We expect property and casualty insurer Chubb Limited CB to beat expectations when it reports first-quarter 2017 results on Apr 25, after the market closes.
Why a Likely Positive Surprise?
Our proven model shows that Chubb has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.82%. This is because the Most Accurate estimate of $2.47 is higher than the Zacks Consensus Estimate of $2.45. This is a meaningful and leading indicator of a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Chubb carries a Zacks Rank #3 (Hold). Please note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Chubb’s favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
What is Driving the Better-Than-Expected Earnings?
Chubb is likely to report top-line improvement in the first quarter on the back of its robust organic and inorganic growth portfolio.
Share buyback should also boost the bottom line.
Moreover, the company has likely witnessed an increase in net premiums written owing to the strategic initiatives undertaken. However, Chubb has scaled down its 2017 guidance for net premiums for a few portfolios.
Further, the property and casualty (P&C) insurer has likely experienced higher net investment income in the to-be-reported quarter. Despite the factors that might impact the variability and investment income, Chubb has raised its projection for quarterly investment income run rate to range between $830 million and $840 million.
Also, the company might have experienced a rise in underwriting income and realized gains in the quarter. Notably, the P&C insurer expects an estimated $60 million reduction in operating income and a corresponding realized gain in 2017.
However, higher loss and loss expenses, policy acquisition costs, administrative expenses and policy benefits are likely to have increased Chubb’s expenses.
With respect to earnings trend, the company delivered positive surprises in three of the last four quarters with an average beat of 5.95%.
Other Stocks to Consider
Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
Selective Insurance Group, Inc. SIGI, which is set to report first-quarter earnings on Apr 26, has an Earnings ESP of +9.59% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Reinsurance Group of America, Incorporated RGA has an Earnings ESP of +1.42% and a Zacks Rank #2. The company is set to report first-quarter earnings on Apr 27.
American International Group, Inc. AIG has an Earnings ESP of +0.90% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 3.
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