We recently compiled a list of the 10 Best Financial Services Stocks To Buy According to Analysts. In this article, we are going to take a look at where Chubb Limited (NYSE:CB) stands against the other best financial services stocks to buy according to analysts.
According to the Financial Industry Index, which increased by more than 30% by mid-December and beat the overall market by about 5 percentage points, 2024 was a spectacular year for the financial industry. This growth followed concerns about mid-sized bank collapses in early 2024, which proved to be isolated incidents rather than an issue impacting the industry as a whole.
Meanwhile, as we have mentioned in our article, 10 Best Financial Stocks To Buy According to Hedge Funds, the market for financial services has expanded significantly in the last several years and is further expected to grow at a compound annual growth rate (CAGR) of 7.7% in the next few years.
Amidst the growth, as per EY’s report, the financial services industry is also undergoing a change because of artificial intelligence, particularly generative AI, which boosts productivity, modifications, and innovation. AI is helping banks provide individual solutions and improve risk control while accelerating processes like fraud detection, loan processing, and customer support. Large financial institutions are using AI to lower expenses, improve compliance, and create new products like automated tax compliance and predictive analytics. Nonetheless, issues like data privacy, rules of conduct, and AI’s “black box” decision-making continue to exist. Notwithstanding these obstacles, artificial intelligence is revolutionizing financial services by spreading beyond banking to include wealth management, insurance, and payments.
According to IBM’s report 2024, Generative AI is revolutionizing financial services by improving customer satisfaction and propelling advancements in risk assessment as well as personalized financial solutions. Secondly, the use of hybrid clouds is growing as companies seek to boost compliance, scalability, and efficiency. Thirdly, cybersecurity is still crucial, with growing investment in fraud detection systems as AI-driven threats emerge. Businesses are putting a greater spotlight on sustainability by giving green financial products and ESG initiatives top priority. By utilizing AI technologies such as Watsonx Assistant, customer experience management (CXM) increases customer pleasure and loyalty. Moreover, the use of open banking is growing as a result of APIs’ ability to simplify procedures and provide customers with more control over their data. Secure online transactions are being reinforced by the resurgence of digital currencies and blockchain.
Looking ahead, Deloitte’s 2025 investment management outlook predicts that AI, digital transformation, and changing investor demands will quickly impact the investment management industry in 2025. Low-cost funds are dominant, with active management flourishing within ETFs. Sustainability-focused investments, hybrid funds, and private financing are important growth areas. AI has exceeded expectations and is transforming operations and sales, but companies that are not embracing it quickly could fall behind. Regulatory changes, cybersecurity, and the combination of traditional and alternative assets are examples of growing risks. While some companies may find it difficult to survive in a high-risk, high-reward environment, bold companies that use AI and diversify their products may benefit from these changes. The key to success is scaling innovation and satisfying the need for sustainable, affordable solutions.
On the other hand, Deloitte’s 2025 banking and capital markets outlook report stated that banks can strengthen their basis for sustainable growth with creativity and discipline as the banking industry adjusts to a low-growth, lower-rate environment. It is anticipated that GDP growth will be 1.5% in 2025, and inflation will be approaching the 2% target, presenting a low-growth, lower-rate scenario for US banks. With savings exhausted by March 2024 and debt reaching $17.7 trillion, consumer spending may decline. Net interest margins may be compressed as a result of declining interest rates, with the federal funds rate falling to 350-375 basis points. Noninterest income presents opportunities, but growing salaries and technology expenditures drive up costs. Credit quality may slightly improve but is expected to stabilize. As geopolitical and regulatory uncertainty further complicate the picture, Deloitte observes that weak business investment and higher deposit costs will test banks’ adaptability.
A close-up of an insurance agent’s hand pointing to a marine insurance policy, highlighting the company’s expertise in marine coverage.
Methodology
We sifted through holdings of financial ETFs and online rankings to form an initial list of 20 financial services stocks. From the resultant dataset, we chose 10 stocks with a projected upside potential of over 7% based on analyst price targets, as of January 9. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Chubb Limited (NYSE:CB)
Upside Potential as of January 9: 7.93%
Warren Buffett’s 2023 investment in Chubb Limited (NYSE:CB), a leading insurance company with operations in 54 countries, brought attention to the company and demonstrated its immense popularity. The company’s global footprint guarantees resilience against localized risks by providing various insurance products and obtaining more than half of its premiums from the United States. Buffett’s investment displays his faith in the business’s strong operations and competitive position.
Chubb Limited (NYSE:CB) is one of the few businesses with a global presence big enough to cater to multinationals. Its network has made it difficult for any rivals to enter the market.
One of the Best Financial Stocks, Chubb Limited (NYSE:CB), delivered outstanding core operating EPS growth of 15.5% in the most recent quarter, driven by a 14.3% increase in core operating income to $2.3 billion. The year’s net and operating income increased by 16.9% and 13.8%, respectively, to set new earnings records. At $1.5 billion, P&C underwriting income increased 11.5%, resulting in a combined ratio of 87.7. While the life insurance business surpassed forecasts with $284 million in profits and premiums up 21% in constant dollars, adjusted net investment income increased 15.9% to $1.6 billion. Life premiums grew 10.6%, while P&C premium revenue grew 7.6% globally, or 8.5% in constant currencies. Globally, Asia Pacific had the highest premium growth rate (9.2%), followed by Europe (7.5%) and Latin America (7%).
The firm reported an operating cash flow of $4.55 billion in Q3 of 2024, and its operating cash flow for the previous twelve months was $14.8 billion. For 31 years in a row, the company has been able to increase dividends due to its strong cash position.
Warren Buffett’s Berkshire Hathaway was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 27.03 million shares worth $7.80 billion as of Q3.
The London Company made the following comment about Chubb Limited (NYSE:CB) in its Q3 2024 investor letter:
Initiated: Chubb Limited (NYSE:CB) – CB engages in the provision of commercial and personal property and casualty insurance, personal accident and health (A&H), reinsurance, and life insurance. While the company is headquartered outside the U.S., roughly 2/3 of its profits are generated in the U.S. with Asian markets representing another 20% of earnings. CB has a portfolio of top-performing, multibillion-dollar businesses that have substantial scale and yet potential for growth. CB has a culture of superior underwriting discipline, and management has a strong track record of expense control. CB also has a well-balanced mix of business by customer and product, with extensive distribution channels. We are attracted to CB’s globally diversified business model, superior underwriting and expense management, consistent and best-in-class profitability, upside potential from growth in Asia, and the potential to benefit from higher interest rates in its investment portfolio.
Overall, CB ranks 9th on our list of the best financial services stocks to buy according to analysts. While we acknowledge the potential for CB to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.