Property and casualty insurer, ACE Limited (ACE) wrapped up the acquisition of New York Life’s Korea business for $75 million in cash.
Initially, in October 2010, ACE Limited had inked a deal to acquire New York Life’s Hong Kong and Korea life insurance operations for a cash consideration of $425 million. The agreement, was however, amended to facilitate separate closings for the Korea and Hong Kong operations.
The acquisition of New York Life’s operations in Hong Kong is also expected to close during the first quarter of 2011.
The acquisition of the life insurance business in Hong Kong and Korea, two major Southeast Asian markets, would complement the company’s already existing property and casualty insurance operations representing approximately $330 million in incremental life insurance revenues, $2.15 billion in assets and over 2,400 captive agents.
The company expects the acquisition to be accretive to earnings, book value per share and return on capital.
Recently, ACE Limited also closed the acquisition of Rain and Hail Insurance Service Inc. for approximately $1.1 billion in cash. ACE Limited was already holding a 20% stake in Rain and Hail. With the acquisition, ACE Limited now has full ownership of Rain and Hail Insurance.
We expect the acquisitions to create a turnaround in premium writings, which suffered a decline in the third quarter when compared with the year-ago results. Also, with considerable balance sheet strength, we expect ACE to be able to grow organically as well as inorganically.
The Zacks Consensus Estimate for fourth-quarter 2010 is $1.84 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $7.56 per share and $7.48 per share.
ACE Limited will report its fourth quarter and full year 2010 earning results after the market closes on February 2.
We maintain our Neutral recommendation on ACE Group over the long term. The quantitative Zacks #4 Rank (short-term Sell rating) for the company indicates downward pressure on the shares 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).
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