We have retained our Neutral recommendation on
). The low interest rate environment, rising operating expenses
and high exposure to weather related losses will likely offset
the positive impact of the acquisitions made by ACE. The excess
liability insurance provider currently carries a Zacks Rank #3
ACE has been witnessing higher operating expenses over the past
few years owing to increasing policy benefits, and losses and
loss expenses. This has affected operating margin adversely.
Also, lower interest rates and the adverse impact of foreign
exchange has hurt net investment income for some time. Moreover
ACE's huge exposure to catastrophe losses always remains a matter
of concern for the company. It incurred a loss of $393 million
from superstorm Sandy in 2012, exceeding its estimate of $380
Counting on the positives, ACE Limited continues to expand its
global footprint through acquisitions in Indonesia and Mexico. To
expand its Surety business, recently it completed acquisition of
Fianzas Monterrey from New York Life Insurance Company for a cash
consideration of $293 million. The company deployed $1.25 billion
for acquisitions in growth regions. ACE Limited expects the
acquisitions to meet or exceed its long-term return on equity
(ROE) goal of 15% within 2-3 years. Extensive acquisitions have
helped the company write more premiums and deliver better
ACE continues to increase shareholders' value. The Board in Aug
2011 authorized a $303 million worth of share buyback in addition
to the $197 million remaining under its previous authorization.
As of Feb 27, 2013, the company is left with $312 million under
its authorization. ACE also has a record of increasing its
dividend every year. The last dividend hike was 4.25% in May
2012. Management also intends to propose a dividend hike of 4% at
the May 16, 2013 general meeting. The company also scores
strongly with the credit rating agencies.
ACE is scheduled to release its first quarter 2013 results on Apr
22, after the closing bell. The Zacks Consensus Estimate for the
first quarter of 2013 is currently pegged at $1.87 representing a
year-over-year decline of 8.9%.
Over the last 30 days two out of 11 estimates moved upwards,
keeping the Zacks Consensus Estimate for full year 2013 at $7.71,
translating into a year-over-year improvement of 0.7%.
Other Stocks to Consider
Among others from the industry,
Cincinnati Financial Corporation
Arch Capital Group Limited
AXIS Capital Holdings Limited
) carry a favorable Zacks Rank #1 (Strong Buy) and are worth
ACE LIMITED (ACE): Free Stock Analysis Report
ARCH CAP GP LTD (ACGL): Free Stock Analysis
AXIS CAP HLDGS (AXS): Free Stock Analysis
CINCINNATI FINL (CINF): Free Stock Analysis
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