Updated Research Report on ACE Ltd. - Analyst Blog

On Mar 18, 2014, we issued an updated research report on ACE Limited ACE. The company had reported better-than-expected earnings results in the last reported quarter.

ACE Limited has delivered positive earnings surprises in each of the last four quarters, with an average beat of nearly 16%. Moreover, this property and casualty insurer delivered robust earnings in the fourth-quarter of 2013, which not only surpassed the Zacks Consensus Estimate by 19.5%% but also climbed 67% on a year-over-year basis.

Solid underwriting performances aided the better-than-expected results at ACE Limited. Absence of any significant cat activities also boosted the upside. Premium revenues witnessed improvement globally. It also benefited from positive prior-year reserve development. ACE Limited also gained on account of improved commercial property & casualty pricing environment.

ACE Limited has always considered acquisition as an efficient strategy to boost inorganic growth and expand its global footprint. In 2010, 2011, 2012 and the first quarter of 2013, ACE Limited made significant acquisitions to extend its global presence and diversify product offering.

The strong capital and liquidity position enables ACE Limited to enhance its shareholders' value in terms of dividend payments and share repurchase activities. It has already grown its dividend at a 5-year CAGR of 19.4%. Additionally, the company expects to reach a target of repurchasing $1.5 billion worth of shares in 2014.

Moreover, ACE limited is one of the largest reinsurance buyers in the world and its risk appetite remains steady. It is benefiting from softening reinsurance market in terms of pricing and better terms, which is expected to further consolidate its future financial results.

However, low interest rate environment continues to weigh on net investment income.

With respect to estimate revisions, this Zacks Rank #2 (Buy) property and casualty insurer has witnessed a positive movement. For 2014, the Zacks Consensus Estimate moved north by 3.5% to $8.67 per share as 11 of the 14 estimates revised upwards and for 2015, the same moved up by 2.7% to $9.11 over the last 60 days.

Other Stocks to Consider

Other top-ranked stocks worth mentioning in the property and casualty insurance industry are Alleghany Corp. Y, AmTrust Financial Services, Inc. AFSI and Fidelity National Financial, Inc. FNF. All these stocks sport a Zacks Rank #1 (Strong Buy).