CB Chubb Limited
Elite insurer at 14% normalized ROE — modestly undervalued with 7% margin of safety.
The story
Chubb is an elite global P&C insurer with expanding margins (operating margin 16.4%→23.1% over four years) and trailing ROE of 15.2%. The combined ratio discipline and premium growth support above-cost returns, but P&C cycles mean-revert and 15%+ ROE is near the top of Chubb's through-cycle range. Book equity of $73.8B grows with retained earnings and disciplined underwriting.
Normalized ROE trimmed slightly from 0.135 to 0.14 as trailing 15.2% and margin expansion confirm durable above-average returns, but I resist extrapolating the peak — catastrophe cycles and rate competition will pull ROE toward 13-14% through-cycle. Beta nudged up from 0.75 to 0.80 reflecting slightly higher market sensitivity. Terminal growth at 4.5% sits just below the 4.81% risk-free rate, supported by retained earnings and global premium growth.
Value drivers
| Return on equity (normalized) | 14.0% |
| Book-value growth (Y1) | 7.0% |
| Terminal book growth | 4.5% |
| Beta | 0.80 |
| Failure probability | 0.2% |
| Cost of equity | 8.4% |
Valuation bridge
| PV of excess returns | 24.14B |
| PV of terminal excess | 29.46B |
| Equity value | 127.10B |
| ÷ shares → per share | $329.46 |
News
bullish +0.30 · 8 articles
- Multi-Line Insurance Stocks Q2 Teardown: Chubb (NYSE:CB) Vs The Rest
- Chubb (CB) Puts Alexis Obligi In Charge Of Personal Lines Across EMEA
- Chubb (CB) Stock Could Be 48% Below Fair Value On Equity Returns
- Chubb (CB) Outpaces Stock Market Gains: What You Should Know
- CB Stock Trades at 1.62x Book Value: Is the Valuation Worth It?
- Insurers Are Buying Back More Stock as Pricing Softens
- Chubb's Middle-Market, Overseas Operations Boost Commercial Growth
- Is Chubb Limited Stock Outperforming the S&P 500?
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 73.76B | 14.0% | 4.13B | 3.81B |
| 2 | 78.92B | 13.6% | 4.10B | 3.49B |
| 3 | 84.23B | 13.2% | 4.04B | 3.17B |
| 4 | 89.65B | 12.8% | 3.94B | 2.85B |
| 5 | 95.18B | 12.4% | 3.80B | 2.54B |
| 6 | 100.79B | 12.0% | 3.63B | 2.23B |
| 7 | 106.44B | 11.6% | 3.40B | 1.93B |
| 8 | 112.12B | 11.2% | 3.14B | 1.65B |
| 9 | 117.79B | 10.8% | 2.83B | 1.37B |
| 10 | 123.41B | 10.4% | 2.47B | 1.10B |
Key risks
- Catastrophe losses could spike combined ratio and compress ROE below normalized assumptions
- P&C pricing cycle softening as competitors chase premium growth
- Investment portfolio credit and duration risk if rates shift sharply
Catalysts
- Hard market continuation in commercial P&C sustaining premium growth
- Capital return via buybacks accelerating book value per share growth
- EMEA and Asia expansion driving geographic diversification of premium