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Morningstar | Chubb Holds Steady in 2Q

Chubb turned in a solid second quarter. We estimate the annualized tangible return on equity at 17%, which supports our narrow moat rating and reinforces our view that Chubb is one of the strongest franchises in the insurance industry. We will maintain our $140 fair value estimate.

Overall, the company’s property and casualty operations performed well. The combined ratio ticked up slightly to 88.4% from 88.0%, as a modest increase in the loss ratio was partially offset by a decline in the expense ratio, but stayed quite strong in an absolute sense.

Net written premiums were up 6% year over year, and management noted that pricing increases have been accelerating as the company has moved through the last few quarters. This would seem to have positive implications for the company’s ability to maintain its underwriting margins going forward.

Looking across segments, premium growth was strongest in North American personal lines, and underwriting margins were flat in this area. North American commercial lines saw more modest growth and underwriting margins declined a bit, which is in line with what we’ve seen from commercial peers. International lines were boosted by currency effects, but grew in line with domestic operations if that factor is excluded. Overall, the results suggest stability throughout Chubb’s operations, and we continue to be impressed by the company’s ability to generate strong overall results from a diversified group of operations.