Intrinsic value of Chubb - CB

Previous Close

$146.62

  Intrinsic Value

$290.26

stock screener

  Rating & Target

str. buy

+98%

  Value-price divergence*

+5000%

Previous close

$146.62

 
Intrinsic value

$290.26

 
Up/down potential

+98%

 
Rating

str. buy

 
Value-price divergence*

+5000%

Our model is not good at valuating stocks of financial companies, such as CB.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CB stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 68.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  65.01
  8.40
  8.06
  7.75
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
  5.86
  5.78
  5.70
  5.63
  5.57
  5.51
  5.46
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
Revenue, $m
  0
  34,233
  36,992
  39,860
  42,841
  45,939
  49,158
  52,504
  55,983
  59,602
  63,367
  67,287
  71,369
  75,623
  80,057
  84,683
  89,510
  94,549
  99,813
  105,313
  111,062
  117,075
  123,364
  129,945
  136,834
  144,047
  151,601
  159,514
  167,805
  176,494
  185,601
Variable operating expenses, $m
 
  27,805
  29,923
  32,124
  34,412
  36,789
  39,260
  41,828
  44,498
  47,275
  50,164
  51,639
  54,772
  58,037
  61,440
  64,990
  68,694
  72,562
  76,601
  80,822
  85,235
  89,849
  94,676
  99,726
  105,013
  110,549
  116,346
  122,419
  128,782
  135,450
  142,439
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  26,268
  27,805
  29,923
  32,124
  34,412
  36,789
  39,260
  41,828
  44,498
  47,275
  50,164
  51,639
  54,772
  58,037
  61,440
  64,990
  68,694
  72,562
  76,601
  80,822
  85,235
  89,849
  94,676
  99,726
  105,013
  110,549
  116,346
  122,419
  128,782
  135,450
  142,439
Operating income, $m
  5,312
  6,428
  7,069
  7,736
  8,430
  9,150
  9,899
  10,677
  11,486
  12,327
  13,203
  15,648
  16,597
  17,586
  18,617
  19,693
  20,816
  21,987
  23,211
  24,491
  25,828
  27,226
  28,688
  30,219
  31,821
  33,498
  35,255
  37,095
  39,023
  41,044
  43,161
EBITDA, $m
  5,312
  8,375
  9,050
  9,752
  10,481
  11,239
  12,027
  12,845
  13,696
  14,582
  15,503
  16,462
  17,460
  18,501
  19,586
  20,718
  21,899
  23,131
  24,419
  25,765
  27,171
  28,642
  30,181
  31,791
  33,476
  35,241
  37,089
  39,025
  41,053
  43,179
  45,407
Interest expense (income), $m
  642
  751
  1,265
  1,810
  2,376
  2,964
  3,576
  4,211
  4,872
  5,559
  6,273
  7,016
  7,790
  8,596
  9,436
  10,311
  11,224
  12,177
  13,172
  14,211
  15,297
  16,432
  17,619
  18,861
  20,160
  21,520
  22,944
  24,435
  25,997
  27,634
  29,349
Earnings before tax, $m
  4,950
  5,676
  5,804
  5,927
  6,054
  6,186
  6,323
  6,465
  6,614
  6,769
  6,930
  8,631
  8,807
  8,990
  9,182
  9,382
  9,591
  9,810
  10,039
  10,279
  10,530
  10,794
  11,069
  11,358
  11,661
  11,978
  12,311
  12,660
  13,026
  13,410
  13,812
Tax expense, $m
  815
  1,533
  1,567
  1,600
  1,635
  1,670
  1,707
  1,746
  1,786
  1,827
  1,871
  2,330
  2,378
  2,427
  2,479
  2,533
  2,590
  2,649
  2,711
  2,775
  2,843
  2,914
  2,989
  3,067
  3,148
  3,234
  3,324
  3,418
  3,517
  3,621
  3,729
Net income, $m
  4,135
  4,144
  4,237
  4,327
  4,419
  4,516
  4,616
  4,720
  4,828
  4,941
  5,059
  6,301
  6,429
  6,563
  6,703
  6,849
  7,002
  7,161
  7,329
  7,504
  7,687
  7,879
  8,081
  8,291
  8,512
  8,744
  8,987
  9,242
  9,509
  9,789
  10,083

