PMIC Penn Millers Holding Corp. (MM)

ACE Limited (ACE) has inked a deal to acquire Penn Millers Holding Corporation (PMIC) for a cash consideration of $107 million. The acquisition is expected to close by the first quarter of 2012 pending approvals.

Wilkes-Barre, Pennsylvania based Penn Millers Holding Corporation, through its subsidiaries, provides various property and casualty insurance products for agricultural and small commercial business customers. As such, the acquisition will enhance ACE Limited’s product offering in agricultural market. Further, the acquisition, in the upcoming quarters, will also help the company to write higher premiums, which showed an impressive growth of 16% in the second quarter.

ACE Limited expects the acquisition to be accretive to earnings, return on equity and book value per share.

Earlier, in September 2010, ACE Limited acquired Johnston, Iowa, Rain and Hail Insurance Service for $1.1 billion in cash to expand its offering in agricultural market. ACE Limited, since 1980, continues to be one of the leading crop insurance writers in the U.S.

ACE Limited posted a strong second quarter with operating income of $2.01 per share, surpassing the Zacks Consensus Estimate by 33 cents. The better-than-expected result stemmed from higher premiums and investment income.

In its second quarter earnings conference call, ACE Limited announced that it would post double-digit revenue growth in the second half of 2011. For 2011, the company raised its operating earnings expectation to $6.00 - $6.20 per share from $5.40 - $5.70 guided earlier.

The Zacks Consensus Estimate for third-quarter 2011 is $1.79 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $6.57 per share and $7.46 per share.

We maintain our Neutral recommendation on ACE Limited. The quantitative Zacks #3 Rank (short-term 'Hold' rating) for the company indicates no clear directional 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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