ACE Limited Approves Share Buyback - Analyst Blog

The board of directors of ACE Limited (ACE) approved a share buyback program, wherein the company is authorized to buy back up to $600 million of its common shares through December 31, 2012. The company with an intention to offset, in whole or in part, the expected dilution from the exercise of stock options and granting of restricted stock under ACE's equity-based incentive plans approved the buyback.

This authorization also replaces the earlier share buyback program approved in November 2001, authorizing the company to buy back up to $250 million of any of its issued debt or capital securities, including common shares. However, no shares have been repurchased under the November 2001 authorization.

Besides the share repurchase authorization, the board of directors of the company also approved a quarterly dividend of 33 cents a share. The dividend will be payable on January 11, 2011, to shareholders of record as of December 16, 2010. The dividend will be paid by the company's transfer agent in U.S. dollars (USD) subject to a required filing with the Swiss Commercial Register.

The par value of the company is currently CHF 30.89 per share. The par value of a share will be reduced concurrent to the dividend installment in terms of the CHF equivalent of $0.33 based on the USD/CHF rate as on December 13, 2010. 

ACE Limited has had a consistent track record of paying quarterly dividends and the current dividend is not an exception. Its dividend yield is 2.2%.

One of the major competitors of the company, The Travelers Companies (TRV), paid dividends worth $169 million during third-quarter 2010. Travelers has also spent $600 million during the third quarter of 2010 to buy back 11.8 million shares. The company is left with the approval to buy back another $3.1 billion worth of shares. Since the initial share repurchase program in the second quarter of 2006, Travelers repurchased 260 million common shares at a total cost of $12.9 billion.

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.

 
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