Thematic evaluation
Back to company overview

Chubb Ltd. (CB)

September 06, 2024

Compared to: Progressive Corp. (PGR) | The Travelers Cos., Inc. (TRV) | Financial Select Sector SPDR Fund (XLF)

Our reasoning

Chubb's current valuation appears fair, balancing strong financial performance and growth prospects against potential risks. While some metrics suggest slight overvaluation (e.g., EV/Sales), others indicate potential undervaluation (e.g., strong ROE and combined ratio). The company's diversified business model, strong market position, and disciplined underwriting approach support the current valuation levels.

Key takeaways
  • Chubb Limited is a well-established global insurance and reinsurance company with a strong financial position, a diversified business model, and attractive growth prospects.
  • The company has a strong track record of profitability, driven by disciplined underwriting and strong investment income.
  • Chubb's robust capital position, strong cash flows, and prudent capital management provide it with the financial flexibility to navigate market cycles, invest in growth, and return capital to shareholders.
  • The company faces various operational, financial, and regulatory risks common to the insurance industry, but its strong financial position and prudent capital management provide it with the ability to navigate these challenges.
  • Chubb's valuation is supported by its strong financial performance, robust cash flow generation, and attractive growth prospects.
  • The company's stock price has generally outperformed the market and its peers, indicating strong relative performance.
  • Chubb's future outlook is positive, with management confident in the company's ability to continue growing operating earnings at a superior rate.
  • Overall, Chubb is a compelling investment opportunity for investors seeking a combination of growth and stability.
Fairly valued
Ask a question about Chubb Ltd. (CB)
Evaluation summary

  1. Company Overview:

    • Chubb Limited is a global insurance and reinsurance company with a diversified business model, offering a wide range of commercial and personal property and casualty (P&C) insurance, accident and health (A&H), and life insurance products and services.
    • The company operates in various segments, including North America Commercial P&C Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance, and Life Insurance.
    • Chubb targets a broad customer base, including large, middle market, and small commercial businesses, affluent and high net worth individuals and families, and agricultural businesses.
    • The company distributes its products through a network of brokers, agencies, and direct marketing programs, and has established relationships with reinsurance intermediaries globally.
    • Chubb's key competitors include other large global insurance/reinsurance companies, regional carriers, and alternative capital market participants.
    • For comparative analysis, we will be using the Financial Select Sector SPDR Fund (XLF) as a benchmark and Progressive Corp. (PGR) and The Travelers Cos., Inc. (TRV) as industry peers.

  2. Financial Performance:

    • Chubb has consistently demonstrated strong financial performance, with revenue growth driven by rate increases, exposure growth, and strategic acquisitions.
    • The company's profitability is robust, driven by disciplined underwriting and strong investment income.
    • Chubb's underwriting performance has been excellent, with a combined ratio of 86.5% in 2023, reflecting lower catastrophe losses and favorable prior period development.
    • Investment income has reached record levels, benefiting from higher reinvestment rates on the fixed income portfolio and the consolidation of Huatai.
    • Chubb's return on average assets (ROA), return on average total equity (ROE), and return on average total capital (ROIC) have been consistently above industry averages, indicating efficient asset utilization and strong profitability.
    • Compared to its peers, Chubb has generally underperformed Progressive Corp. (PGR) in terms of revenue growth and profitability, but has consistently outperformed The Travelers Cos., Inc. (TRV).

  3. Operational Efficiency:

    • Chubb's balance sheet is strong, with a healthy cash balance and a low debt-to-equity ratio.
    • The company's working capital management is efficient, with a strong current ratio and quick ratio, indicating ample liquidity.
    • Chubb's cash flow generation is robust, driven by its disciplined underwriting approach and strong investment performance.
    • The company's free cash flow margin has been consistently high, supporting debt repayment, dividend growth, and investment in organic growth opportunities.
    • Chubb's capital expenditure (CapEx) is relatively low, indicating a focus on organic growth and acquisitions rather than significant investments in fixed assets.
    • The company's dividend and share repurchase program is sustainable, supported by strong cash flow generation and a conservative capital structure.
    • Compared to its peers, Chubb has a lower debt-to-equity ratio and a higher current ratio, indicating a more conservative financial position.

