Evan Greenberg, President and CEO of Chubb Ltd., arrives at the morning session of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, USA, on Wednesday, July 10, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Chubbs The stock is falling on Wednesday despite a strong earnings beat and a series of price target hikes from Wall Street analysts.
Instead of focusing on these numbers, investors are deterred by signs of a slowdown in the property insurance market with increasing competition and falling interest rates.
In Wednesday’s earnings call, CEO Evan Greenberg pointed to these pressures, calling the industry’s aggressive price cuts to win new business “stupid.”
Chubb is intentionally downsizing its business in the wholesale and excess and experience areas because it believes the price it receives is not commensurate with the risk.
Paul Newsome, an analyst at Piper Sandler, called Chubb’s approach to price cutting “deliberate.”
“We believe the takeaway from the quarter is that Chubb is more focused on profitability than growth,” Newsome wrote.
While that might deter some investors in the short term, it is “the right thing to do,” the analyst said.
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Most analysts were positive, as was Newsome.
Andrew Kligerman, an analyst at TD Securities, praised Chubb’s “exceptional underwriting” for the earnings increase. The company reported first-quarter earnings per share of $6.82, compared to consensus expectations of $6.60, according to Refinitiv.
Greenberg said he was confident about the company’s balance sheet, earnings power and liquidity position, despite the risk of rising inflation caused by the Iran war.
“The impact of war is increasing pressure on certain financial, fiscal and economic strengths, such as underlying inflation, budget deficits and government debt, global supply chains and financial valuations including stocks and credit, and growing energy shortages, to name a few,” Greenberg said.
He described his geopolitical outlook as concerned but said the impact of the war was “not something I really wring my hands about.”
Chubb was named administrator of the federal government’s maritime reinsurance for ships seeking to transit the Persian Gulf and the Strait of Hormuz, but Greenberg says no ship has yet taken advantage of it.
The threat of cyberwar by Iran or its proxies has also put insurers on alert — and potentially opened up new business opportunities.
Greenberg says mid-sized companies are particularly vulnerable – more targeted than small businesses because they have more money but are less powerful and don’t focus on strong digital defenses.
He also says Anththropic’s Mythos has uncovered new vulnerabilities that can be exploited by AI.
When it comes to fighting back, Greenberg said, “The arms race is on.”
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