The Chubb Corporation: An Analysis of 2004-2012 Return on Equity
11 Pages Posted: 30 May 2017
Abstract
In March 2012, a buy-side analyst with a midsize (more than $5 billion in managed assets) investment management firm was asked by one of its portfolio managers to help him evaluate the Chubb Corporation (Chubb) as a potential investment candidate to diversify his portfolio to include a property casualty insurer. Chubb's stock performance was inspiring, tripling in value since 2004. But an initial screening indicated weakness on some key financial statement metrics: low top-line premium growth, rising costs, low investment returns, and, most important of all, a flat to falling return on equity.
Excerpt
UVA-C-2356
Feb. 4, 2015
The Chubb Corporation: An Analysis of 2004–2012 Return on Equity
Who insures you doesn't matter. Until it does.
(Chubb Corporation annual review, 2009)
Paula Kelly was a buy-side analyst with SunnyDale Advisors, a midsize (more than $ 5billion in managed assets) investment management firm based in Stamford, Connecticut. She was asked by Richard Haines, one of SunnyDale's portfolio managers, to help him evaluate the Chubb Corporation (Chubb) as a potential investment candidate. It was March 2012, and Haines was looking to diversify his portfolio to include a property casualty insurer. He only had interest in those companies that had steady records of delivering returns, and Chubb certainly fit that mold. The company's stock performance was inspiring, tripling in value since 2004 and outperforming its peers (Exhibits 1 and 2). But Haines's own initial screening indicated weakness on some key financial statement metrics: low top-line premium growth, rising costs, low investment returns, and, most important of all, a flat-to-falling return on equity (ROE). Haines asked Kelly to complete a summary of Chubb's key drivers of financial performance that would explain the company's strong stock performance (Chubb's financial statements are displayed in Exhibits 3, 4, and 5).
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Keywords: financial performance, ROE, investment returns, insurance coverage, income statement, financial reporting, annual report, financial analysis
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