Earnings Preview: Chubb

Apr.15.10 | About: The Chubb (CB)

Property and casualty insurer Chubb Corp. (NYSE:CB) is scheduled to release its first quarter 2010 earnings on April 22, 2010, after the close of the market. Management has not provided any financial guidance for the first quarter.

The insurer is likely to face a dent in its first quarter profits from the estimated $189 million of after tax losses from recent catastrophes –- Northeast storms, the Xynthia windstorm and the Chilean earthquake. Top line is also expected to remain under pressure due to soft market conditions coupled with increasing competition, which in turn will restrict premium growth. However, the company’s ongoing share repurchase program will partially offset the negatives.

For 2010, management expects earnings in the range of $5.15–5.55 per share, lower than that achieved in 2009. Most of the decline is attributed to higher assumed level of loss from catastrophes in 2010 compared with the unusually low level in 2009. A soft pricing environment coupled with increasing competition is also expected to exert downwards pressure on top-line growth, thereby impacting earnings.

Estimate Revision Trends

Chubb Corp. is expected to earn 98 cents per share in the quarter, as per the Zacks Consensus Estimate. The company had a reported profit of $1.43 per share in the first quarter of 2009 and $1.66 per share in the last quarter of 2009. According to the Zacks Consensus Estimate, Chubb Corp. is expected to record net earnings of $5.00 per share for full-year 2010, in contrast to a net profit of $6.14 reported in 2009.

Over the last 30 days, 16 of the 19 analysts covering the stock have lowered their estimates for the first quarter of 2010, while no upward revisions were witnessed. The absence of upward estimate revisions for the first quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.

With respect to earnings surprises, Chubb Corp. has surpassed the Zacks Consensus Estimate in all the trailing four quarters. This is reflected in the average positive earnings surprise of 13.4%.

The downside potential for the estimate for the first quarter, essentially a proxy for future earnings surprises, currently stands at 5.10% for Chubb Corp.