The recent 90-day pause on the imposition of tariffs by President Trump, better pricing, climate change, the effects of which expose insurers to catastrophe losses, and accelerated digitalization are likely to have an impact on the insurance industry. Though the Fed has held the borrowing rate between 4.25% and 4.5% since December, it projects two rate cuts for 2025, totaling 50 basis points. The profitability of Berkshire Hathaway Inc. (BRK.B) and Chubb Limited CB — two insurance behemoths — is expected to be impacted by these factors.  

Being predominantly property and casualty insurers, cat losses weigh on the companies’ underwriting results.  Per CoreLogic, a risk modeling and catastrophe data company, the initial estimate for insured losses from the Los Angeles wildfires is between $35 billion and $45 billion. Per Moody’s RMS Event Response, the insured losses for the January 2025 Los Angeles firestorm events are estimated in the range of $20-$30 billion.

Per a report from Willis Towers Watson’s Quarterly Deal Performance Monitor, merger and acquisition (M&A) activity is projected to witness momentum in 2025, given a higher number of technology-driven deals.

Yet, as an investment option, which stock is more attractive? Let’s closely look at the fundamentals of these stocks. 

Factors to Consider for BRK.B

Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities, ranging from insurance to consumer products, thus lowering concentration risk.

Among its diverse business activities, the most important is its insurance operations, which contribute around one-fourth of Berkshire’s top line. The insurance business is poised for long-term growth, banking on increased exposure, prudent underwriting standards and better pricing. 

Continued insurance business growth fuels an increase in float, drives earnings and generates maximum return on equity and provides power for strategic buyouts. 
With a huge cash hoard, Berkshire Hathaway acquires entities or adds stakes of companies that have consistent earning power and generate impressive returns on equity or add.  While big acquisitions open up more business opportunities for the company, bolt-on acquisitions enhance the earnings of the existing business.  

Warren Buffett has always eyed acquisitions or made investments in properties that are undervalued and have potential for growth. Investments in Coca-Cola, American Express, Apple, Bank of America, Chevron and Occidental Petroleum show its investment acumen.

Net margin, measuring a company's profitability, expanded 3150 basis points in the last two years.

It has strengthened its balance sheet with more than $100 billion in cash reserves, low debt, and a high credit rating.

Berkshire’s return on equity of 7.7% lags the industry average of 8.3% but this company has improved the same over time. BRK.B shares have gained 27.4% in the past year.

Factors to Consider for CB

Chubb is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer, based on market capitalization. Its operations span more than 50 countries.

Chubb remains focused on capitalizing on the potential of middle-market businesses (both domestic and international) as well as enhancing traditional core packages and specialty products for long-term growth. In its efforts to accelerate growth, Chubb is also making strategic investments in various initiatives. 

Prudent underwriting helps it deliver one of the lowest combined ratios in the industry. Net margin improved 980 basis points over the last two years.

Chubb pursues strategic mergers and acquisitions to diversify its portfolio, add capabilities and synergies and expand its geographic footprint.  Acquisitions have also improved premium revenues. Premiums are expected to benefit from commercial P&C rate increases, new business and strong renewal retention.  An impressive inorganic growth story helps to achieve a higher long-term return on equity. It is expanding in emerging economies that have low insurance penetration but high long-term growth potential. 

Though the Fed has started lowering the interest rate, investment income should benefit from improving operating cash flow.  Chubb expects quarterly adjusted net investment income to have a run rate between $1.67 billion and $1.75 billion over the next six months.

Chubb has a strong capital position and sufficient cash-generation capabilities, which support wealth distribution to shareholders and growth initiatives. 

A solid capital deployment strategy supports growth and helps return wealth to shareholders. Its return on equity of 13.6% betters the industry average. CB has gained 14.7% in a year. 

Estimates for BRK.B and CB

The Zacks Consensus Estimate for BRK.B’s 2025 revenues implies a year-over-year decrease of 8.5% while that for EPS implies a year-over-year increase 1.1%.  EPS estimates have moved southward over the past 30 days. 

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for CB’s 2025 revenues implies a year-over-year decrease of 7.2% while that for EPS implies a year-over-year increase 7.3%.  EPS estimates have moved southward over the past 30 days. 

Image Source: Zacks Investment Research

Are BRK.B and CB Shares Expensive?

Berkshire is trading at a price-to-book multiple of 1.73X, above its median of 1.39X over the last five years. Chubb’s price-to-book multiple sits at 1.67X, above its median of 1.54X over the last five years.

Image Source: Zacks Investment Research

Conclusion

Holding shares of Berkshire Hathaway adds dynamism to shareholders’ portfolios. It gives the feel of investing in mutual funds while rewarding investors with higher returns. Above all, the company has Warren Buffett at its helm, who has been creating tremendous value for shareholders over nearly six decades with his unique skills. However, concerns remain over Berkshire’s succession planning.

Chubb is poised to grow on better pricing, new business growth and high renewal rates. It is also focused on business lines that have immense room for growth. Chubb is considered a premium insurer, especially in high-net-worth personal lines.

Though both these insurers engage in share buybacks, Berkshire does not pay dividends. On the other hand, Chubb has a solid track record of increasing dividends for the last 31 years and has proposed a 6.5% hike again this year. The company’s current dividend yield of 1.3% is better than the industry average of 0.3%, which makes the stock an attractive pick for yield-seeking investors. 

On the basis of return on equity, which reflects a company’s efficiency in generating profit from shareholders' equity as well as gives a clear picture of the company's financial health, CB scores higher than BRK.B.

Though both these stocks carry a Zacks Rank #3 (Hold), Chubb has an edge over Berkshire. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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