NEW YORK (Bloomberg) ? ACE Ltd., a Bermuda-based business insurer, may raise between $700 million and $1 billion by selling shares in its bond-insurance business, according to estimates of two stock analysts.

The company, which recently announced its plans to spin off 65 to 75 percent of the business in an initial public offering, said the IPO will free up funds to expand in property and casualty insurance. It plans to complete the IPO in the first half of next year.

Hugh Warns, an analyst at J.P. Morgan, said ACE could free up about $1 billion in capital and raised his rating on the stock to "neutral" from "underweight." Michael Paisan, an analyst at Legg Mason Wood Walker, said the company could raise between $700 million and $900 million.

Bond insurers, also called financial guaranty insurers, protect debt holders against default. The company, which has not estimated how much it may fetch, hasn't broken out the unit's profit. The business sold $111 million, or 4.8 percent, of the company's policies in the third quarter. ACE said it would release detailed plans in a registration statement this month.

Warns said Ace estimates that about 15 percent, or $1.25 billion, of the company's $8.35 billion in overall equity supports the bond insurance business. The analyst's estimate assumes ACE sells shares in 65 percent of the unit at 1.25 times that book value, he said in a note to clients.

Paisan, who has a "buy" rating on the stock, estimates the financial guaranty business has earned an 11 to 12 percent return on equity, compared with at least 15 percent from property and casualty insurance.

ACE's financial guaranty business includes Capital Re Corp., a reinsurer of other bond insurers. Ace bought it in 1999 for $588 million in cash and stock after winning a bidding war with XL Capital Ltd.