On Mar 4, 2015, we issued an updated research report on ACE limited ACE.
The Zacks Rank #2 (Buy) property and casualty insurer kept its surprise streak alive in the fourth quarter. Earnings per share surpassed the Zacks Consensus Estimate as well as year-ago number on solid underwriting performances and improved investment results. Its trailing 4-quarter average beat is 8.23%.
ACE Limited has always considered acquisition as an efficient strategy for inorganic growth and global expansion. In 2014, the company closed two acquisitions expanding its reach in Thailand and Brazil apart from enhancing its product portfolio. In addition, the company also agreed to buy Fireman’s Fund – a high net worth personal lines insurance business in the U.S. – from German insurer Allianz, positioning it as a premier high net worth personal lines insurer in the U.S.
Acquisitions have improved premium writings. Higher premium in turn also drove the top line.
Besides focusing on inorganic growth, ACE limited made investments in various strategic initiatives that should pave way for long-term growth.
ACE Limited boasts a strong capital position. Its book value doubled in the last five years and tripled in the last 10 years.
The strong capital and liquidity position enables ACE Limited to enhance its shareholders’ value. In the fourth quarter of 2014, the company returned $650 million ($430 million in share repurchases and $220 million in dividends) to its shareholders. Moreover, its dividend yield of 2.29% is ahead of the sector yield of 1.19%.
Nonetheless, increased expenses have been taking a toll on margin expansion. If expenses continue to increase at a higher pace than revenue growth, operating margin expansion will be affected further.
Being a property and casualty insurer, ACE Limited is exposed to cat occurrences. If the company incurs a huge cat loss, its underwriting results and combined ratio will be hugely affected.
Investors interested in property and casualty insurers may consider Allied World Assurance Company Holdings, AG AWH, Arch Capital Group Ltd. ACGL and Endurance Specialty Holdings Ltd. ENH. All these sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment