Piper Jaffray Comments On ACE Limited After Reporting Solid Earnings

ACE Limited ACE reported operating EPS of $0.79 for 1Q11, topping both Piper Jaffray's estimate of $0.37 and consensus of $0.63, driven by lower than anticipated losses. Underwriting performance drove the bulk of the upside with a combined ratio of 105.0% coming in ahead of Piper's 111.0% estimate. Meanwhile, net premiums decreased 3.5% year over year to $3.4B. As a result of 1Q cat losses, management lowered 2011 operating guidance to $5.40-$5.70 per share. ACE reported a combined ratio of 105.0% compared to a forecasted 111.0% and 92.8% in the prior year. L&LAE of $2.3B below our estimate of $2.5B. North America combined ratio increased 430bps Y/Y to 95.0%, while Overseas came in at 107.2%, up from 95.0% Y/Y. Not surprisingly, catastrophe losses hurt results at Global Re in the quarter as the combined ratio increased to 129.7% from 78.8% in 1Q10. Key risks include: catastrophe events, regulatory changes, loss of rating, economic risks, competitive pricing, reserve deficiency, and foreign operation risks. Piper Jaffray has a $77 PT and Overweight rating on ACE ACE closed Wednesday at $66.47