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ACE Makes a Small Ticket Buy - Analyst Blog

On Wednesday, ACE Group ( ACE ) announced the purchase of Ecuador-based general insurance company,Guayas Compania deSeguros yReaseguros . The acquisition will cost ACE $55 million.

ACE has had a high appetite for mergers and acquisition since the past couple of years. In 2010, the company acquired the majority ofProClaim America shares, to form a new business unit namedESIS ProClaim . The company also acquired Rain and Hail Insurance Service Inc.

In early 2011, ACE Group acquired New York Life's Hong Kong and Korea life insurance operations and 100% ofJerneh InsuranceBerhad in Malaysia, thereby expanding its footprint in Asia. In June, ACE INA International Holdings, Ltd., a subsidiary of ACE limited, acquired the remaining 49% stake in ACE Synergy InsuranceBerhad in Malaysia from Advance Synergy CapitalBerhad for $39 million.

Furthermore, in order to enhance its product offering in the agricultural market, in September, ACE Limited acquired Penn Millers Holding Corporation for $107 million..

The purchase ofGuayas Compania is relatively small (costing $55 million in cash) in comparison to the prior acquisitions. However, the products offered byGuayas complement ACE's product portfolio (its existing business in Ecuador). The alliance is thus expected to generate synergies in terms of geography, products and distribution.

ACE's acquisition spree has been aided by a sturdy capital position, consistent earnings performance and strong cash flows. The company's low reliance on debt provides it adequate financial flexibility to manage its business and invest in its globally diversified platforms.

At the end of third quarter, debt-to-capital ratio stood at 16.3%. Acquisitions have led to a turnaround in premium writings and in turn helped the company to deliver better numbers. We expect the trend to continue going forward. With considerable balance sheet strength, we expect ACE to grow both organically and inorganically.

ACE Group competes closely with American International Group Inc. ( AIG ) and The Travelers Companies Inc. ( TRV">TRV ). The company currently retains aZacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the shares.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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