Stifel Nicolaus & Co. Analyst Meyer Shields says that he is generally skeptical of acquisitions in the insurance sector because the buyer typically acquires “every mistake that the selling firm has ever made.” But, he says ACE Limited’s (ACE) acquisitions tend to be more profitable than its competitors’.
“ACE actually has a phenomenally unique track record of identifying and executing on positive acquisition opportunities,” Shields says. “Those range from domestic opportunities, such as recently buying the high-net-worth personal lines business of the Fireman’s Fund from Allianz (ETR:ALV), to numerous international acquisitions in countries ranging from Mexico to Turkey to Indonesia and Malaysia.”
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Shields says the profitability of ACE’s acquisitions tends to work out very well.
“ACE doesn’t seem to experience the same reserve risk — where liabilities were understated by the acquired company — that has often played out merger and acquisition activity in the insurance industry,” he says.
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