The stock is down from 78 in April to 57, but Winans sees it rebounding to 73 in a year. That's 1.6 times his estimate of 2003 book value, which is usual for a top insurer, vs. 1.4 now. The current low price reflects concern over new management, led by industry outsider John Finnegan, and worry over earnings as Chubb builds up its reserves. "These fears are overblown," says Winans, who believes CEO Finnegan "will surprise investors" at the fourth-quarter-earnings meeting with analysts in early February. "He will win investors' confidence when they hear of Chubb's performance and growth prospects."
The company, he adds, can easily absorb future reserve adjustments if they are necessary. In the past two years, Chubb has raised its rates--which shows up in the 28% growth in premium revenue in 2002. Winans figures Chubb will still post a hefty 19% in 2003. He expects operating earnings to leap to $6.48 a share in 2004, up from $4.96 in 2003 and $2.03 in 2002.
Catherine Seifert of Standard & Poor's also rates Chubb a buy, despite asbestos worries. By adding $635 million to reserves in the third quarter, Chubb has provided for asbestos and toxic-waste claims, says Seifert. Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.