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Chubb (CB) Provides Q3 Catastrophe Loss Estimate of $372M


Chubb Limited CB has recently released its preliminary net loss estimates of $450 million pretax or $372 million after tax, net of reinsurance including reinstatement premiums. The loss estimates can be attributed to more than 20 different weather-related events including Hurricane Florence in the United States in September, California wildfires, rain and hailstorm in Colorado, and typhoons Mangkhut and Jebi in Asia.

These losses are generated by commercial and personal property and casualty insurance businesses as well as its reinsurance operations. Per the analysts at Keefe, Bruyette & Woods (KBW) third-quarter catastrophe losses were expected to be near the $641 million mark, owing to the P&C insurer’s substantial exposure to global loss events during this time period. The Zacks Consensus Estimate for earnings in the third quarter is currently pegged at $2.56 per share, reversing the prior-year quarter’s loss of 13 cents per share. We expect the estimates to move downward as analysts incorporate the impact of the catastrophe loss.

Chubb’s status as a P&C insurer has made it fairly susceptible to loss from natural disasters, man-made catastrophes and other weather-oriented events. This has led to volatility in its underwriting results.

In fact, in the first half of 2018, the company incurred pre-tax catastrophe loss of $591 million (45.6% higher than the same period in 2017), primarily due to the severe weather-related events including California mudslides and the northeast winter storms. As a result, the company’s combined ratio came under pressure, having deteriorated 140 basis points (bps) in the first half compared with the level in 2017.

Chubb has an Earnings ESP of -1.75% and a Zacks Rank #4 (Sell) that reflects an unfavorable combination for an earnings beat. A company needs a positive ESP and a favorable Zacks Rank to be confident about an earnings surprise. Thus, this combination leaves surprise prediction inconclusive when the insurer reports results on Oct 23.

Shares of the company have lost 13.3% year to date versus the industry’s growth of 1.6%.The Zacks Consensus Estimate for the current year has moved 0.4% south while the same for 2019 has slipped 0.1% ahead of its earnings release. Calamities affecting underwriting results could remain a drag on the share price.

Recently, United Insurance Holdings Corp. UIHC announced to have incurred $35 million pre-tax catastrophe loss due to Hurricane Florence.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Markel Corporation MKL and Kingstone Companies, Inc. KINS both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel markets and underwrites specialty insurance products in the United States, the U.K., Canada and internationally. The company delivered positive surprises in two of the trailing four quarters with an average beat of 34.72%.

Kingstone Companies underwrites property and casualty insurance products to small businesses and individuals in New York. The company pulled off positive surprises in two of the previous four quarters with an average positive surprise of 0.17%.

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