EUR 850.00 For Business Accounts Only

Morningstar | Chubb’s Underlying Underwriting Results Hold Steady in 3Q

Overall, we think Chubb’s third-quarter results were solid. We estimate annualized tangible ROE at 16%, a level that supports our narrow moat rating for the company. We will maintain our $140 fair value estimate.

The quarter was a little light in terms of growth, with net written premiums within P&C operations up only 2.5% year over year. Management commented that pricing is not keeping up with loss cost trends in certain lines, which limited Chubb’s overall appetite for growth. This jibes with comments we have heard from peers, and we believe being selective in today’s mixed pricing environment is the most value-creative move.

Stripping out catastrophe losses and reserve development, the combined ratio in P&C lines was basically flat year over year at 88.2% for the quarter, with modest deterioration in personal lines offset by a modest improvement in commercial lines. We view the absolute level of Chubb’s combined ratio as very attractive, and management’s ability to hold at this level is impressive, in our view.

Pretax catastrophe losses were $450 million in the quarter, a level that didn’t do too much damage to the bottom line and certainly was a dramatic improvement over last year when catastrophe losses pushed Chubb to a small loss. While the impact of Hurricane Michael will come in the fourth quarter, our overall impression is that catastrophe losses for the industry will be somewhat elevated this year but a marked improvement from 2017.