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Chubb May Face $2 Bln In D&O Losses

 

Wednesday, Jul 08,2009, 2:13:23 PM   Click:

SAN FRANCISCO (MarketWatch) -- Chubb Corp. (cb) may face $2 billion in losses from directors and officers insurance policies it has sold as litigation surges in the wake of the financial crisis and recession, Barclays Capital analyst Jay Gelb wrote in a note to investors Monday. "Chubb does not appear appropriately reserved in this line," the analyst said. "If Chubb's 2008 U.S. D&O accident year loss ratio of 78% rose to the peak developed loss ratio over the past 10 years of 120% (which occurred in 2002 due to the tech bubble/IPO laddering), we estimate Chubb could report additional D&O losses of $2 billion, pre-tax over several years." Gelb cut his price target on Chubb shares to $41 from $43, but kept his equal weight rating. That's because Chubb shares trade at a historically low one times book value. Chubb shares rose 1.1% to $39.23 during afternoon trading on Monday.

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