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We expect property and casualty insurer ACE Limited (ACE - Analyst Report) to beat expectations when it reports its first-quarter 2014 results on April 29.

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 +1.41%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #2: ACE Limited has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of ACE Limited’s Zacks Rank #2 and +1.41% ESP makes us very confident of a positive earnings beat on April 29.

What is Driving the Better-than-Expected Earnings?

A benign cat environment favoring better underwriting results, are expected to drive ACE Limited results in the first quarter.

ACE limited is one of the largest reinsurance buyers in the world and as such, its risk appetite remains steady. It is benefitting from a softening reinsurance market in terms of pricing and better terms, which is expected to further consolidate its results.

In addition, the acquisitions by the company are expected to ramp up its growth profile.

The company’s share buybacks, lowering the share count, should also boost the bottom line.

The positive trend is backed by the trailing three-quarter average surprise of 15.97%, much of which was contributed by the impressive 19.50% surprise achieved in the last reported quarter. Moreover, better underwriting results continue to aid the company’s performance.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter:  

AXIS Capital Holdings Limited  (AXS - Analyst Report), earnings ESP of +3.28% and a Zacks Rank #2 (Buy).

RenaissanceRe Holdings Ltd. (RNR - Analyst Report), earnings ESP of +3.15% and a Zacks Rank #1 (Stong Buy).

The Allstate Corporation (ALL - Analyst Report), earnings ESP of +3.15% and a Zacks Rank #3 (Hold).

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