The Chubb Corporation: Hoping For Disaster

The Chubb Corporation (CB) ($52.95) has been dead money for the last two years. I think it's the best managed of the insurers. But I usually wait for some kind of disaster to push the market down before I buy a property and casualty insurer. People hate this sector right now because property and casualty rates have been falling after the big runup after Katrina. Now we've gone a couple years without a huge disaster and prices are really coming down.

Many who watch the sector are worried that prices do not reflect the risk. They are right but the discount being applied to Chubb is just too much. It has a trailing p/e of only 8.7 right now. So I'm going to add a bit to my position in the next few days, maybe right after I write this. What is my risk? A big hurricane or earthquake. That's true and I really hope that doesn't happen because it means people suffer - and some payouts for Chubb. But a disaster like that and claims for Chubb would also mean a return to higher insurance rates which would also be good for Chubb.

Disclosure: I own Chubb (CB). Chubb is my property insurer for my New York Condo. I think I pay too much but since they have a reputation for paying claims quickly and without fighting much I'll stick with them.