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ACE Closes Fianzas Monterrey Buy

Zacks Equity Research

ACE Limited (ACE) acquired Fianzas Monterrey from New York Life Insurance Company for a cash consideration of $293 million. This acquisition, announced in Sep 2012, will help the company expand its surety business.

Based in Mexico and founded in 1943, Fianzas Monterrey primarily caters to clients in the construction and industrial sectors offering administrative performance bonds. With three regional offices, 25 branch offices and an extensive 600 independent agents and brokers, Fianzas Monterrey is the second-largest surety lines company in Mexico and the third largest in Latin America.
Surety business forms a part of ACE Limited’s specialty property & casualty business. Additionally, owing to the promising economic scenario in the Mexican markets, it expects to capitalize on the opportunities as and when they are available. Moreover, it will augment ACE Seguros, the existing commercial lines and personal accident insurance business in Mexico.

ACE Limited has always considered acquisition as an efficient strategy to boost inorganic growth and expand its global footprint. Also, acquisitions have created a turnaround in premium writings and in turn, have helped the company deliver better numbers, which we expect to continue going forward.

ACE Limited is scheduled to release its first-quarter 2013 earnings results on Apr 22 after the closing bell. The Zacks Consensus Estimate for the first quarter is currently pegged at $1.85, reflecting nearly a 10% year over year decline.

ACE Limited guided 2013 operating earnings to a band of $6.60–$7.00 per share. The guidance includes catastrophe loss of $450 million. The Zacks Consensus Estimate for 2013 is $7.68, up 0.5% year over year.

ACE Limited carries a Zacks Rank #2 (Buy). Property and casualty insurers AXIS Capital Holdings Limited (AXS), Cincinnati Financial Corp. (CINF) and Arch Capital Group Ltd. (ACGL) carry a favorable Zacks Rank #1 (Strong Buy) and appear impressive.

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