  4. Growth Opportunities:

    • Chubb has identified several growth opportunities, including market expansion, strategic acquisitions, and product innovation.
    • The company has a strong track record of successful acquisitions, such as the acquisition of Cigna's Asian business and the consolidation of Huatai Group.
    • Chubb is actively investing in technology and digital capabilities to enhance its product offerings and improve customer experience.
    • The company is expanding its geographic footprint, particularly in emerging markets with high growth potential.
    • Chubb's current strategic focus areas include disciplined underwriting, profitable growth, and shareholder returns.
    • The company's capital allocation strategy is focused on organic growth, acquisitions, and shareholder returns.
    • Chubb's management team has a strong track record of executing strategic plans and delivering on its commitments.

  5. Risks and Threats:

    • Chubb faces various operational, financial, and regulatory risks common to the insurance industry, including reserve adequacy, investment performance, and evolving compliance requirements across its global footprint.
    • The company's exposure to natural and man-made catastrophes, including the potential impact of climate change, could lead to significant losses.
    • Chubb's reliance on reinsurance could expose it to credit risk from reinsurance counterparties.
    • The company's operations in various jurisdictions could be impacted by regulatory and legal changes.
    • The competitive landscape in the insurance industry is intense, with increasing competition from both traditional and non-traditional players.
    • Chubb's business is also subject to macroeconomic risks, such as economic downturns, interest rate volatility, and inflation.

  6. Valuation Analysis:

    • Chubb's valuation metrics, such as price-to-earnings (P/E) ratio and enterprise value-to-EBITDA (EV/EBITDA) ratio, are generally in line with its peers.
    • The company's valuation is supported by its strong financial performance, robust cash flow generation, and attractive growth prospects.
    • Potential catalysts for Chubb's valuation include continued premium growth, disciplined underwriting, and strong investment income.

  7. Price Performance:

    • Chubb's stock price has generally outperformed the Financial Select Sector SPDR Fund (XLF) over the past three years, indicating strong relative performance.
    • The company's stock has also exhibited lower volatility than XLF, suggesting a more stable investment.
    • Compared to its peers, Chubb's stock price has generally underperformed Progressive Corp. (PGR) but has consistently outperformed The Travelers Cos., Inc. (TRV).

  8. Future Outlook:

    • Chubb's management team is confident in the company's ability to continue growing operating earnings at a superior rate through P&C revenue growth, underwriting margins, investment income, and life insurance income.
    • Analyst estimates for Chubb's future earnings growth are generally positive, reflecting the company's strong financial performance and attractive growth prospects.

