ACE

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Commercial property-casualty insurance firm ACE ( ACE) is another name that boosted its dividend payout last week. Last Thursday, the firm announced a 4.26% increase that makes 2012 the firm's 18th consecutive year of dividend raises for shareholders. The move puts ACE's payout at a 2.6% yield.

ACE built its business on providing major corporations with insurance against catastrophic losses. Around 90% of ACE's revenues come from that commercial property-casualty insurance line, a business with high barriers to entry for the otherwise commoditized insurance industry. Because few insurers can offer the scale that ACE offers, the company is able to underwrite profitable policies with reduced competition.

But while the catastrophic insurance business can be extremely profitable when times are good, it can be treacherous when risks aren't adequately covered. That's an area where ACE has left much to be desired lately. Not only did the firm carry a riskier investment portfolio during the recession, but it's also dealing with more insurance losses than its models counted on in the last few years.

A stabilizing insurance market should bode well for ACE in the coming years and months, but for now the firm's increased dividend doesn't justify exposure to this name.

ACE, one of Citadel Advisors' holdings, shows up on lists of 5 Insurance Stocks for 2012 and JPMorgan's 24 Stocks That Are More Attractive Than Apple.

If you liked this article you might like

BlackRock to Pay Costs of External Research Per New EU Rules

Big Companies Say They Favor Diversity, Most Refuse to Prove It

China Communist Party Has Just Become Besties With Hong Kong

Hong Kong Investors Now Have a Comrade Shareholder: the Communist Party

What Mutual Fund Mark-Downs Say About Uber