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  159,786
  172,893
  186,828
  201,314
  216,370
  232,015
  248,274
  265,173
  282,744
  301,020
  320,036
  339,832
  360,449
  381,933
  404,330
  427,692
  452,070
  477,522
  504,106
  531,884
  560,921
  591,286
  623,050
  656,288
  691,080
  727,508
  765,660
  805,625
  847,499
  891,382
  937,378
Adjusted assets (=assets-cash), $m
  159,786
  172,893
  186,828
  201,314
  216,370
  232,015
  248,274
  265,173
  282,744
  301,020
  320,036
  339,832
  360,449
  381,933
  404,330
  427,692
  452,070
  477,522
  504,106
  531,884
  560,921
  591,286
  623,050
  656,288
  691,080
  727,508
  765,660
  805,625
  847,499
  891,382
  937,378
Revenue / Adjusted assets
  0.000
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
Average production assets, $m
  3,825
  4,142
  4,476
  4,823
  5,184
  5,559
  5,948
  6,353
  6,774
  7,212
  7,667
  8,142
  8,636
  9,150
  9,687
  10,247
  10,831
  11,440
  12,077
  12,743
  13,439
  14,166
  14,927
  15,723
  16,557
  17,430
  18,344
  19,301
  20,304
  21,356
  22,458
Working capital, $m
  0
  548
  592
  638
  685
  735
  787
  840
  896
  954
  1,014
  1,077
  1,142
  1,210
  1,281
  1,355
  1,432
  1,513
  1,597
  1,685
  1,777
  1,873
  1,974
  2,079
  2,189
  2,305
  2,426
  2,552
  2,685
  2,824
  2,970
Total debt, $m
  13,418
  22,586
  32,313
  42,424
  52,933
  63,853
  75,202
  86,998
  99,263
  112,019
  125,292
  139,110
  153,501
  168,496
  184,130
  200,436
  217,452
  235,217
  253,773
  273,162
  293,430
  314,624
  336,796
  359,996
  384,281
  409,708
  436,337
  464,233
  493,461
  524,091
  556,197
Total liabilities, $m
  111,511
  120,679
  130,406
  140,517
  151,026
  161,946
  173,295
  185,091
  197,356
  210,112
  223,385
  237,203
  251,594
  266,589
  282,223
  298,529
  315,545
  333,310
  351,866
  371,255
  391,523
  412,717
  434,889
  458,089
  482,374
  507,801
  534,430
  562,326
  591,554
  622,184
  654,290
Total equity, $m
  48,275
  52,214
  56,422
  60,797
  65,344
  70,069
  74,979
  80,082
  85,389
  90,908
  96,651
  102,629
  108,856
  115,344
  122,108
  129,163
  136,525
  144,212
  152,240
  160,629
  169,398
  178,568
  188,161
  198,199
  208,706
  219,708
  231,229
  243,299
  255,945
  269,197
  283,088
Total liabilities and equity, $m
  159,786
  172,893
  186,828
  201,314
  216,370
  232,015
  248,274
  265,173
  282,745
  301,020
  320,036
  339,832
  360,450
  381,933
  404,331
  427,692
  452,070
  477,522
  504,106
  531,884
  560,921
  591,285
  623,050
  656,288
  691,080
  727,509
  765,659
  805,625
  847,499
  891,381
  937,378
Debt-to-equity ratio
  0.278
  0.430
  0.570
  0.700
  0.810
  0.910
  1.000
  1.090
  1.160
  1.230
  1.300
  1.360
  1.410
  1.460
  1.510
  1.550
  1.590
  1.630
  1.670
  1.700
  1.730
  1.760
  1.790
  1.820
  1.840
  1.860
  1.890
  1.910
  1.930
  1.950
  1.960
Adjusted equity ratio
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,135
  4,144
  4,237
  4,327
  4,419
  4,516
  4,616
  4,720
  4,828
  4,941
  5,059
  6,301
  6,429
  6,563
  6,703
  6,849
  7,002
  7,161
  7,329
  7,504
  7,687
  7,879
  8,081
  8,291
  8,512
  8,744
  8,987
  9,242
  9,509
  9,789
  10,083
Depreciation, amort., depletion, $m
  0
  1,947
  1,981
  2,016
  2,052
  2,089
  2,128
  2,169
  2,211
  2,254
  2,300
  814
  864
  915
  969
  1,025
  1,083
  1,144
  1,208
  1,274
  1,344
  1,417
  1,493
  1,572
  1,656
  1,743
  1,834
  1,930
  2,030
  2,136
  2,246
Funds from operations, $m
  3,912
  6,091
  6,218
  6,342
  6,471
  6,605
  6,744
  6,888
  7,039
  7,195
  7,359
  7,115
  7,292
  7,478
  7,671
  7,873
  8,085
  8,305
  8,536
  8,778
  9,031
  9,296
  9,573
  9,864
  10,168
  10,487
  10,821
  11,172
  11,539
  11,925
  12,329
Change in working capital, $m
  -1,380
  42
  44
  46
  48
  50
  52
  54
  56
  58
  60
  63
  65
  68
  71
  74
  77
  81
  84
  88
  92
  96
  101
  105
  110
  115
  121
  127
  133
  139
  146
Cash from operations, $m
  5,292
  6,049
  6,174
  6,296
  6,423
  6,555
  6,692
  6,835
  6,983
  7,137
  7,298
  7,052
  7,227
  7,410
  7,600
  7,799
  8,007
  8,225
  8,452
  8,690
  8,939
  9,200
  9,473
  9,758
  10,058
  10,372
  10,701
  11,045
  11,407
  11,786
  12,183
Maintenance CAPEX, $m
  0
  -383
  -414
  -448
  -482
  -518
  -556
  -595
  -635
  -677
  -721
  -767
  -814
  -864
  -915
  -969
  -1,025
  -1,083
  -1,144
  -1,208
  -1,274
  -1,344
  -1,417
  -1,493
  -1,572
  -1,656
  -1,743
  -1,834
  -1,930
  -2,030
  -2,136
New CAPEX, $m
  0
  -317
  -334
  -347
  -361
  -375
  -390
  -405
  -421
  -438
  -456
  -474
  -494
  -515
  -537
  -560
  -584
  -610
  -637
  -666
  -696
  -727
  -761
  -796
  -834
  -873
  -914
  -957
  -1,003
  -1,051
  -1,102
Cash from investing activities, $m
  -5,315
  -700
  -748
  -795
  -843
  -893
  -946
  -1,000
  -1,056
  -1,115
  -1,177
  -1,241
  -1,308
  -1,379
  -1,452
  -1,529
  -1,609
  -1,693
  -1,781
  -1,874
  -1,970
  -2,071
  -2,178
  -2,289
  -2,406
  -2,529
  -2,657
  -2,791
  -2,933
  -3,081
  -3,238
Free cash flow, $m
  -23
  5,349
  5,426
  5,501
  5,580
  5,662
  5,747
  5,835
  5,927
  6,022
  6,122
  5,811
  5,919
  6,031
  6,149
  6,271
  6,399
  6,532
  6,671
  6,817
  6,969
  7,128
  7,295
  7,469
  7,652
  7,843
  8,044
  8,253
  8,473
  8,704
  8,945
Issuance/(repayment) of debt, $m
  -1
  9,168
  9,727
  10,112
  10,509
  10,920
  11,349
  11,796
  12,265
  12,756
  13,273
  13,818
  14,391
  14,996
  15,633
  16,306
  17,016
  17,765
  18,555
  19,389
  20,268
  21,195
  22,171
  23,201
  24,285
  25,427
  26,630
  27,896
  29,228
  30,630
  32,106
Issuance/(repurchase) of shares, $m
  167
  0
  0
  48
  128
  209
  295
  384
  478
  578
  684
  0
  0
  0
  62
  206
  361
  525
  700
  885
  1,082
  1,291
  1,512
  1,747
  1,995
  2,257
  2,535
  2,828
  3,137
  3,464
  3,808
Cash from financing (excl. dividends), $m  
  431
  9,168
  9,727
  10,160
  10,637
  11,129
  11,644
  12,180
  12,743
  13,334
  13,957
  13,818
  14,391
  14,996
  15,695
  16,512
  17,377
  18,290
  19,255
  20,274
  21,350
  22,486
  23,683
  24,948
  26,280
  27,684
  29,165
  30,724
  32,365
  34,094
  35,914
Total cash flow (excl. dividends), $m
  383
  14,517
  15,153
  15,662
  16,216
  16,791
  17,390
  18,015
  18,670
  19,357
  20,079
  19,629
  20,310
  21,027
  21,844
  22,784
  23,776
  24,822
  25,926
  27,091
  28,319
  29,614
  30,978
  32,417
  33,932
  35,527
  37,208
  38,977
  40,838
  42,798
  44,859
Retained Cash Flow (-), $m
  -19,140
  -3,939
  -4,208
  -4,375
  -4,547
  -4,725
  -4,910
  -5,104
  -5,306
  -5,519
  -5,743
  -5,978
  -6,226
  -6,488
  -6,764
  -7,055
  -7,362
  -7,686
  -8,028
  -8,389
  -8,769
  -9,170
  -9,593
  -10,038
  -10,507
  -11,001
  -11,522
  -12,069
  -12,646
  -13,253
  -13,891
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  10,578
  10,944
  11,287
  11,670
  12,067
  12,480
  12,911
  13,363
  13,837
  14,336
  13,650
  14,084
  14,539
  15,080
  15,729
  16,413
  17,136
  17,898
  18,702
  19,550
  20,444
  21,386
  22,379
  23,424
  24,526
  25,686
  26,907
  28,193
  29,545
  30,968
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  10,113
  9,959
  9,730
  9,483
  9,193
  8,862
  8,494
  8,091
  7,657
  7,196
  6,165
  5,676
  5,181
  4,706
  4,255
  3,807
  3,369
  2,946
  2,544
  2,168
  1,821
  1,507
  1,227
  982
  772
  596
  450
  333
  241
  170
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  99.9
  99.8
  99.6
  99.3
  98.9
  98.5
  98.0
  97.5
  97.5
  97.5
  97.5
  97.5
  97.4
  97.2
  96.9
  96.6
  96.2
  95.7
  95.2
  94.7
  94.0
  93.4
  92.7
  91.9
  91.1
  90.3
  89.5
  88.6

