P&C Insurer Stocks Offer Value, Dividends

NEW YORK (TheStreet) -- With financial stocks like Citigroup (C Quote) and Bank of America (BAC Quote) looking pricey these days, largely ignored property and casualty insurers seem like relative bargains.

Citigroup and Bank of America are trading at 60 and 20 times estimated 2010 earnings, respectively. Meanwhile, as the accompanying chart shows, many property and casualty insurer stocks trade below book value. The eight I've selected all trade below their historic price to book ratios of the last five years.

They look good on a price-to-earnings basis as well, with all except Chubb (CB Quote) and Cincinnati Financial (symbol Quote), trading below their average price-to-earnings multiples of the last five years. Allstate (ALL Quote), ACE Ltd.(ACE Quote) and Travelers (TRV Quote) look particularly good vs. their historical multiples.

Despite the attractive valuations, not to mention some healthy dividends, investors couldn't be less interested. Chicago-based Sandler O'Neill analyst Paul Newsome was in New York Monday to talk to investors about the sector, but many wouldn't even meet with him.

"People are focused on virtually anything else but this sector," he said.

The weak economy has taken its toll on insurers like virtually everything else, but Newsome says insurance for individuals, which makes up about half the industry, has been relatively stable.

"Most people, even in a recession, are not going to give up their car, and the same is true for their home," Newsome says. By contrast, a decline in construction activity has caused commercial insurance underwriting business to take a big hit.