Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We retain our Neutral recommendation on ACE Limited (ACE - Analyst Report) following the second quarter earnings results. The property and casualty insurer carries a Zacks Rank #3 (Hold).

Why the Reiteration?

ACE Limited has been experiencing rising expenses over the last few years. Expenses increased 2.8% in 2010, accelerated by 19.6% in 2011, and by 1.1% in 2012. In the first half of 2013, expenses increased 5.8% year over year. The increases can be primarily attributed to the rise in losses and loss-related expenses, policy acquisition costs, and administrative expenses. If expenses continue to increase, it might take a toll on the company’s operating margin expansion.

Additionally, low interest rate environment continues to weigh on net investment income.

To add to its woes, ACE Limited also faces substantial exposure to losses resulting from natural disasters, man-made catastrophes, and other catastrophic events. Management expects catastrophe loss of $260 million for the remainder of the year.

Counting on the positives, the second quarter delivered a positive earnings surprise of 19.3%. This marked the fourth straight earnings beat with an impressive average of 12.4%. The long-term expected earnings growth rate for this stock is 7.3%.

ACE Limited’s inorganic growth story also looks impressive with the ongoing acquisitions.

ACE Limited also remains focused toward enhancing its shareholder value. In the first half of 2013, the company repurchased 2.5 million shares for $212 million and is left with $249 million under its buyback program. It has also approved a 4% hike in its quarterly dividend, currently yielding 2.3%. Given its strong capital, which exceeds $33.3 billion, and a solid liquidity position, we expect to see more such initiatives going forward.

ACE Limited’s earnings generating capability and stability, supported by its conservative reserving philosophy and commitment to underwrite profitability provide a solid base for its enterprise risk management program. As such, the company strongly scores with the credit rating agencies.

Other stocks to Consider

Property and casualty insurers Alleghany Corporation (Y - Snapshot Report), Everest Re Group Ltd. (RE - Analyst Report) and Global Indemnity plc (GBLI) with a favorable Zacks Rank #1 (Strong Buy) are worth considering.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
BITAUTO HOLD BITA 35.33 +14.82%
ANI PHARMACE ANIP 24.79 +14.66%
E HOUSECHINA EJ 10.99 +9.24%
CANADIAN SOL CSIQ 26.97 +7.15%
INTERNATIONA ICAGY 33.30 +5.38%