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On Tuesday, Deutsche Bank (ETR:DBKGn) analysts revised their stance on Chubb Corporation (NYSE:CB), downgrading the stock from Buy to Hold and adjusting the price target to $303 from the previous $319. The firm cited concerns over the insurance company’s future performance in comparison to the broader market. Currently trading at $292.49, Chubb commands a market capitalization of $117 billion and maintains a "GREAT" financial health rating according to InvestingPro analysis.
Chubb’s shares have outperformed the S&P 500 year-to-date, but Deutsche Bank expects this trend might not continue. The analysts pointed to a shift in investor focus towards underlying fundamentals, where they observe signs of deterioration. Chubb, as a prominent underwriter of large commercial risks, is particularly vulnerable to the insurance pricing cycle, which has begun to show a decline in rates across key lines.
The bank’s analysts believe that Chubb’s North American Commercial business, which is considered its flagship segment, is likely reaching its peak in terms of margins. They also predict that growth in this segment could face challenges. The current market valuation of Chubb, trading above its historical average, does not offer a sufficient margin of safety to outweigh the risks associated with the early stages of a softening cycle in the insurance industry.
Over the past six months, there has been a divergence in pricing within the insurance sector. Large accounts have seen a decline in pricing, whereas small to mid-sized accounts have remained robust. Initially, it was expected that large accounts would lead the cycle and smaller accounts would follow suit, but recent data has challenged this view. Deutsche Bank now anticipates that this divergence might last longer than initially expected, posing a near- to medium-term challenge for Chubb due to its significant exposure to large accounts. This anticipated headwind has informed the firm’s decision to downgrade the stock. The current analyst consensus recommendation stands at 2.41, with price targets ranging from $245 to $340. For deeper insights into Chubb’s financial metrics and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Chubb Limited announced a 6.6% increase in its annual dividend, raising it to $3.88 per share, marking the 32nd consecutive year of dividend hikes. This decision was made during the company’s Annual General Meeting, where a new $5 billion share repurchase program was also authorized, set to begin on July 1, 2025. Shareholders at the meeting approved the renewal of the company’s capital band, allowing the Board of Directors to adjust Chubb’s share capital by up to 20% until May 2026. Additionally, Chubb made significant leadership changes, appointing Tim Boroughs as Vice Chairman and Chris Hogan as the new Chief Investment Officer. In terms of analyst activity, Keefe, Bruyette & Woods slightly reduced Chubb’s price target from $316 to $314, maintaining an Outperform rating due to anticipated slower growth in investment income. Meanwhile, Raymond (NSE:RYMD) James raised Chubb’s price target to $340, maintaining a Strong Buy rating, citing expectations of double-digit core operating earnings growth by 2026. These developments reflect ongoing strategic adjustments and analyst confidence in Chubb’s market position.
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