Rates And Loss Ratios Remain Risks, But Chubb's Valuation Is Getting Interesting

I have long thought that the managers of ACE, now operating under the name of Chubb (NYSE:CB) after that merger, are some of the best in the business and I continue to believe that that is a strong foundation for a positive investment thesis. That said, the P&C business has been flooded with capital and only recently have there been signs of rate improvement. At the same time, underwriting margins are getting squeezed and I’m worried about the outlook for loss trends.

Like many other insurers, Chubb has seen some share price weakness since January of this year, with the shares off about 10% from the 52-week high and up only a little bit over the last year. While I have some concerns about the impact of higher losses and lower reserve releases, that’s balanced by the reality that good names like Chubb don’t get all that cheap all that often. I do have some “falling knife” worries here, but the share price is getting to a point where long-term investors might want to freshen up their due diligence.

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Rates And Loss Ratios Remain Risks, But Chubb's Valuation Is Getting Interesting