Chubb Limited (CB)

Total return at 5 years: 8.1%/year = 6.8% appreciation + 1.2% dividend. The target price ($480) is ex-dividend; the $24 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $740 · Multiples $406) exceeds the market price ($345).

Today — fairly valued: at $345 trades ~15.1% below its value discounted to today (~$406); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($480) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$255.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($345) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-12.2%/year) than we project (3.9%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$5.6 bn of owner earnings in year 5 (vs ~$13 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

An insurer is valued on equity —a multiple on earnings plus price against book value, with return on equity as the profitability measure— never on enterprise value: the float, which is invested policy reserves, is its own low-cost funding and not capital structure. The model's metric is core operating income (the measure Chubb reconciles to net income in the financial supplement of each release), not GAAP net income: the latter incorporates realized portfolio gains, market-risk benefits, and amortization of the fair-value adjustment on acquired assets, which are market movements rather than underwriting economics, and it is on core operating income that the company itself measures its return and ties management's compensation. The method's band for this type of business is calibrated on that same measure. The grid is rolling: the base year is the trailing twelve months ended June 30, 2026, read from the XBRL instance of the 10-Q filed on July 28, 2026 —the SEC's data interface has not yet ingested it— and from the financial supplement of the July 21, 2026 release. Core operating income for that trailing period is $11,516 million, built by levels (fiscal 2025 $9,954 million, plus first-half 2026 $5,531 million, minus first-half 2025 $3,969 million), and is normalized for catastrophes before being projected. The trailing-twelve-month catastrophe load was $1,625 million pretax on property and casualty net premiums earned of $47,294 million, i.e., 3.44%, well below the three-year range the annual report publishes: 4.5% in 2023, 5.5% in 2024, and 6.3% in 2025. Carried to the midpoint of that range, 5.4%, the normalized load would be $2,554 million, so the trailing period received $929 million pretax —$748 million after the period's core operating income effective tax rate, 19.4%— that does not recur. The base year comes to $10,768 million, equivalent to $27.92 per share on the 385.6 million shares outstanding at quarter-end, and to a normalized combined ratio of 84.7% versus the 82.7% actually reported. Favorable prior-period reserve development, $1,198 million or 2.53 points of the combined ratio, is not normalized: its published series climbs steadily (1.9% in 2023, 2.0% in 2024, and 2.5% in 2025) and adjusting it would imply a reversal the filing does not support. The path keeps the shape of the prior model. Chubb does not publish earnings forecasts —the search of the quarter's release and the annual report returns none— so the starting point is anchored to its own trajectory: normalized core operating income in the first half grew about 9% year-over-year, of which roughly 2.8 points are foreign exchange, putting normalized organic growth at around 6.5%. Year 1 is modeled below that figure, at 4.6%, for a reason the release itself documents: written premium, the leading indicator of earned premium, grew just 3.0% in property and casualty —6.3% excluding major accounts and E&S property— with North America Commercial at −2.3% and the major accounts and specialty business at −9.0% on property underwriting decisions; management describes "excessively soft" conditions in global property and its spread into parts of casualty and financial lines. Growth converges to 3% by year 5 as earned premium catches up to written premium and the boost from investment income moderates. The adverse scenario prolongs the soft market and adds a year of larger catastrophes; the favorable one assumes prices re-harden and float income keeps rising. The 12.5-times exit multiple on core operating income sits at the center of the method's band for a quality property and casualty insurer, 11 to 15 times, where it is placed by a wide but stable-direction moat, a return on equity well above the 10% bar, and moderate terminal growth; the implied 8% yield plus that growth covers the bar. Shares decline 2.5% a year, below the 3.3% year-over-year actually revealed (398.7 million at June 30, 2025 versus 385.6 million a year later): the trim is deliberate and reflects that the buyback was executed at an average price of $326.03 per share in the first half, near 1.7 times book value, a level that limits how much it adds per share. The base-year dividend is the amount declared over the last four quarters, $3.93 per share; year 1's is the current rate of $1.02 quarterly, $4.08 annualized, the same across the three scenarios because it is a declared fact rather than a scenario variable. The return the table shows is core operating income per share over ending book value per share: 14.3% in the base year, reproducing the 14.3% return on equity of core operating income the company published for the first half of 2026.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $480 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $345, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $480 in 5 years plus $24 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $406. Against the current market price ($345), the margin of safety is 15.1% (trades below the maximum → there is margin) and the total return at that price would be 8.1% annually.

