Strong dollar, weak foreign sales hurt profits at Ace, cut 850 jobs at FMC, helped oust DuPont boss

The drop in foreign currency valuse vs. the U.S. dollar has hurt U.S. manufacturers who invested abroad during the late commodity-export boom: Dupont CEO Ellen Kullman announced her abrupt departure after her company's foreign pesticide sales and profits plunged, "primarily in Brazil;" and Philadelphia-based FMC plans to cut 800-850 jobs worldwide to cover falling Brazil profits, FMC said here.

And it's not just manufacturers; In a "historic" change that marks the globalization of the once-insular U.S. insurance business, "the size of the currency exchange rate changes have been too large to ignore" for big insurers like Ace Ltd., Chubb (which Ace plans to acquire) and AIG, and investor "uncertainty and confusion" could hurt share prices in the months ahead, warns analyst Paul Newsome in a report to clients at Sandler O'Neill + Partners. 

Consolidation in the relatively slow-growing U.S. market and foreign expansion by U.S. companies has left the big firms more vulnerable to the rising dollar. The 22 percent summer drop in the Brazilian real and 5-10% declines in the Australian and Canadian dollars, Mexican peso and Korean won should trim Ace Ltd. earnings by a nickel a share in teh third quarter; as a group, big U.S. property/casualty insurers and borkers should see "third-quarter earnings reduced by 5% to 8% due to changes in currency exchange rates," Newsome writes.

Yet his firm is meanwhile increasing its next-year Ace share-price target to $118, from $116 (the stock is lately trading around $107), given its "long-term" profitability and the likelihood Chubb will prove a "transformational acquisition" that boosts Ace's worldwide market share and allows profitable cost-cutting, Newsome concluded. Ace is nominally based in the world tax haven of Switzerland (formerly Bermuda); its largest employment center, the former Insurance Co. of North America in Philadelphia, is in the early stages of being combined with Chubb's Warren, N.J. headquarters.