DCF Studio

    CB · NYQ · Financial Services

    Chubb Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 734.79

    Market price

    USD 340.64

    Implied upside

    +115.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Wrong toolThis is a financial. Banks and insurers report no meaningful operating income, and capex and working capital do not mean what a free-cashflow model assumes, so a DCF will misprice it. The model below runs on best-effort numbers - treat it as an illustration, not a valuation.
    AdjustedReported capital expenditure averages just 0.00% of revenue, which is too low to be the company's real investment - property trusts and similar structures invest through lines that are not reported as capex. Capex has been set to 1.00% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.
    AdjustedCapital expenditure runs at 1.0% of revenue against depreciation of 0.6%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 734.79+115.7%
    Exit multiple
    USD 566.81+66.4%
    Market price
    USD 340.64

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn13bn26bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 66.7bnUSD 74.4bnUSD 83.0bnUSD 92.6bnUSD 103.3bn+11.6%
    EBITUSD 12.7bnUSD 14.2bnUSD 15.9bnUSD 17.7bnUSD 19.7bn+11.6%
    NOPATUSD 10.6bnUSD 11.8bnUSD 13.1bnUSD 14.7bnUSD 16.3bn+11.6%
    Add depreciation & amortisationUSD 394.2mUSD 439.8mUSD 490.6mUSD 547.4mUSD 610.7m+11.6%
    Less capital expenditureUSD -667.0mUSD -744.1mUSD -830.1mUSD -926.1mUSD -1.0bn+11.6%
    Less increase in working capitalUSD 6.5bnUSD 7.2bnUSD 8.0bnUSD 9.0bnUSD 10.0bn-11.6%
    Free cashflow to firmUSD 16.7bnUSD 18.7bnUSD 20.8bnUSD 23.2bnUSD 25.9bn+11.6%
    Discount factor0.96340.89410.82980.77010.7148-
    Present valueUSD 16.1bnUSD 16.7bnUSD 17.3bnUSD 17.9bnUSD 18.5bn+3.5%
    Present Value Of The ForecastUSD 86.6bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.586Reported 0.382, pulled toward 1.0 (Blume)
    Cost of equity8.22%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 131.4bn88.4% of capital
    Total debtUSD 17.2bn11.6% of capital, book value as a proxy
    Tax rate17.2%Effective, capped at statutory
    WACC7.75%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 734.79

    68% of EV

    Forecast FCFF, final year
    USD 25.9bn
    Capex at depreciation, working capital in reinvestment
    USD 16.9bn
    Less reinvestment at g/ROIC (22.2% of NOPAT)
    USD -3.7bn
    Capitalised
    USD 13.1bn
    ROIC (reported)
    11.3%
    Terminal value, undiscounted
    USD 256.1bn
    Terminal value, discounted
    USD 183.1bn
    Enterprise value
    USD 269.7bn
    Less net debt
    USD -25.4bn
    Equity value
    USD 295.0bn

    Exit at 7.9x EBITDA

    Value per shareUSD 566.81

    57% of EV

    Terminal value, undiscounted
    USD 161.8bn
    Terminal value, discounted
    USD 115.6bn
    Enterprise value
    USD 202.2bn
    Less net debt
    USD -25.4bn
    Equity value
    USD 227.6bn

    Spread between methods: 26%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.75%965.711020.261091.171187.361325.70
    6.75%808.68836.95871.55915.00971.42
    7.75%701.35716.73734.80756.38782.74
    8.75%623.17631.60641.17652.18665.05
    9.75%563.57567.99572.85578.24584.31

    Outlined: this model. Green text: above today's price of 340.64. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.6%-4.1%-15.6pp
    EBIT margin19.1%6.1%-13.0pp
    Discount rate7.7%18.6%+10.8pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.