Insurers expand share buybacks as Bank of America warns of long-term value risk

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Insurers expand buybacks risk

Highlights

Chubb authorized a new $7.5 billion share repurchase on May 21 and Travelers increased its buyback capacity to $7 billion in January 2025.
Bank of America warns that insurers buying shares at two to three times book value may erode long-term shareholder value despite short-term EPS support.
Arch Capital and AIG are cited as disciplined capital allocators, repurchasing shares near book value while peers like Progressive return capital via special dividends.

Buyback push gathers pace

As reported by CNBC, Chubb said on May 21 after its annual meeting that its board authorized a new $7.5 billion share repurchase program, while Travelers in January approved a $5 billion buyback that lifts its total repurchase capacity to $7 billion. The Hartford and broker W.R. Berkley are also moving ahead with plans to buy their own shares.

Bank of America analysts said in a May 26 research note that the approach echoes an earlier insurance down cycle, when companies used repurchases to support earnings per share by reducing share count. Analyst Joshua Shanker and his team said the strategy worked two decades ago because insurers were buying stock at or below book value, whereas many companies now trade at two to three times book value, making repurchases potentially dilutive to long-term capital even if they improve short-term EPS.

A review of current valuations shows Chubb, Hartford and W.R. Berkley all trade above their 10-year average book value multiples. That gap is central to the bank's warning that buybacks at elevated prices may erode shareholder value over time rather than enhance it.

Capital allocation choices under scrutiny

Bank of America said buybacks can still create value when they are executed with pricing discipline. It pointed to Arch Capital, which bought back $8.5 billion of stock over 20 years at an average cost of about 1.2 times book value, and noted that in the fourth quarter of 2024 Arch chose a $5 per share special dividend when its price-to-book ratio was nearing 2 times instead of stepping up repurchases.

Progressive also favors an annual special dividend and returned $7.9 billion to shareholders through dividends in the fourth quarter of 2025, though it still repurchases shares. AIG has bought back nearly 25% of the company over a little more than two years at about 1 times book value, which Shanker described as what he expects to be its best use of capital with almost no reservations. Everest Group and RenaissanceRe are also viewed as creating value by buying shares at lower multiples or at discounts to book.

Travelers said on its earnings call that its balance sheet and underwriting performance support both its large buyback plan and a dividend. In Chubb's third-quarter 2025 earnings call, Chief Executive Evan Greenberg said the company increased repurchases because its stock was trading well below intrinsic value and said it can continue buying back shares while still building capital and invested assets.

For investors, the debate is shifting beyond headline EPS growth. In a softer insurance market, the more important question may be whether management teams are deploying capital with the discipline of long-term owners.

In our earlier article on Brookfield Corporation’s BN shares, we covered the shareholder-approved plan to merge Brookfield Corporation and Brookfield Wealth Solutions into a single listed entity under the BN ticker. We also noted that the deal keeps quarterly distributions in place and comes with a renewed buyback authorization to repurchase up to 7.79% of shares through 2027, while the stock was expected to remain rangebound unless key resistance levels were cleared.

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