) to overweight.
Analyst Jay Gelb says the upgrade is based on significant increase in his 2004 and 2005 EPS estimates, higher expected return on equity, and fewer concerns going forward. Previously, his thesis was that Chubb would be unable to achieve a 15% return on equity by 2005 -- this outlook now appears too pessimistic.
Gelb thinks Chubb made significant progress addressing his concerns involving surety claims from Aquila, Chubb Financial Solutions, the potential loss reserve deficiencies. He also sees an improving cost ratio. Gelb upped the $6.50 2004 EPS estimate to $7.15 and upped the $7.30 2005 EPS estimate to $8.50 reflecting continued margin improvement. He upped the $75 target to $80.