  9. Summary:

    • Chubb Limited is a well-established global insurance and reinsurance company with a strong financial position, a diversified business model, and attractive growth prospects.
    • The company has a strong track record of profitability, driven by disciplined underwriting and strong investment income.
    • Chubb's robust capital position, strong cash flows, and prudent capital management provide it with the financial flexibility to navigate market cycles, invest in growth, and return capital to shareholders.
    • The company faces various operational, financial, and regulatory risks common to the insurance industry, but its strong financial position and prudent capital management provide it with the ability to navigate these challenges.
    • Chubb's valuation is supported by its strong financial performance, robust cash flow generation, and attractive growth prospects.
    • The company's stock price has generally outperformed the market and its peers, indicating strong relative performance.
    • Chubb's future outlook is positive, with management confident in the company's ability to continue growing operating earnings at a superior rate.
    • Overall, Chubb is a compelling investment opportunity for investors seeking a combination of growth and stability.
Peer fundamentals 
Fundamentals
Insights
  • Chubb Limited is a global insurance and reinsurance company with a strong financial position and a diversified business model.
  • The company has a strong track record of profitability, driven by disciplined underwriting and strong investment income.
  • The company has a strong liquidity position and a conservative capital structure, providing it with significant financial flexibility.
  • The company's cash flow generation is robust and supports debt repayment, dividend growth, and investment in organic growth opportunities.
  • The company faces various operational, financial, and regulatory risks common to the insurance industry, but its strong financial position and prudent capital management provide it with the ability to navigate these challenges.
Analysis
  • Revenue - Revenue growth is strong and sustainable, driven by rate increases, exposure growth, and strategic acquisitions. - The company has a diversified global business model, with robust growth across its North America P&C, International P&C, and Life Insurance segments. - The company's strategic initiatives, such as acquisitions and expansion into new markets, are expected to continue to drive revenue growth.
    • Profitability
      • Profitability is strong and improving, driven by disciplined underwriting and strong investment income.
      • The company's disciplined underwriting approach, with a focus on only writing business where it can earn an adequate return on capital, has enabled it to maintain excellent profit margins.
      • The company's investment portfolio continues to generate strong returns, with investment income up nearly 26% and a reinvestment rate averaging 5.9%, positioning it well for future growth.
    • Liquidity
      • The company has a strong liquidity position, as evidenced by increasing cash balances and a healthy current ratio.
      • The company's strong cash flow generation is driven by its disciplined underwriting approach and strong investment performance.
      • The company has significant financial flexibility for future investments or economic downturns.
    • Solvency
      • The company has a strong solvency position, as evidenced by the low debt-to-equity ratio.
      • The company's robust capital position, strong cash flows, and prudent capital management provide it with the financial flexibility to navigate market cycles, invest in growth, and return capital to shareholders.
    • Operational Efficiency
      • The company appears to be effectively utilizing its assets to generate revenue, as indicated by the increasing return on average assets.
      • The company's CapEx efficiency is high, as indicated by the flat CapEx trends and strong revenue and profit growth.
    • Cash Flow Analysis
      • The company has a strong cash flow generation, as evidenced by the increasing net operating cash flow and free cash flow to equity.
      • The company's strong cash flow generation is driven by its disciplined underwriting approach and strong investment performance.
      • The company's overall capital allocation strategy appears to be focused on organic growth, acquisitions, and shareholder returns.
    • Risk Factors
      • The company faces various operational, financial, and regulatory risks common to the insurance industry, including reserve adequacy, investment performance, and evolving compliance requirements across its global footprint.
      • The company's exposure to natural and man-made catastrophes, including the potential impact of climate change, could lead to significant losses.
      • The company's reliance on reinsurance could expose it to credit risk from reinsurance counterparties.
      • The company's operations in various jurisdictions could be impacted by regulatory and legal changes.
    • Future Outlook
      • The company is expected to continue to grow its revenue and profitability, driven by rate increases, exposure growth, and strategic acquisitions.
      • The company's strong cash flow generation is expected to continue to support debt repayment, dividend growth, and investment in organic growth opportunities.
      • The company's financial flexibility is expected to remain strong, allowing it to pursue growth opportunities and return capital to shareholders.
Most recent earnings report
Financial statements 
All public filings
Comparative Analysis
Benchmarks (as of 2024-09-04)
Financial Select Sector SPDR Fund (XLF)
  • Performance Comparison: Chubb Ltd. (CB) has consistently outperformed the Financial Select Sector SPDR Fund (XLF) over the past three years. This outperformance has been particularly strong in the longer-term periods, with CB delivering a 40.91% return over the past three years compared to XLF's 27.07% return. This suggests that CB has been a strong investment relative to its peers.
  • Risk and Return Analysis: Chubb Ltd. (CB) has generated higher annualized returns than the Financial Select Sector SPDR Fund (XLF) over the past three years. However, CB has also exhibited lower annualized volatility than XLF. This suggests that CB has been able to deliver higher returns with less risk. The maximum drawdown figures also support this conclusion, with CB experiencing a maximum drawdown of 19.16% compared to XLF's 25.64%. This indicates that CB has been more resilient to market downturns than XLF.
  • Risk-Adjusted Performance: Chubb Ltd. (CB) has consistently offered a better risk-adjusted return than the Financial Select Sector SPDR Fund (XLF) over the past three years, as evidenced by its higher Sharpe Ratio. This suggests that CB has been able to generate higher returns for a given level of risk. The beta value of CB is also lower than XLF, indicating that CB is less sensitive to market movements. This further supports the conclusion that CB is a relatively low-risk investment.
  • Overall Assessment: Chubb Ltd. (CB) has demonstrated strong relative performance, lower risk, and better risk-adjusted returns compared to the Financial Select Sector SPDR Fund (XLF) over the past three years. This suggests that CB is a compelling investment opportunity for investors seeking a combination of growth and stability. The stock's consistent outperformance, lower volatility, and higher Sharpe Ratio indicate that CB has been able to deliver attractive returns with less risk than its peers. However, it is important to note that past performance is not necessarily indicative of future results. Investors should conduct their own due diligence before making any investment decisions.
Peers Price History(as of 2024-09-04)
Progressive Corp. (PGR)The Travelers Cos., Inc. (TRV)
  • Performance Comparison: Chubb Ltd. (CB) has generally underperformed Progressive Corp. (PGR) over the past three years, particularly in the longer timeframes. However, it has consistently outperformed The Travelers Cos., Inc. (TRV), especially in the shorter timeframes. This suggests that Chubb Ltd. (CB) may be more sensitive to market downturns than Progressive Corp. (PGR) but has a more stable performance compared to The Travelers Cos., Inc. (TRV).
  • Risk and Return Analysis: Chubb Ltd. (CB) has provided lower annualized returns than Progressive Corp. (PGR) over the past three years. However, it has also shown lower annualized volatility, indicating that it has been less risky. This suggests that Chubb Ltd. (CB) may be a more conservative investment option compared to Progressive Corp. (PGR).
  • Risk-Adjusted Performance: Chubb Ltd. (CB) has generally shown a lower Sharpe Ratio compared to Progressive Corp. (PGR) and The Travelers Cos., Inc. (TRV), indicating that it has not been as efficient in generating risk-adjusted returns. However, its lower beta value suggests that it is less sensitive to market movements, which could be considered a positive factor for investors seeking a more stable investment.
  • Overall Assessment: Chubb Ltd. (CB) appears to be a more conservative investment option compared to Progressive Corp. (PGR), with lower returns but also lower volatility and a lower beta value. It has consistently outperformed The Travelers Cos., Inc. (TRV), suggesting that it may be a more stable investment choice within the insurance sector. However, investors should consider their risk tolerance and investment goals when evaluating these companies. The recent trend of increasing volatility in the insurance sector, particularly for Progressive Corp. (PGR), suggests that investors should carefully monitor market conditions and consider the potential impact on their investments.
Peers Fundamentals(as of 2024-06-30)
Progressive Corp. (PGR)The Travelers Cos., Inc. (TRV)