Chubb Limited, through its subsidiaries, property and casualty insurance and reinsurance products worldwide. The company’s North America Commercial P&C Insurance segment offers commercial property, marine, general casualty, workers’ compensation, package policies, and risk management; and specialty categories, such as professional lines, marine and construction risk, environmental and cyber risk, and excess casualty, as well as group accident and health insurance to large, middle market, and small commercial businesses in the United States, Bermuda, and Canada. Its North America Personal P&C Insurance segment offers affluent and high net worth individuals and families with homeowners, automobile, valuables, umbrella, and recreational marine insurance and services in the United States and Canada. The company’s North America Agricultural Insurance segment provides comprehensive multiple peril crop and crop-hail insurance; and coverage for farm and ranch property, as well as commercial agriculture products. Its Overseas General Insurance segment offers coverage for traditional commercial property and casualty, and specialty categories, such as financial lines, marine, energy, aviation, political risk, and construction risk, as well as group accident and health, and traditional and specialty personal lines. The company’s Global Reinsurance segment markets reinsurance products; and provides solutions for small to mid-sized clients and multinational ceding companies. Its Life Insurance segment offers protection and savings products comprising whole life, endowment plans, individual term life, group term life, group medical, personal accident, credit life, universal life, and unit linked contracts. The company was formerly known as ACE Limited and changed its name to Chubb Limited in January 2016 as a result of its acquisition of The Chubb Corporation. Chubb Limited was founded in 1985 and is headquartered in Zurich, Switzerland.

