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We retain our Outperform recommendation on ACE Limited (ACE - Analyst Report) following the company’s outperformance in the third-quarter 2013 earnings results as well as its efforts to boost shareholders’ value and strengthen its product suite. The property and casualty insurer carries a Zacks Rank #2 (Buy).

Why the Reiteration?

ACE Limited has witnessed rising estimates following its solid third-quarter results and efforts to enhance shareholders’ value. The Zacks Consensus Estimate for 2013 rose 3.8% over the last 60 days to $8.90 while the same for 2014 increased 1.7% to $8.34 over the same time frame.

Third-quarter operating net income of $2.49 per share surpassed the Zacks Consensus Estimate by 12.7% and the year-ago number by 23.9%.

Solid underwriting performances aided the better-than-expected results. Absence of any significant cat activities aided the upside. ACE Limited also gained on account of improved commercial property & casualty (P&C) pricing environment.

ACE Limited has, over the past several quarters, delivered positive earnings surprises. The expected long-term earnings growth rate for this stock is 7.8%.

In November, the board of directors also announced its intention to propose a 24% increase in quarterly dividend to 63 cents per share. With respect to share buyback, the board also approved a $2 billion share repurchase program. Given its strong capital, which exceeds $34 billion, and a solid liquidity position, we expect to see more such initiatives going forward.

ACE Limited, with its considerable balance sheet strength, remains focused to grow both organically and inorganically. The company expects its acquisitions to meet or exceed its long term return on investment (ROE) goal of 15% within 2-3 years.

Also, ACE Limited announced the launch of ACE Global Export Protection in Continental Europe. This new product is likely to support the casualty needs of middle-market businesses. The timing for the launch seems perfect given that several European mid-sized companies are now expanding in emerging economies.

Other Stocks to Consider

Other stocks worth considering in the property and casualty industry include Alleghany Corp. (Y - Snapshot Report), Allied World Assurance Company Holdings, AG (AWH - Snapshot Report) and Cincinnati Financial Corp. (CINF - Analyst Report). All these stocks sports a Zacks Rank #1 (Strong Buy).

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