Wedgewood Partners: Chubb ($CB) Investment Case
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In their Q4 2025 investor letter, Wedgewood Partners introduces a new position in Chubb, a global leader in property and casualty insurance. The firm, known for their quality stock approach over 33 years, highlights Chubb as an attractive investment despite 2025 being their worst relative calendar year since 1993. Wedgewood’s decision to invest in Chubb reflects their history of successfully holding insurance-related positions, including a 20-year stake in Berkshire Hathaway and more recent ownership of Progressive.
Investment Highlight: Chubb ($CB)
Business Overview
- Global property and casualty insurance company founded in 1882
- Domiciled in Switzerland, generates over 60% of revenues in the U.S.
- Listed on NYSE and S&P 500 component
- Specializes in “specialty” or “non-standard” insurance products
Market Position
- Focus on high-net-worth clients in personal insurance lines
- Emphasizes mid-sized and small businesses over large corporations
- Limited exposure to commodity-like, price-driven markets
- Avoids heavily regulated pricing structures (e.g., low/mid-range U.S. auto insurance)
Performance Analysis
- Underwriting Excellence:
- Best-in-class combined ratio performance
- 10-year combined ratios: 86.6% (1-year), 86.9% (3-year), 89.2% (5-year), 89.8% (10-year)
- Peer average: 93.8% (1-year), 96.1% (3-year), 96.5% (5-year), 97.8% (10-year)
- Consistent double-digit percentage earnings growth over long periods
- Product Differentiation:
- Corporate segment: Risk engineering, D&O insurance, energy, aviation
- Personal segment: High-net-worth focus prioritizing asset protection over price
- International: Accident, health, and life insurance in faster-growing Asian markets
- U.S. agricultural insurance covering crops, cattle, and horse ranches
Growth Runway
- Investment portfolio generating additional income from reserves and retained earnings
- Rising investment returns from higher-return private market investments
- Double-digit growth in investment income over recent years
- Portfolio grown 9.9% CAGR from $66B (2015) to $166B (Q3 2025)
Market Dynamics and Opportunities
- Multiple business lines and geographic markets insulate from single insurance cycles
- Ability to shift emphasis between different cycles as necessary
- Hundreds of risk consultants and engineers providing proprietary insights
- Superior service reputation with industry awards and recognition
Valuation and Capital Allocation
- Strong free cash flow generation
- Management retaining underwriting profits for portfolio deployment
- Investment income grown 12.2% CAGR from $2.2B (2015) to $6.9B (2025 est.)
- Capital set aside for reserves invested in low-risk, liquid investments
Risks
- Investment portfolio income may fluctuate with broad interest rate movements
- Exposure to catastrophic events and large-scale insurance losses
- Competition from mass-market insurance providers in standard lines
- Regulatory changes affecting pricing power in certain markets
Other Key Points
- Proprietary data advantage from long operating history across global markets
- De-emphasis of commodity markets dominated by State Farm, Progressive, Liberty, Allstate
- Client example: Ranch owner switched from competitor after Chubb consultant identified uncovered risks
- Independence from single insurance cycle due to diversified geographic and product exposure
Wedgewood Partners views Chubb as an attractive investment opportunity, citing its superior underwriting strength, focus on specialty and non-standard products serving high-value clients, and consistent performance across diverse market conditions. The firm believes Chubb’s multiple business lines, rising investment portfolio returns, and independence from any single insurance cycle will continue generating consistent growth at attractive profitability levels for the foreseeable future.
