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What Led to Chubb’s Discounted Valuations?

Raymond Anderson - Author

Aug. 18 2020, Updated 5:31 a.m. ET

Lower valuations

Chubb Limited’s (CB) price-to-book ratio on a next-12-month (or NTM) basis stood at 1.30x, and its competitors’ average price-to-book ratio on an NTM basis stood at 1.33x, implying Chubb’s discounted valuations. 

Chubb’s competitors RenaissanceRe Holdings (RNR), Allstate (ALL), and Everest Re Group (RE) have price-to-book ratios of ~1.3x, ~1.6x, and ~1.2x, respectively, on an NTM basis.

Chubb has been successful in gaining investors’ confidence as the company rewarded shareholders with $667 million in 2Q17 via repurchases and dividends. Out of $667 million, the company has repurchased $335 million in shares, and it has declared $332 million in dividends.

The company’s management team has a positive outlook on the back of a strong balance sheet. Chubb has total capital of more than $63 billion. Chubb could be considered a long-term stock as the company’s merger with ACE Limited made it more powerful due to the complementary businesses.

Chubb could see another decline in its valuations in 2H17, as the company is expected to incur huge costs due to Hurricanes Harvey and Irma.

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Price-to-earnings ratio

Chubb Limited has a price-to-earnings ratio of ~13.2x on a trailing-12-month (or TTM) basis. Its peers in the insurance (IYF) industry have the following price-to-earnings ratios on a TTM basis:

  • RenaissanceRe Holdings (RNR): ~11.9x
  • Everest Re Group (RE): ~8.3x
  • Allstate (ALL): ~13.6x

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