The Case for Chubb

Photo: Generac

Covid-19 risk is still unclear, but protection from virus claims should make insurance companies durable, in particular, this Swiss iNsurance giant.

For those about to insure, we salute you. Particularly, Zurich-based insurance giant Chubb (CB).

As economies around the world struggle to restructure in the face of the Covid-19 crises, a premium is being put on so-called survivability. That is, which firms will have the resources and stamina to find a place in the new post-Covid world order? A flexible and sustainable labor force will be key. Diverse intellectual property that can adapt to differing global economies will matter. As will a firm social contract with a stable government that has the will to solve a problem, no matter the political stripe of that problem. 

In terms of that kind of survivability, it’s almost impossible to beat Chubb. 

Here’s a Swiss-based insurance behemoth with 33,000 employees that operates in most major countries around the world. But what makes it a true Covid survivor is that it is managed out of Zurich, a battle-hardened capital if there ever was one. More than 3,000 Swiss bridges, tunnels and critical points of infrastructure are prewired with munitions to blow sky high in the face of an enemy attack. Every Swiss citizen, male or female, is obliged to donate regular compulsory service that drills the principles of order, toughness and fighting it out to the last man or woman. 

The Swiss also have an excellent health care system that gets no credit for coping relatively well with Covid. Even though the Swiss are reporting coronavirus cases-per-million in line with those of Italy -- with over 9,000 cases and 86 deaths -- hospitals are managing. 

The Swiss even have a flair for the dramatic. An artist went as far projected the Swiss flag on the side of the 13,000-foot tall Matterhorn. Covid or no Covid, these are a people who will prevail.

Few Payouts for Covid

The Swiss sense of resilience and creativity in the face of organized war-scale social challenge runs throughout Chubb. Chubb is one of the world’s top-tier insurance companies, that books about $176 billion in assets through automobile, commercial and liability insurance policies. Profits were up for the last quarter, to nearly $1.2 billion. 

The question for Chubb when it comes to Covid, is the as for most insurers: What will the future exposure be as the world restructures? Here, Chubb is in relatively good shape in terms of balance sheet values, interest rate exposure and the standard risks all insurance companies face. 

But Chubb is benefitting from a bit of good luck: Pandemics are probably not covered in standard commercial insurance policies. So while lawsuits will flare up for major lost events, like March Madness and The Olympics, and workforce reductions will be an issue, overall, there will not be a wave of losses coming, as during hurricane season. 

Auto claims are also expected to drop as driving dramatically falls in the near term. And insurance brokers -- the critical sales force to a company like Chubb -- should be able to continue to serve customers as the economy goes virtual. Of note, we think larger brokers like Gallagher and Co. (AJG) and Aon (AON) also are interesting ideas. Insurance brokers have always proved to be solid defensive picks during recessions. 

Chubb’s is not a tricky story to get right: This is a massive blue-chip, large-cap stock, trading at just 10.5 earnings per share. It still pays a 3% dividend, and just rebounded off its 52-week low. 

And, oh yeah, one of Chubb’s directors, Ted Shasta, bulked up on an additional 2,000 shares of stock. On March 20, his stake rose to a cool 16,375 shares. 

Depending on your portfolio, why wouldn’t Chubb be worth a look?