  1. Market Position and Size:

    • Chubb Ltd. (CB) is a mid-sized player in the property and casualty insurance industry, with a market capitalization of 117521.0, smaller than Progressive Corp. (PGR) but larger than The Travelers Cos., Inc. (TRV).
    • Despite having higher revenue and net income than PGR, CB's market cap is significantly smaller, suggesting that PGR is valued more highly by the market.
    • CB's market cap is significantly larger than TRV, despite having lower revenue and net income, suggesting that CB is valued more highly by the market.

  2. Profitability and Efficiency:

    • CB exhibits strong profitability, with a significantly higher net profit margin than its peers and the industry average.
    • However, CB's return on assets and equity are significantly lower than PGR's, suggesting that PGR is more efficient in utilizing its assets and capital to generate profits.

  3. Financial Health and Stability:

    • CB has a strong financial position, with a low level of debt compared to its peers and the industry.
    • However, CB's liquidity position appears to be relatively weak, particularly compared to the industry average.

  4. Valuation and Market Perception:

    • CB's valuation is mixed, with its EV/Sales and P/S ratios suggesting a premium valuation, but its P/E and P/B ratios suggesting a discount valuation.
    • The market may be valuing CB's growth potential and revenue generation capabilities at a premium, but its earnings and book value are perceived as less valuable compared to its peers.

  5. Cash Flow and Capital Management:

    • CB generates a strong free cash flow, suggesting that it has a healthy cash flow position and is able to generate significant cash after accounting for capital expenditures.
    • CB's low capital expenditure suggests that it is not investing heavily in capital projects.

  6. Growth and Future Prospect:

    • CB's growth trends are mixed, with strong growth in profitability and cash flow generation, but slower growth in size and market share.
    • CB's growth is decelerating, suggesting that it may be facing challenges in maintaining its current growth trajectory.

  7. Potential for Investment:

    • CB's investment attractiveness is mixed. Its strong profitability and cash flow generation are attractive, but its slower growth and lower liquidity raise concerns.

  8. Key Risks and Considerations:

    • CB's slower growth in sales revenue and market share could indicate challenges in competing with larger peers.
    • CB's lower liquidity could make it more vulnerable to economic downturns or unexpected events.

  9. Overall Assessment:

    • Chubb Ltd. (CB) is a financially sound company with strong profitability and cash flow generation. However, its slower growth and lower liquidity raise concerns about its future prospects. CB's competitive position is mixed, and it may face challenges in competing with larger peers. Investors should carefully consider these factors before making any investment decisions.