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5 Buy-Rated Insurance Stocks for Long-Term Investors

4. Ace Limited

Shares of Ace Limited (ACE) of Zurich closed at $71.49 Thursday, returning 3% year-to-date, following last year's 15% total return.

The company is currently paying a quarterly dividend of 47 cents a share, but announced on Feb. 23 that its board of directors would propose an annual dividend of $1.96 a share -- distributed in quarterly installments of 49 cents -- at Ace Limited's annual meeting in May. On the rather safe assumption that shareholders will approve additional gravy, the forward dividend yield is 2.74%.

The shares trade for 0.9 times tangible book value and 9.5 times the consensus 2012 EPS estimate of $7.55. The consensus 2013 EPS estimate is $7.59.

The company earned $1.6 billion, or $4.65 a share during 2011, declining from $3.1 billion, or $9.11 a share, in 2010, mainly because of $795 million in realized losses on investments. Excluding the investment losses and $432 million in gains recorded in 2010, Ace earned $1.94 a share in 2011, compared to $2.05 a share the previous year.

Ace limited issued guidance for 2012, with operating income "expected to range between $6.65 and $7.05 per share."

Credit Suisse analyst Michael Zaremski has a neutral rating on Ace Limited, with a $73 price target, and said last month that an update of crop insurance premium methodology by the U.S. Department of Agriculture's Risk Management Agency would lead "lower insurance rates for corn and soybean producers (farmers) in the 2012 crop year." The analyst said the premium changes "current crop prices (and lower levels of crop volatility) point to top-line declines in the 4%-8% range for the 2012 crop season," for Ace's crop insurance business.

Zaremski lowered his 2012 EPS estimate for ACE by six cents to $7.16, while also saying "the economics of crop insurance remains relatively attractive and ACE has been a best in class crop underwriter over the years." The analyst estimates ACE will earn $7.15 a share in 2013.

Interested in more on Ace Limited? See TheStreet Ratings' report card for this stock.
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