ACE Limited Strengthens Thai Presence with Samaggi Buyout - Analyst Blog

ACE Limited ACE along with its local partner, has acquired a 32.17% stake in The Siam Commercial Samaggi Insurance PCL (Samaggi). The acquisition – carried out through a mandatory tender offer – was in compliance with Thai regulations. The recent buyout is in addition to the 60.86% stake that was acquired by ACE from Siam Commercial Bank in April. ACE now owns 93.03% in Samaggi. The acquisition of Samaggi, a general insurance company in Thailand, is expected to strengthen ACE's grip on commercial, auto and personal accident insurance and foothold in Thailand and Southeast Asia.

Inorganic Story

ACE Limited has always considered acquisitions as a prudent strategy to boost growth and expand the global footprint. Over the years, ACE Limited made significant acquisitions to widen its global presence and diversify its product offerings. However, ACE Limited was quiet for nine months since it acquired Mexico-based ABA Seguros, a property and casualty insurer, for $690 million lastMay. The company's acquisitions were confined to the first half of last year. Fianzas Monterrey, a leading surety lines company in Mexico was acquired for $293 million in cash in April and Indonesia's PT Asuransi Jaya Proteksi was taken over for $100 million in cash in January. The acquisitions are boosting ACE's premiums and taking it closer, a step at a time, to its long-term ROE goal of 15%.

Backed by Solid Liquidity

ACE Limited has been strengthening its balance sheet, which is enough to travel the inorganic path and perk up operational performance.  While cash balance improved 46% over the 2013 level, retained earnings grew 5.3%. ACE Limited has also been effectively lowering its leverage ratios.

Zacks Consensus Estimate

ACE Limited has been witnessing rising estimates on the strength of solid earnings results, and efforts to distribute more profits with shareholders. The Zacks Consensus Estimate for 2014 and 2015 moved up as most of the estimates were raised over the last 60 days. It increased 2.5% to $8.97 for 2014 and 1.3% to $9.25 for 2015. The expected long-term earnings growth rate is 10%.  The property and casualty insurer carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Investors interested in property and casualty industry can take a look at AmTrust Financial Services, Inc. AFSI, Endurance Specialty Holdings Ltd. ENH or Hallmark Financial Services Inc. HALL. All these stocks sport a Zacks Rank #1 (Strong Buy).