FINANCIAL RATIOS  of  Chubb (CB)

Valuation Ratios
P/E Ratio 16.5
Price to Sales 2.2
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 12.9
Price to Free Cash Flow 12.9
Growth Rates
Sales Growth Rate 65%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 26.8%
Total Debt to Equity 27.8%
Interest Coverage 9
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 8.2%
Ret/ On T. Cap. - 3 Yr. Avg. 8%
Return On Equity 10.7%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 17.7%
EBITDA Margin - 3 Yr. Avg. 18.6%
Operating Margin 16.8%
Oper. Margin - 3 Yr. Avg. 17.9%
Pre-Tax Margin 15.7%
Pre-Tax Margin - 3 Yr. Avg. 17%
Net Profit Margin 13.1%
Net Profit Margin - 3 Yr. Avg. 14.2%
Effective Tax Rate 16.5%
Eff/ Tax Rate - 3 Yr. Avg. 16.2%
Payout Ratio 28.4%

CB stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CB stock intrinsic value calculation we used $31580 million for the last fiscal year's total revenue generated by Chubb. The default revenue input number comes from 2016 income statement of Chubb. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CB stock valuation model: a) initial revenue growth rate of 8.4% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.6%, whose default value for CB is calculated based on our internal credit rating of Chubb, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Chubb.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CB stock the variable cost ratio is equal to 81.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CB stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.6% for Chubb.

Corporate tax rate of 27% is the nominal tax rate for Chubb. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CB stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CB are equal to 12.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Chubb operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CB is equal to 1.6%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $48275 million for Chubb - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 467.232 million for Chubb is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Chubb at the current share price and the inputted number of shares is $68.5 billion.

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COMPANY NEWS

▶ ETFs with exposure to Chubb Ltd. : July 3, 2017   [Jul-03-17 03:00PM  Capital Cube]
▶ ETFs with exposure to Chubb Ltd. : June 19, 2017   [Jun-19-17 03:03PM  Capital Cube]
▶ ETFs with exposure to Chubb Ltd. : June 9, 2017   [Jun-09-17 01:20PM  Capital Cube]
▶ 5 Companies Reach Yearly Highs   [Jun-06-17 01:47PM  GuruFocus.com]
▶ [$$] Adair Turner to chair Chubb's European operations   [May-17-17 02:06PM  Financial Times]
▶ AIG Stock Upgraded: What You Need to Know   [May-16-17 01:01PM  Motley Fool]
▶ Cramer: These Sectors Look Bullish (Part II)   [May-09-17 07:00AM  TheStreet.com]
▶ Chubb tops Street 1Q forecasts   [Apr-25-17 05:00PM  Associated Press]
▶ Greenberg Rails Against Trump's America-First Policy   [Apr-06-17 03:25PM  Bloomberg]
▶ Chubb Ltd Stock Trades Ex-Dividend Wednesday   [Mar-28-17 11:31AM  Investopedia]
Stock chart of CB Financial statements of CB Annual reports of CB
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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