In a concerted effort to enhance shareholders value, ACE Limited (ACE) intends to substantially boost its dividend. The board of directors will propose a 33% increase in the quarterly dividend at the extraordinary general meeting scheduled on January 9, 2012.
ACE Limited, if approved, will now pay a quarterly dividend of 47 cents ($1.88 on an annualized basis), up from 35 cents ($1.40 on an annualized basis). Previously, in February 2011, the board, announced a 6.5% increase in the quarterly dividend to 35 cents ($1.40 on an annualized basis), up from 33 cents ($1.32 on an annualized basis).
ACE has had a consistent track record of paying quarterly dividends and the current dividend is not an exception to the case. The company also has a record of increasing its dividend each year. It lowered its dividend when the world faced the economic recession, but continued making dividend payments. Its dividend yield is 2.04%.
ACE appears to have a strong capital and liquidity position, helping it increase the quarterly dividend. The cash balance of ACE Limited at third quarter end totaled $766 million, up 57% from year ago level. Year -to-date, cash from operation also increased 8% to total approximately $3 billion.
ACE Limited reported a strong third-quarter with operating income coming in at $2.22 per share, which came in ahead of the Zacks Consensus Estimate by a substantial 43 cents. Earnings improved 10% from $2.01 per share earned in the year-ago quarter.
Better-than-expected results stemmed from higher premiums and investment income. The quarter experienced solid current accident year underwriting results benefiting from both underwriting discipline and risk management. Acquisitions also contributed to the better results.
The results of ACE Limited were not affected despite natural disasters that led to catastrophe losses. The company is well poised driven by the strength of its international presence, diversified product offering, risk management, conservative underwriting practice and strong reserves. ACE Limited remains focused on enhancing its earnings, return on equity and book value per share.
ACE Limited raised its operating earnings expectation for 2011 to $6.55 – $6.75 per share from $6.00 – $6.20 guided earlier.
The Zacks Consensus Estimate for fourth-quarter 2011 is $1.95 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $6.93 per share and $7.45 per share.
We maintain our long-term Neutral recommendation on ACE Limited. The quantitative Zacks #2 Rank (short term Buy rating) for the company indicates upward pressure on the stock over the near term.
Headquartered in Zurich, Switzerland, ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to commercial and individual customers worldwide. The company competes with American International Group Inc. (AIG) and The Travelers Companies Inc. (TRV).
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