NEW YORK ( TheStreet) -- Insurance shares this year have been to investors what kryptonite is to Superman.
The following companies aren't risk-free but are safer than many of their peers and may generate good returns in the next year. They were selected based on low price-to-earnings ratios, low-to-average price-to-book values, a low beta (a tendency to follow broader stock-market trends) and high dividend yield. (SNL Financial provided a significant amount of the data.)
ACEACE (ACE), along with Travelers (TRV), is in the best position to pursue acquisitions. According to SNL, Credit Suisse analyst Vinay Misquith says ACE has the ability to spend as much as $7 billion in cash. Although ACE has some exposure in Dubai, the company said the amount is negligible. ACE is large, with a $16.5 billion market value. Its P/E ratio is a low 8.4, and price to book is average at 88%. Short interest -- representing investors who are betting on a share-price decline -- has been dropping over three months. The stock is trading lower than it was a year ago, and it's 33% below analysts' consensus price target. With a yield of 2.53%, this stock looks like it's ready to pop.
American Financial GroupAmerican Financial Group (AFG) offers a different proposition. With a market value of $2.7 billion, it's significantly smaller than ACE and probably will offer smaller returns, although net income is expected to be fractionally higher in 2010, according to analysts' estimates. Despite its size, American Financial Group has the dubious privilege of holding the 12th-highest residential mortgage-backed securities portfolio of all life insurers, $2.7 billion.
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