What Led to Chubb’s Premium Valuations?



Higher valuations

Wall Street analysts have given a one-year price target of $157.53 on Chubb (CB), an 11.4% upside from the current price level. The company has managed to report adjusted net investment income of $855 million in 2Q17 and $816 million in 2Q16, a rise of 4.8%. Chubb has a one-year-forward price-to-earnings ratio of 13.76x, which is higher than the competitors’ average one-year forward price-to-earnings ratio of 10.78x. The one-year forward price-to-earnings ratios of other insurance companies (IYF) are as follows:

  • American International Group (AIG): 11.49x
  • MetLife (MET): 10.82x
  • Prudential Financial (PRU): 10.03x
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Chubb Limited has also witnessed a fall in its post-tax catastrophe losses in 2Q17 as compared to 2Q16. In 2Q17, the company reported post-tax catastrophe losses of $152 million. In 2Q16, it reported post-tax catastrophe losses of $311 million. According to Chubb’s management, the company’s annual effective tax rate will be in the range of 16% to 18% for 2H17.

Price-to-cash-flow ratio

Chubb Limited (CB) has a price-to-cash-flow ratio of 13.77x on a trailing-12-month (or TTM) basis. However, the price-to-cash-flow ratios of its peers on a TTM basis are as follows:

  • Prudential Financial (PRU): 7.37x
  • MetLife (MET): 3.54x
  • Allstate (ALL): 8.21x

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