Chubb’s earnings flew across the street. Here’s why stocks are falling

Chubb’s The stock is falling despite strong earnings Wednesday and price target increases by Wall Street analysts.

Instead of focusing on those figures, investors have been spooked by signs of a softening of the property insurance market as competition increases and rates fall.

On Wednesday’s earnings call, CEO Evan Greenberg addressed those pressures, calling aggressive price reductions in the industry to win new business “foolish.”

Chubb is intentionally shrinking its business into larger accounts and excess and surplus lines where it feels the price it is getting is not worth the risk.

Piper Sandler analyst Paul Newsome called Chubb’s approach to softening prices “deliberate.”

“We think the takeaway from this quarter was that Chubb is more focused on profitability than growth,” Newsom wrote.

While this may disappoint some investors in the near term, the analyst said, “it’s the right thing to do.”

Most analysts were as positive as Newsom.

TD Securities analyst Andrew Kligerman credited Chubb’s “extraordinary underwriting” for its earnings decline. The company reported first-quarter EPS of $6.82, compared to the consensus estimate of $6.60, according to Refinitiv.

Greenberg said that despite the risk of increased inflation from the Iran war, he is confident in the company’s balance sheet, earnings strength and liquidity position.

Greenberg said, “The impact of the war exerts pressure on certain financial, fiscal and economic forces, such as underlying inflation, fiscal deficits and sovereign debt, global supply chains and financial valuations including equities and credit, and rising energy shortages.”

He described his geopolitical outlook as worrying, but said the impact of the war “isn’t something I’m really wringing my hands about.”

Chubb has been named administrator of the federal government’s marine reinsurance for ships trying to transit the Persian Gulf and the Strait of Hormuz, but Greenberg says no ships have taken advantage of it so far.

The threat of cyberwarfare by Iran or its proxies has also put insurers on alert – and potentially opened up new business opportunities.

Greenberg says medium-sized companies are particularly vulnerable – more targeted than small businesses because they have more money, and are less capable and focused on strong digital defense.

Additionally, he says Anthropic’s mythos has exposed new vulnerabilities that could be exploited by AI.

When it comes to countermeasures, Greenberg said, “the arms race is on.”

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