ACE Limited Earnings: Here’s Why Shares are Lower

ACE Limited (NYSE:ACE) delivered a profit and beat Wall Street’s expectations, AND beat the revenue expectation. However, ACE Limited guided lower – an operating profit of between $6.60 and $7.00 per share for 2013, under the average analyst forecast of $7.89 per share. Shares are down 4.51%.

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ACE Limited Earnings Cheat Sheet

Results: Net income increased 2% to $765 million ($1.43 per diluted share) in the quarter versus a net gain of $750 million in the year-earlier quarter.

Revenue: Decreased 18.29% to $3.66 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: ACE Limited reported adjusted net income of $1.43 per share. By that measure, the company beat the mean analyst estimate of $1.28. It beat the average revenue estimate of $3.27 billion.

Quoting Management:

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had a good fourth quarter, which contributed to an excellent year. Even with the impact of Superstorm Sandy, we produced over $490 million of operating income and increased book value per share 2%. These results continue to demonstrate the strength of our underwriting culture and balance sheet, and the benefits of our globally diversified business…

…For the year, after-tax operating income was $2.6 billion, up 13% from 2011. We produced $1.2 billion in underwriting income – an increase of 11% over prior year – and a combined ratio of 93.9%. This is an excellent underwriting result, particularly given the worst drought conditions in the U.S. in 25 years as well as the losses from Sandy. We also produced strong investment results, with investment income down less than 3% – a good performance considering record low interest rates. Our operating ROE was 11% and per share book value grew 12% for the year, bringing three-year and five-year compounded annual book value per share growth to 11.4% and 10.7%, respectively.

Key Stats:

Revenue decreased 28.77% from $5.14 billion in the previous quarter. Net income increased 19.53% from $640 million in the previous quarter.

Looking Forward: Analysts have a more negative outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has fallen from a profit of $1.88 to a profit $1.87. For the current year, the average estimate has moved down from a profit of $8.05 to a profit of $7.49 over the last ninety days.

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(Company fundamentals provided by Xignite Financials.)