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We expect property and casualty insurer ACE Limited (ACE - Analyst Report) to beat expectations when it reports third-quarter 2013 results on Oct 23.

Why a Likely Positive Surprise?

Our proven model shows that ACE Limited is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +2.73%. This is noteworthy and is indicative of a likely positive earnings surprise.   

Zacks Rank #2 (Buy): Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (carrying a Zacks Rank #4 or 5) going into an earnings announcement should never be considered, especially when the company is seeing negative estimate revisions.  

The combination of a Zacks Rank #2 (Buy) and an ESP of 2.73% makes us confident of a positive earnings beat by ACE Limited on Oct 23.

What is Driving the Better-than-Expected Earnings?

Global expansion, prudent acquisition strategies and the improved environment of the property and casualty sector is expected to lead to a positive earnings surprise for ACE Limited in the forthcoming quarter. The company also remains focused on launching products to enhance its current portfolio.

ACE Limited delivered positive surprises in the last four quarters with an average beat of 12.44%, with the highest surprise coming in at 19.27% in the second quarter of 2013. This was made possible by the company’s strong capital position as well as solid underwriting performances & growth in both U.S. and international operations.

Other Stocks to Consider

ACE Limited is not the only firm looking forward to outperform this earnings season. We also see likely earnings beats coming from these 3 industry peers:

The Hanover Insurance Group Inc. (THG - Snapshot Report), earnings ESP of +15.00% and a Zacks Rank #1 (Strong Buy).

Allied World Assurance Company Holdings, AG (AWH - Snapshot Report), earnings ESP of +12.12% and a Zacks Rank #1 (Strong Buy).

Platinum Underwriters Holdings Ltd. (PTP - Snapshot Report), earnings ESP of +4.43% and a Zacks Rank #1 (Strong Buy).

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