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Insurance Stocks

Chubb Ltd Stock Valuation – February 2016 $CB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Chubb Ltd (CB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Chubb Corporation is a holding company with subsidiaries principally engaged in the property and casualty insurance business. The property and casualty insurance subsidiaries (the P&C Group) underwrite insurance in the United States, Canada, Europe, Australia and parts of Latin America and Asia. The P&C Group operates through three business units: Chubb Personal Insurance, offers personal insurance products for homes and valuable articles (such as art and jewelry) for high net worth individuals; Chubb Commercial Insurance, offers multiple peril, primary liability, excess and umbrella liability, automobile, workers’ compensation and property and marine insurance, and Chubb Specialty Insurance, offers specialized professional liability products for privately held and publicly traded companies, financial institutions, professional firms, healthcare and not-for-profit organizations.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CB

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $31,884,746,417 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 39.71% Pass
5. Moderate PEmg Ratio PEmg < 20 12.70 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.29 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CB value chart February 2016

EPSmg $9.00
MG Growth Estimate 4.57%
MG Value $158.70
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $130.47
MG Value based on 0% Growth $76.48
Market Implied Growth Rate 2.10%
Current Price $114.31
% of Intrinsic Value 72.03%

Chubb Corp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $6.90 in 2012 to an estimated $9.00 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.1% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. Chubb Corp performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $135.65
PEmg 12.70
PB Ratio 1.29
Dividend Yield 2.33%
Number of Consecutive Years of Dividend Growth 0


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Dec2015
Long-Term Debt $9,447,000,000
Total Assets $102,366,000,000
Intangible Assets $5,683,000,000
Total Liabilities $73,231,000,000
Shares Outstanding (Diluted Average) 328,835,000

Earnings Per Share History

Next Fiscal Year Estimate $9.10
Dec2015 $8.62
Dec2014 $8.42
Dec2013 $10.92
Dec2012 $7.89
Dec2011 $4.52
Dec2010 $9.11
Dec2009 $7.55
Dec2008 $3.50
Dec2007 $7.66
Dec2006 $6.91
Dec2005 $3.31
Dec2004 $3.88
Dec2003 $5.25
Dec2002 $0.27
Dec2001 -$0.78
Dec2000 $2.31
Dec1999 $1.85
Sep1998 $2.96
Sep1997 $2.69
Sep1996 $2.69

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $9.00
Dec2015 $8.66
Dec2014 $8.51
Dec2013 $8.37
Dec2012 $6.90
Dec2011 $6.42
Dec2010 $7.23
Dec2009 $6.12
Dec2008 $5.29
Dec2007 $5.93
Dec2006 $4.68
Dec2005 $3.17
Dec2004 $2.80
Dec2003 $2.10
Dec2002 $0.79
Dec2001 $1.30
Dec2000 $2.39

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – February 2016
10 Best Stocks For Value Investors This Week – 9/26/15
Chubb Corporation Analysis – September 2015 Update $CB
The 10 Best Stocks For Value Investors This Week – 6/20/15
Chubb Corporation Analysis – June 2015 Update $CB

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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