Chubb's New Buyback Authorization - Analyst Blog

In a concerted effort to increase shareholders' wealth, The Chubb Corp. (CB) yesterday announced a fresh share buyback authorization of 30 million shares. 

During the recently concluded third quarter, the commercial property insurer Chubb repurchased 10.2 million shares for a total of $555 million at $54.63 per share. For the first nine months of the year, the average repurchased cost per share was $51.94. As of September 30, 2010, there were 6.6 million shares remaining under the current repurchase authorization, which was announced in December 2009 and increased by 14 million shares in June 2010. 

Chubb has been very active with respect to its share buyback program. Since its initial buyback authorization in December 2005, it has repurchased approximately 37% of its market capitalization at that time.

There was no expiration date set for the buyback program, given management's enthusiasm in buying back shares, we believe the new repurchase program which amounts to approximately 10% of the 304.9 million outstanding shares at September 30, 2010, will be exhausted by the end of 2011.  

Concurrently, Chubb also announced a regular quarterly cash dividend of 37 cents to be paid on January 11, to shareholders' of record as of December 23, 2010.  The insurer has been regular with its dividend payouts and has maintained its tradition of increasing dividend year over year.

The second quarter saw a 6% increase in quarterly dividend to 37 cents or $1.48 on an annual basis, marking the twenty eighth consecutive annual dividend increase, an indication of its financial strength and resilience in a cyclical industry.

The announcement by Chubb emits strong signals about its inherent capital strength. During the third quarter, the company reported operating earnings of $1.69 per share, 29 cents ahead of the Zacks Consensus Estimate, benefiting from fewer shares effectuated by management's aggressive buying back of shares. It also raised its 2010 full- earnings expectation of $5.75 to $ 5.55 per share from its earlier guidance of $5.15 to $5.55.

Chubb carries a Zacks #3 Rank, which translates into a Hold rating for the Short-term (1-3 months). Also, over the long-term (6+ months) we rate the shares as Neutral.