Chubb shares are up on merger speculation.
Chubb’s supposedly buying AIG — but both companies deny it.
Chubb Limited (NYSE: CB) stock jumped 3.6% through 1:05 p.m. ET Thursday after insurance industry reporter Insurance Insider reported Chubb “has made an informal takeover approach” to rival insurer American International Group (NYSE: AIG).
Choosing its words carefully, a Chubb spokesperson denied the company has made “an offer” to buy AIG. But that wasn’t exactly the question asked…
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So is Chubb trying to buy AIG or isn’t it? Wall Street is of two minds. On the one hand, a Cantor Fitzgerald analyst thinks an offer for AIG seems “very unlikely” and is standing pat on its neutral rating for Chubb stock.
Furthermore, AIG itself has stated that it “is not for sale.” (But one wonders, at the right price, might it become for sale?)
On the other hand, Piper Sandler admits that a deal might be “possible,” and the two companies share similar cultures that could facilitate a merger. Bank of America agrees that a merger of two insurance giants would “make … sense.” BofA does point out that Chubb would need to make an attractive (read expensive) offer for AIG — and that’s not a scenario that would likely make Chubb’s stock price rise, as it’s doing right now.
Seems to me, this suggests investors are bidding up Chubb stock today because they think it actually will not buy AIG. So why would that be good news?
The most obvious answer is: Chubb as-is, is not an expensive stock. The shares cost barely 12 times earnings, pay a modest 1.3% dividend yield, and earnings have increased an impressive 84% over the last three years. Perhaps the best news of all would be if Chubb continues to do exactly what it has been doing already.
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Bank of America is an advertising partner of Motley Fool Money. Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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