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On Oct 17, 2013, we upgraded our recommendation on ACE Limited (ACE - Analyst Report) to Outperform as global expansion and acquisition strategies are expected to help the company come up with better numbers going forward.

Why the Upgrade?

Estimates for ACE Limited have been increasing ever since it reported second quarter results on Jul 23. ACE Limited’s second-quarter operating net income came in at $2.29 per share that surpassed the Zacks Consensus Estimate by 19.27% as well as the year ago numbers by 5.5%.

Following the release of second quarter results, the Zacks Consensus Estimate for 2013 has gone up 2.1% to $8.64 per share. However, there was no change in the Zacks Consensus Estimate for 2014. With the Zacks Consensus Estimates for 2013 going up, this property and casualty insurer and reinsurer now has a Zacks Rank #2 (Buy).

Solid underwriting performances and growth in both the U.S. and international operations helped the company post better operating earnings in the second quarter of 2013. We believe the improved commercial property and casualty pricing environment will continue to aid results in the upcoming period.

Moreover, the acquisition initiatives of ACE Limited have always helped the company to boost inorganic growth and expand its global footprint. The recent approval by the Tunisian Ministry of Finance to commence operations in Tunisia deserves particular mention. This is because the go-ahead complements the company’s global expansion strategy, particularly expansion 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.

Further, ACE Limited boasts of a strong capital position that provides adequate financial flexibility to the company to manage its business and invest in its globally diversified platforms. This also helps the company to enjoy a solid track record of paying regular dividends that also exhibits an increasing trend every year and engage in share repurchase programs towards retaining investor confidence on the stock.

The company also scores strongly with the credit rating agencies. In September, Moody's Investors Service, a wing of Moody’s Corp. (MCO - Analyst Report) affirmed the insurance financial strength (IFS) ratings of ACE Seguradora S.A. (ACE Seguradora), a subsidiary of ACE Limited, at Baa1.

ACE Limited is scheduled to release its third quarter 2013 results on Oct 22, 2013. The Zacks Consensus Estimate for the third quarter of 2013 is currently $2.20 per share, representing a 9.68% improvement year-over- year.

Other Stocks to Consider

Other companies in the property and casualty insurance space that are worth considering include Chubb Corporation (CB - Analyst Report) and Cincinnati Financial Corp. (CINF - Analyst Report),  with both carrying a favorable Zacks Rank #1 (Strong Buy).

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