Chubb is one of North America’s mid-sized insurance companies; it has a global market share of about 7.5% for commercial lines, 4% of the global house insurance market, and 4.7% of the all-combined risk.
The P&C insurers look defensive in an uncertain economic environment. Companies with strong fundamentals such as Chubb should not be impacted by the present economic downturn. We continue to favor commercial lines insurers as the outlook for pricing, margins and earnings improves. While reinsurance fundamentals have improved meaningfully given the “hard” property cat reinsurance market, we believe that it is largely reflected in valuations. While the upside to earnings revisions is limited, we like the defensiveness of the business. Personal lines insurers are in the midst of a “hard” market which should drive underlying margin improvement and upward consensus estimate revisions over the next 12 months. Losses have been high in recent years, and premiums are therefore adjusted upwards which is, generally, share price positive.