• Multiple vs the band. ~12× core operating income (within a quality insurer's band, 11 to 15 times — reasonable) but near 2× book value, in the high end of its historical range. The earnings multiple is not expensive; the book-value multiple leaves no room for expansion.
• Near highs. It trades with no discount, with price against book value in the high end of its range. The market pays for the quality plus Berkshire's backing. Full but reasonable price.
• Margin of safety. Base case 5y ~$480 against a price of ~$345 → total return +8%/year (book value compounding plus dividend). Decent but not exceptional; little room for multiple expansion. Better bought at a cycle trough.

• ROE vs the 10% bar. Return on equity of core operating income of 14.3% and on tangible equity of 20.9% in the first half — above the 10% bar. Sustained, with underwriting discipline and the float as the engines. Less volatile than an investment bank, more than a deposit-taking bank.
• Underwriting quality. The combined ratio (82.7% in the trailing twelve months, 85.7% in FY2025) is a solid technical profit, and the current-accident-year ratio excluding catastrophes is flat at 82.2%: the underlying margin did not move. Reserve development is consistently favorable, with the published series climbing. ⚠️ The 82.7% is helped by a benign catastrophe year; normalized it would be 84.7%.
• The float. $175.4bn of invested assets (a quality, unlevered portfolio) that generated $6.8bn of net investment income in the trailing twelve months, with the adjusted quarterly component hitting a record (+11.4%) — its own low-cost funding, the superpower of insurance.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The engine of a property and casualty insurer is underwriting (a combined ratio below 100% is a technical profit; Chubb ran 82.7% in the trailing twelve months, or 84.7% normalized to a mid-cycle catastrophe load) plus the float (invested policy reserves, $175.4bn of invested assets, which generated $6.8bn of net investment income and whose adjusted quarterly component was a record, +11.4%). The value metric is book value per share compounding —up 12.3% year-over-year, and tangible book value up 17.1%— plus the 33-year dividend aristocrat streak. The pricing cycle is cyclical and is soft today in property, compressing premium growth; catastrophes are the inherent risk. Chubb returns capital via dividend plus buybacks, with a Board authorization of up to $5,000 million in effect since July 2025 and no expiration date.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. Growth (earned premiums +4-5%, book value per share +12.3% year-over-year) is real: premium volume, Asia, and the float. No monetary inflation distorting it.
• Growth driver. Premium volume (life +7.5% of written premium in the quarter, led by Asia) plus rising float income plus buybacks. Book value compounding is the value engine. Modest, cyclical plus secular.
• Pricing cyclicality. The pricing cycle turned soft in property and brakes written premium growth (+3.0% in property and casualty). Book value growth moderates but does not stop; the business is defensive.

• Relevant in 10 years (recurrence). Insurance is essential and recurring (policies renew); Chubb is the quality leader. It will still be in use in 10 and in 50 years. High recurrence; pricing cyclicality is the limit.
• Pricing power. Cyclical: in a hard market Chubb raises prices; in a soft one, like today's in property, it gives up volume rather than underwrite mispriced risk — major accounts and specialty fell 9.0% in written premium in the quarter on underwriting decisions. The power lies in the discipline to turn down bad business, not in setting prices against the cycle.
• Moat and its direction. Wide moat (underwriting discipline plus scale plus float plus AA balance sheet), stable direction. But it is one of execution (the culture), which depends on Greenberg — succession is the question mark.
• Pricing cyclicality. The disconfirmer: the pricing cycle turned soft and shows in the company's own premium — property and casualty written premium grew 3.0% in the quarter and North America Commercial fell 2.3%, with the softening spreading into parts of casualty. Chubb is defensive (recurring and resilient) but the underwriting margin is cyclical.

• ✓Underwriting profitability (combined ratio)Combined ratio 82.7%
• ✓Reserve adequacy (development)Favorable +2.5% pts
• ✓Catastrophe exposure3.4% pts of the combined ratio
• ✓Book value compounding+10%/yr · core ROE 14%
• ✓Float return (investment income)$6.8 bn on $175.4 bn of float

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Underwriting profitability. 82.7% combined ratio in the trailing twelve months (85.7% in FY2025) — a solid technical underwriting profit, before float income. ⚠️ Helped by a catastrophe load of 3.4 points against a three-year range of 4.5 to 6.3; normalized it would be 84.7%.
• Reserves + balance sheet. Consistently favorable reserve development (2.53 points of the combined ratio in the trailing twelve months, with the series climbing), a balance sheet of $281.3bn of assets and $75.4bn of equity, a quality, unlevered investment portfolio. Solid.
• Catastrophe exposure. A mega-catastrophe year hits results (the 2025 wildfires cost $1.47bn and pushed the annual load to 6.3 points) — the inherent risk, managed with reinsurance and diversification. The result excluding catastrophes remains very profitable: 82.2% current-accident-year ratio.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. Greenberg holds shares significant in dollar terms (though <1%); insiders <1%. ⭐ Berkshire Hathaway (Buffett) is the largest disclosed shareholder in the proxy (8.07%) — a strong vote of confidence in the franchise.
• Capital allocation. Reinvests at a core operating income return on equity of 14.3% (grows book value) and returns the rest: $775 million of dividends and $2.12bn of buybacks in the first half, against an authorization of up to $5,000 million. Buying back near 2× book value is expensive but modest.
• Execution / integrity. Greenberg built the underwriting discipline over more than twenty years (a combined ratio sustained in the low-to-mid 80s, consistently favorable reserve development). ⚠️ Succession (71, no named successor) is the continuity risk to that culture.

• It is neither cheap nor expensive: it trades at ~12× core operating income —within the method's band for this type of business— but at around 2× book value, with no discount.
• The market already recognizes the quality: a combined ratio sustained in the low-to-mid 80s, a float yielding increasingly more (record adjusted investment income in the quarter, +11.4%), 33 years of dividends, and Buffett as the largest disclosed shareholder. It is priced fairly.
• The soft property market is a headwind visible in the company's own premium —property and casualty written premium grew 3.0% in the quarter, with North America Commercial at −2.3%— and that tempers enthusiasm; but the business is recurring and book value per share still compounded 12.3% year-over-year.

Chubb is neither a bargain nor overvalued: it is a great business at a fair price. The taxonomy of why a stock trades cheap does not fully apply here — there are no missing buyers (it is a blue-chip name with Berkshire as a shareholder) nor motivated sellers, and price against book value in the high end of its range says the quality is fully priced. Nor is it a case of stacked optimism like expensive cyclicals: the multiple on core operating income is reasonable, the business is defensive, book value compounds, and the dividend carries part of the return. There is one caveat the filing itself requires: the trailing-twelve-month result is helped by a catastrophe load of 3.4 points against a three-year range of 4.5 to 6.3, so the multiple one sees on reported earnings is lower than what corresponds to normalized earnings — the model uses the normalized figure, precisely to avoid mistaking a benign year for a bargain. The read: a superb compounder at fair value, with a decent but not exceptional total return, and little room for multiple expansion from an already full level. The best entry is a pricing-cycle trough or a catastrophe scare.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +1%/year (+6% total): the margin of safety protects the downside. The bull (+14%/year, +94% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Soft pricing cycle. The central disconfirmer: the market turned soft in property and already shows in the company's own premium (property and casualty written premium +3.0%, North America Commercial −2.3%, major accounts −9.0% on underwriting decisions), spreading into parts of casualty. A prolonged soft cycle pushes up the combined ratio.
• Greenberg's succession. At 71 with no successor named, the underwriting discipline culture (his legacy, the moat) faces transition risk — the long-term structural question.
• Catastrophes. A mega-catastrophe year hits results — the inherent volatility of a property and casualty insurer, managed with reinsurance and diversification. The trailing twelve months ran at a 3.4-point load against a three-year range of 4.5 to 6.3, so the reported result is helped; the model normalizes the base year to 5.4 points.
• Valuation in the high end of the range. Price against book value of around 2×, in the high end of its historical range — little room for multiple expansion, and a reversion would be a headwind to the return.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROE 14% above the 10% bar, but the margin is limited (+15%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 4% at a PEG of 3.2 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -12% vs our 4%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -0%/yr, bull-scenario ceiling +13%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -12%, within what we project (4%) — the story squares with the numbers.