ACE Limited (ACE) has one of the strongest book value growths over the last decade among insurers, with global exposure to growing international markets and also to improving domestic segments of the insurance markets, says Amit Kumar, Vice President and Senior Analyst at Macquarie Group Limited.
“If you look at ACE, clearly it’s a global business mix play. If you’d look at the book value CAGR, which means how well the company has done in terms of value creation, and if you go back to let’s say 2003, you will see that ACE has had one of the strongest book value CAGRs, compounded annual growth rate, of midteens since 2003, which meaningfully outpaces the rest of the players in the space. In terms of business mix, the U.S. and non-U.S. are split evenly,” Kumar said.
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Kumar says ACE‘s exposure to P&C is only in the single digits, and the company’s exposure to Latin America should eventually reflect into the stock price. He also says its exposure to crops has meaningfully improved.
“Now, as I said, property catastrophe is the area that is under pressure, but for ACE, reinsurance is only 7% of their business mix. So again, their fortunes are not tied. The company is known for being ahead of the curve and recently has made multiple international acquisitions, especially in Mexico, but the stock has lagged. The stock is up only 14% for 2013 versus peer group, which is 22%. Not only all these good things, ACE is also the second-largest crop insurer in the U.S. with 21% market share. Recently, we did a Midwest crop tour, and our takeaway was that crop planting conditions had meaningfully improved over last month. So ACE is a great place to hide during this volatile pricing environment,” Kumar said.
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