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ACE Buys PT Asuransi's Major Stake

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Property and casualty insurer, ACE Limited purchased 80% of PT Asuransi Jaya Proteksi in Indonesia. Jakarta-based Asuransi Jaya Proteksi will leverage ACE presence in the fast-growing South Asian market. Furthermore, it will help broaden accident and health and commercial property and casualty businesses in Indonesia.

In mid June this year, ACE announced its plans to acquire Asuransi Jaya Proteksi, one of the top 10 general insurers in Indonesia and leading provider in personal lines. The purchase consideration comprises a cash payment of about $130 million on closing. Being a leader in personal lines business, the acquisition will also help ACE strengthen its foothold in Indonesia.

ACE will not only benefit from the wide network coverage that Asuransi Jaya Proteksi has already established in the Indonesian market, but will also have a defined structure for marketing and distributing its products. The growing customer base in this region is expected to support its revenue growth. Moreover, with both the companies having almost similar service offerings, ACE will find it easier to amalgamate Asuransi Jaya Proteksi’s business with its own.

Acquisitions have created a turnaround in premium writings and in turn have helped the company deliver better numbers and grow inorganically. The market has also reacted positively on the company’s move. The share price of ACE inched up 0.6% to close at $76.85 as on Tuesday.   

Recently, to expand its surety business, ACE agreed to buy Mexico based Fianzas Monterrey, from New York Life Insurance Company for a cash consideration of $285 million. The acquisition will expand its footprint in Mexico and owing to the promising economic scenario in the Mexican markets, it hopes to capitalize on the opportunities as and when they are available.

The company expects premium growth to gain momentum in each quarter, averaging in the mid-to-upper single digits in 2012. Acquisition will thus help it to achieve its expectation. ACE Limited estimated 2012 operating earnings to come in the band of $7.20–$7.60 per share, up from $7.03–$7.43 per share guided earlier. The Zacks Consensus Estimate for 2012 is currently pegged at $7.80, higher than the company’s guided range. This also represents a year-over-year improvement of nearly 12%.

We currently have a Neutral recommendation on ACE Limited. The quantitative Zacks Rank for the company is presently “3”, indicating no clear directional pressure on the shares over the near term. The Travelers Companies, Inc. (TRV - Free Report) , which closely competes with ACE Limited, also shares a Zacks #3 Rank.

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