Opinions
David Driscoll
Chubb Limited
CB-N
HOLD
Jun 02, 2025
Stock price when the opinion was issued
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62% of premiums are in the US and the rest international, so they have global exposure. They are growing life insurance in Asia. They have a good track record in assessing risk, then generate investment income through a large bond portfolio and private equity investments. Berkshire announced a stake in CB earlier this year. Trades at a reasonable 12x forward PE.
(Analysts’ price target is $302.57)CB is a large property and casualty insurance company, which has shown disciplined underwriting and risk management over the years, leading to its large scale and strong profitability. It pays a yield of 1.4%, it has grown its sales and earnings at a 10.6% and 22.4% five-year CAGR, respectively. Forward growth is expected to be strong, and it has increased by 18% over the past year. It trades at a 12X forward earnings, and overall we would be quite comfortable with CB as a defensive play.
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Very defensive. Insurance pricing has not slowed because of all the catastrophes happening. Their combined ratio is 84%. He likes that they invest in bonds, not stocks, so they will survive a correction and grow their dividend. Most bonds are 1-5 years, so will benefit from rate cuts.
(Analysts’ price target is $303.43)Long term (going back 20-25 years) has done very well. With the dividend, averages 8-10% annual return. All-time record highs back in April. These things do take pauses, especially after making new highs. At a very good support level. Looks good for a short-term trade to upside of ~$300, and then see where it goes.
Try a half position today, and then put more in if the stock moves up beyond $300.
Don't hold on if it drops below $270. That would mean something's gone wrong and it's lost momentum. You don't need to sell out immediately, but start reducing to reduce your risk.
Bigger longer-term uptrend. Lots of insurance names have had really strong moves in line with interest rates moving higher. So the move to lower interest rates affects them all across the board. Likes the stories longer term. Should ultimately come back to $250-260, so look to add there.
His work's telling him that interest rates are in a new secular uptrend, and this would benefit all the insurance names eventually.
Combined ratios for P&C are in the 83% range, amongst the lowest of the group. (For every $1 of policy issued, they pay out only 83 cents in claims.) That 17 cent difference is free cashflow to them, which they invest in a short-medium bond portfolio. Very conservative, pricing has been good.
Because of it size, exposed to more of the catastrophic risk out there. Offsets that by about 90% by buying reinsurance for the policies they write.
Performance YTD is 8%, 10 years is 13%, 15 years is 15% (that should be the target over time). Likes insurance companies a lot more than banks right now, based on what may be coming with interest rates and loan refinancing in Canada and US.
Out of Switzerland, operating globally.