Seeking Alpha
Profile| Send Message| ()  

ACE Limited (ACE) guided first quarter 2011 preliminary net after-tax losses from natural catastrophes to be $210 million, including reinstatement premiums. The total amount comprises $115 million attributable to the New Zealand earthquake, $80 million for the Australian floods and Cyclone Yasi, and $15 million for the U.S. winter storms.

Besides, the company estimates net after-tax losses from the recent Japanese earthquake to range between $200 million and $250 million.

ACE Limited recorded higher catastrophe losses of $50 million in the fourth quarter 2010 compared with $23 million a year ago. In fiscal 2010, total catastrophe losses were $401 million compared with $136 million in 2009. The combined ratio at the Property & Casualty business deteriorated 70 basis points year over year to 90.3% in the quarter, and 190 basis points year over year to 90.2% in 2010.

ACE Limited reported fourth-quarter 2010 operating income of $2.05 per share, beating the Zacks Consensus Estimate by 20 cents and the year-ago earnings by 4 cents.The company also guided fiscal 2011 operating income in a range of $6.10 to $6.50 per share.Catastrophe losses included in the estimate are $300 million.

The Zacks Consensus Estimate for first-quarter 2011 is $1.74 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $7.21 per share and $7.31 per share.

The company’s results remained unaffected to a large extent in spite of frequent natural disasters that led to large catastrophe losses. The company is well poised on the strength of its international presence, diversified product offering, risk management, conservative underwriting practice and strong reserves.

The company is also on an aggressive acquisition spree. ACE Limited closed the acquisitions of New York Life’s Korea and Rain and Hail Insurance Service, Inc. ACE Limited remains focused on expanding its footprint in faster growing economies. We expect the acquisitions to turn around premium writings and help in the company’s growth.

We maintain our long-term “Neutral” recommendation on ACE Limited. The quantitative Zacks #3 Rank (short term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Zurich, Switzerland, ACE Limited, through its subsidiaries, provides a range of insurance and reinsurance products to commercial and individual customers worldwide. The company competes with American International Group Inc. (AIG) and The Travelers Companies Inc. (TRV).

Source: ACE Forecasts Catastrophe Losses