Can Catastrophe Loss Mar Chubb's (CB) Q1 Earnings Prospects?
Zacks Investment Research | Apr 19, 2018 11:49PM ET
Chubb Limited (NYSE:CB) is slated to report first-quarter 2018 results on Apr 24 after the market closes. Last quarter, the company delivered a positive earnings surprise of 37.23%.
Let’s see, how things are shaping up for this announcement.
Chubb’s first quarter underwriting results will be affected by the California mudslides (which occurred in early January). Chubb has projected catastrophe loss from the same at nearly $125 million after tax while the total catastrophe loss is estimated at $305 million after tax. This apart, the company has issued loss estimates pertaining to the northeast winter storms, which hit the East Coast first on Jan 3 and later on Mar 1, 2018. Net loss from these storms is anticipated to be $115 million and $80 million, respectively, on a pre-tax basis.
Further, other net losses related to natural catastrophes to date globally in the first quarter, are projected at $60 million pretax.
It is important to mention here that such loss is attributable to commercial and personal property plus casualty insurance operations as well as reinsurance activities. The Zacks Consensus Estimate for the company’s combined ratio is pegged at 89%, a deterioration of 100 basis points from the year-ago quarter.
The Zacks Consensus Estimate for earnings is pegged at $2.24, reflecting a 9.7% year-over-year decrease.
Additionally, the company might have incurred increased expenses, mainly due to higher loss and loss expenses, policy acquisition costs, administrative expenses as well as policy benefits. This in turn will possibly weigh on the P&C insurer’s operating margin expansion.
However, higher net investment income is expected to have cushioned the company’s top line. In fact, the Zacks Consensus Estimate is pegged at $780 million, representing a rise of 4.7% on a year-over-year basis. This is mainly owing to the improved interest rates as well as better-than-expected private equity distributions. Also, the company expects its quarterly investment income run rate to range between $845 million and $855 million.
Moreover, the company is likely to report increased premiums in the soon-to-be-reported quarter, driven by an improved commercial property and casualty (P&C) pricing across its numerous business lines as well as a compelling product portfolio.
Strategic buyouts are expected to have contributed to this probable increase in premiums.
Earnings Whispers
Our proven model does not conclusively show that Chubb is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Zacks Investment Research
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