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Chubb Limited (CB)

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Chubb Limited is a global provider of insurance products covering property and casualty, accident and health, reinsurance, and life insurance. Chubb operates in 54 countries and is the world’s largest publicly traded property and casualty insurer. The company provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance. The current company arose when ACE Limited acquired Chubb in 2016, and then adopted the Chubb name. Its core operating insurance companies are rated "AA" (Very Strong) for financial strength by Standard & Poor’s and "A++" (Superior) by A. M. Best, with stable outlooks from both agencies. Its current total market capitalization of $67.5 billion makes CB a large capitalization stock (a large-cap stock has a market capitalization value of more than $10 billion) with a long history of consistent earnings growth and dividend payments.


It is considered a solid and well-diversified business with a durable competitive advantage over its rivals, which also enjoys a solid management and corporate culture. According to Yahoo! Finance, consensus estimates call for the company to earn about $6.91 per share this year, and to go to about $11.44 per share next year. Chubb has paid dividends to investors since 1984, and has increased its payments for twenty-eight consecutive years. During the past ten years, it has increased its dividends at an annualized average rate of 11.15%, with its quarterly payment of $0.78 currently providing a trailing twelve-month yield of 2.01%.


The value of dividends reinvestment: A hypothetical investment in the company has grown cumulatively (including dividends reinvested) 1,859.15% during the past twenty-five years. The same investment has grown only 1,084.00% in the same period of time, excluding dividends. During the same period, a hypothetical investment in the S&P 500® index (thru the Vanguard 500 Index Fund (VFIAX) has grown cumulatively 872.66%, including dividends reinvested. According to the data and calculations of the financial website dqydj.com (don’t quit your day job), a periodic monthly investment of $100 in CB for the past twenty-five years would has grown to $192,288, including dividends reinvested. The company still has room for significant dividend payments and dividend increases in the coming years, since its current Dividend Payout Ratio (DPR), which is its dividend payments as a percentage of its earnings, is just 61%. Its average DPR during the past five years is 39%.


Its current Price to Forward Earnings ratio (P/E Forward--a measure of valuation based on projected Earnings) is 13.59. Its Price to Book ratio (P/Book) of 1.23 is 58.86% below the US Market Index. Its Price to Sales ratio (P/Sales) of 2.00 is 19.03% below the Market, and its Price to Cash Flow (P/Cash Flow) of 8.06 is 49.97% below the index. Technically (from the chart’s perspective) CB also looks attractive, trading 23.3% below its all-time high), while it is forming a long double-bottom base pattern, between $168 and $87 approximately, in which $87 is acting as a strong technical support level.


The actively managed mutual funds American Funds Washington Mutual and Vanguard Dividend Growth are major shareholders of CB, holding 2.2% and 1.7% of its shares respectively. CB’s main competitors are Berkshire Hathaway Inc. (BRK.A) and American International Group Inc. (AIG). Chubb’s 5-year Beta (a measure of the volatility or systematic risk in comparison to the market as a whole as evidenced by the S&P 500® Index) is 0.67, so the stock is 33% less volatile than the Market.


Best and worst years during the past 25 years: Its best year was 2000, in which CB returned, excluding dividends, 154.31%. On the flip side, its worst year was 1999, when the stock declined 51.5%, excluding dividends. CB’s Dividend Reinvestment Plan charges no fees for cash investing, dividend reinvestment, safekeeping, automatic investment or termination of the Plan. With the stock being fundamental and technically attractive, this company might be an appropriate holding for investors who wish to build a holding over the long term.

Disclosure: Mario Medina has no position in Chubb Limited and has no plans to initiate any position in the immediate future. The author wrote the article himself and it expresses his own opinions. The author has no business relationship with CB and this article is not intended as a recommendation to invest as the information published does not take into account any subscriber's personal finances, goals or risk tolerance. Accordingly, you should be aware of all the risks associated with any financial investment and should consult an independent financial advisor for any personal investment advice. Past results and risks illustrated in the article are for reference and educational purpose only and do not guarantee future performance.