Tickers in this Article: TRV, ACE, ENH, C
Mention insurance companies as an investment these days and most folks will think you are a nut. It seems all the bad press engendered by the AIG bailout, among others, has marred the good name of many an upstanding and legitimate insurer. It's a shame, but it presents an opportunity. Why? Because the chance to capitalize on an entire sector that is "overshot" on the downside is now at hand. The good got flushed with the bad in this fall's sell off, so for those willing to pick through the rubble, there are deals to be had.

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Life vs. Property/Casualty
It may not be wisest to dive into the same dirty pool where AIG and its ilk are still swimming. Instead, it is perhaps preferable to ply clearer waters and avoid the life insurers in general. In the property/casualty field, however, there are some excellent opportunities. Here are a number of them along with a quick enumeration of the risks attending each.

Insurance Picks and Risks
Travelers Companies Inc.
(NYSE:TRV) is a giant in the insurance world with a market cap of over $24 billion and a customer base focused in the continental United States. The company recently replaced Citigroup's (NYSE:C) in the Dow Jones Industrial Average stock trades with a yield of 2.8% and a trailing year P/E ratio of just 9.5. In addition, Travelers is trading below its breakup value with a P/B ratio of just 0.93. (Find out how this index tracks market movements - and where it falls short, see How Now, Dow? What Moves The DJIA?.)

Travelers, like many other property/casualty insurers, is vulnerable to a number of eventualities beyond management's control. They include (but are not limited to) large catastrophic losses associated with Gulf Coast hurricanes or other natural disasters, a rise in the number of asbestos or other environmentally-based claims (which have abated recently) and further dramatic deterioration of the credit markets.

Travelers' stock is up over 45% since its lows for the year and saw a jump after the DOW announcement.

Endurance Specialty Holdings Ltd. (NYSE:ENH) is a smaller scale, Bermuda-based property/casualty operation that does business in the U.S. and the United Kingdom. The company's shares pay out 3.6% annually and trade, like Travelers, at a discount to book value. Current P/B is just 0.7.

Endurance's American Agri-Business Insurance Company (ARMtech) exposes it to severe droughts and/or pestilence issues that would affect U.S. farm crops. Additionally, the company's unique lines could also expose it to a large scale terrorist event or other such catastrophe. Endurance company stock is up over 25% in just the last three months of trading.

Ace Ltd. (NYSE:ACE) is up nearly 50% in the last 10 weeks on stronger overall market conditions and a recent decision to raise the dividend by 7%. The shares now offer investors a 2.8% annual yield and trade at a very reasonable P/E multiple of 10.9x trailing earnings. Its price-to-book ratio stands at a very neat 1.00x. (Explore arguments for and against company dividend policy, and learn how companies determine how much to pay out How and Why Do Companies Pay Dividends?)

Ace operates insurance and reinsurance businesses worldwide out of its Bermuda offices. It has been pushing recently into new emerging markets, especially in Latin America. Quarterly profits there were up by 40%, the company's fastest growing regional segment by far.

The Wrap
Should the market choose to value these well-run property casualty insurers simply at book value, substantial gains will be had. Should it ascribe more traditional price/book valuations to the industry, these companies will have been well worth the investors' while.

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