, strong renewal retention, positive rate increases, solid capital position and better return on capital pave the way for long-term growth. The insurer’s dividend history is impressive. It has increased dividends for 31 straight years and is set to hike it again this year by 6.5%. CB has a dividend yield of 1.3%, better than the industry average of 0.3%.  As of Feb. 26, 2025, $1.5 billion remained in its share repurchase authorization.However, given its premium valuation, a projected decline in the bottom line in 2025, and unfavorable leverage and times interest earned, we prefer to stay cautious on this Zacks Rank #3 (Hold) stock.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Travelers Companies, Inc. (TRV): Free Stock Analysis Report Chubb Limited (CB): Free Stock Analysis Report The Allstate Corporation (ALL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks