In the third quarter of 2023, global commercial insurance rates declined by 4%, marking the first drop after seven consecutive years of increases, according to Marsh’s Global Insurance Market Index. Despite this softening in pricing, major players like Berkshire Hathaway Inc. (BRK.B) and Chubb Limited (CB) remain strong due to their extensive operations. Swiss Re anticipates that insured losses from natural disasters will reach approximately $107 billion by 2025, primarily due to events such as the wildfires in California and severe storms in the U.S. The combined ratio for the insurance sector is expected to improve to 98.5% in the same year.
Berkshire Hathaway’s insurance segment, contributing about 25% of total revenues, leverages a vast cash reserve exceeding $100 billion to make acquisitions. The company is expecting a 6% year-over-year revenue growth for 2026, although EPS estimates have decreased by 4.2%. Meanwhile, Chubb, the largest publicly listed property and casualty insurer based on market capitalization, reports a projected 8.6% EPS increase despite an estimated 6.5% revenue decline for the same year. Chubb is also focused on enhancing its cyber insurance offerings and maintaining one of the lowest combined ratios in the industry at 12.9% return on equity, surpassing the 8% industry average.
Both companies maintain Zacks Rank #3 (Hold), but Chubb, with its higher return on equity and solid dividend track record, appears to offer a competitive edge. BRK.B shares have seen a slight decrease of 0.2% over the past three months, while CB shares have increased by 8.1%. Current valuations show BRK.B trading at a price-to-book ratio of 1.53, above its five-year median, whereas Chubb’s 1.52 ratio remains below its historical median.
