Company ProfileÂ (excerpt from Reuters): Chubb Limited, incorporated on July 18, 2008, is a holding company. The Company, through its subsidiaries, provides a range of insurance and reinsurance products and services to clients around the world. Its segments include North America Commercial property and casualty (P&C) Insurance, North America Personal P&C Insurance, North America Agricultural Insurance, Overseas General Insurance, Global Reinsurance and Life Insurance. It offers commercial insurance products and service offerings, such as risk management programs, loss control, and engineering and complex claims management. It provides specialized insurance products to areas, such as aviation and energy. It also offers personal lines insurance coverage, including homeowners, automobile, valuables, umbrella liability and recreational marine products. In addition, it supplies personal accident, supplemental health and life insurance to individuals in select countries.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$62,335,221,108||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||25.14%||Fail|
|5. Moderate PEmg Ratio||PEmg < 20||14.98||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.25||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
|MG Growth Estimate||0.73%|
|MG Value based on 3% Growth||$131.60|
|MG Value based on 0% Growth||$77.15|
|Market Implied Growth Rate||3.24%|
|% of Intrinsic Value||150.47%|
Chubb Ltd is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $8.66 in 2015 to an estimated $9.08 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 3.24% 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 below the price.
At the time of valuation, further research into Chubb Ltd revealed the company was trading below its Graham Number of $158.96. The company pays a dividend of $2.9 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.98, which was below the industry average of 26.11, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Chubb Ltd performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||3|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||12/1/2018|
|Long-Term Debt & Capital Lease Obligation||$12,395,000,000|
|Shares Outstanding (Diluted Average)||463,196,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$10.25|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$9.08|
Other ModernGraham posts about the company
|Chubb Ltd Valuation â€“ June 2018 $CB|
|Chubb Ltd Valuation â€“ March 2017 $CB|
|21 Best Undervalued Stocks of the Week â€“ 8/27/16|
|Chubb Limited Valuation â€“ August 2016 $CB|
|Chubb Ltd Stock Valuation â€“ February 2016 $CB|
Other ModernGraham posts about related companies
The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.