On Jan 22, Zacks Investment Research upgraded ACE Limited (ACE) to a Zacks Rank #1 (Strong Buy) following quarterly recent dividend increase and the acquisition of a major stake in Thai general insurer, The Siam Commercial Samaggi Insurance.
Why the Upgrade?
On Jan 12, 2014, ACE Limited and its local partners inked a deal to acquire 60.9% stake in The Siam Commercial Samaggi Insurance PCL, a general insurance company in Thailand, from Siam Commercial Bank. Per the agreement, ACE Limited and its partners will make a mandatory tender offer for the remaining 39.1% stake on closure of the initial deal. The total transaction is valued at around $185 million.
With the acquisition, ACE Limited will consolidate its foothold in Thailand, the second-largest economy in Southeast Asia. The company is expecting to strengthen its grip on commercial, auto and personal accident insurance sectors, capitalizing on The Siam Commercial Samaggi Insurance’s strong presence across Thailand.
It is noteworthy that the acquisition by Ace Limited is cushioned by its solid cash position.
Moreover, on Jan 10, 2014, ACE Limited’s board approved a 24% increase in quarterly dividend. The company now pays a quarterly dividend of 63 cents a share which yields at 2.61% better than the financial sector’s average yield of 2.17%.
In the past, ACE Limited has maintained a consistent track record of increasing its dividend payout each year. Over the past 5 years, the company has increased its dividend at a CAGR of 15.2%. In May 2013, the board had announced a 4% increase in quarterly dividend.
ACE Limited will pay the dividend from its capital contribution reserves that are duly supported by sustained solid operational performance at the company.
Other top-ranked Property and Casualty insurers worth considering include Aspen Insurance Holdings Ltd. (AHL), Platinum Underwriters Holdings Ltd. (PTP) and White Mountains Insurance Group, Ltd. (WTM). All these stocks carry the same Zacks Rank as ACE Limited.
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