On Oct 16, Zacks Investment Research upgraded ACE Limited (ACE) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
ACE Limited has been witnessing rising earnings estimates. The Zacks Consensus estimate for 2013 moved north by 2% to $8.63 as 8 of 14 estimates were raised over the last 60 days.
In mid-September, Tunisian Ministry of Finance approved ACE’s plans to establish a reinsurance operation in Tunisia. This go-ahead complements the company’s effort to grow its business in the Middle East and North Africa. The company has also been leveraging its solid footprint in Asia and Latin America to capitalize on the opportunities in these markets.
ACE also increased the critical catastrophe limits to $30 million across all its North American retail and wholesale broker-distributed commercial property lines of business.
In September, Moody's Investors Service, a wing of Moody’s Corp. (MCO) affirmed the insurance financial strength (IFS) ratings of ACE Seguradora S.A. (ACE Seguradora), a subsidiary of ACE Limited, at Baa1. Previously A. M. Best Co. assigned a financial strength rating of A (Excellent) and an issuer credit rating of “a” to ACE Seguros S.A. (ACE Seguros).
ACE Limited continues to benefit from improved commercial property & casualty pricing environment.
The company also enjoys a solid track record of paying regular dividends that also exhibits an increasing trend every year. Its dividend of 51 cents per share yields 2.16%
With respect to earnings performance, ACE Limited has a track record of delivering positive earnings surprises for 18 straight quarters. We expect ACE Limited to deliver another positive earnings surprise when it reports its third quarter results on Oct 23. This is because our proven model shows that the property and casualty insurer has the right combination of a positive Earnings ESP and Zacks Rank.
Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +6.05%. The Zacks Consensus Estimate for the third quarter is pegged at $2.15, representing a year–over-year improvement of 6.9%.
The long-term expected earnings growth rate for this stock is 7.4% on expected sales growth of 7.7%.
Other Stocks to Consider
Property and casualty insurers AmTrust Financial Services, Inc. (AFSI) and Arch Capital Group Ltd. (ACGL) carrying a Zacks Rank #1 (Strong Buy) are also worth considering.
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