BOSTON (TheStreet) -- The Hartford (HIG) - Get Report, a besmirched insurer that accepted TARP money, has become an attractive investment. Its stock ranks fifth-cheapest among S&P 500 components, based on forward earnings. Analysts offer a middling view, with eight rating it "buy," 11 rating it "hold" and one ranking it "sell." Yet, The Hartford's value is compelling.

The stock has risen 11% in 2010, in accordance with the average large-cap. Its trailing earnings multiple of 11, forward earnings multiple of 7, book value multiple of 0.5 and cash flow multiple of 4.5 reflect discounts of 50%, 51%, 85% and 69% to insurance peer averages.

The Hartford held $46 billion of cash and equivalents at quarter's end and just $7 billion of debt, a reassuring sign for investors. Insurance stocks have been routine underperformers since the recession, despite cheap share prices. The Hartford, for example, has a five year-average earnings multiple of 20, but currently trades at a multiple of just 11. And fundamentals are clearly on the mend.

The Hartford swung to a third-quarter GAAP profit of $666 million, or $1.34 a share, from a loss of $220 million, or 79 cents, a year earlier. Revenue increased 26% to $6.6 billion. The gross and operating margins climbed from negative territory to 17% and 15%, respectively. Both margins are above insurance industry averages. Return on equity is modest, touching 5% in the latest quarter, less than the S&P 500 mean of 13%. Still, The Hartford is beating expectations. It exceeded analysts' consensus earnings estimate by just 0.2%, but its stock popped 8% on the announcement. Researcher

Barclays

is bullish, rating the sector "positive" and The Hartford "overweight."

Barclays is encouraged by The Hartford's new management team, which is focused on reducing its capital markets risk, namely, exposure to the U.S. equity market and downside from further strengthening of the yen. Volatility in its investment portfolio and elevated claims levels in its group disability business weighed on The Hartford's stock price in 2010.

Barclays is encouraged that management is addressing these two issues with additional hedging techniques and a commitment to amplify top-line growth. Insurers, which invest float, or the income derived from policies, in various stocks and bonds, are subject to capital swings when markets turn down. Oftentimes, a market downturn coincides with an economic recession and thus higher claims, making insurers doubly vulnerable. This is what happened during the subprime crisis when The Hartford required a now-repaid $3.4 billion government loan.

As financial safety is paramount to customers, the TARP loan had a deleterious effect on reputation and sales volume. But, according to Barclays, insurance distributors are now becoming more comfortable with the company and recommending its products more frequently to clients, a trend which Barclays expects to not only persist, but accelerate.

Management is stressing a need to de-risk, in response to investors' complaints, and a major transaction could be in the works in the near future as equity markets continue to melt up. Barclays values The Hartford's stock at $32, suggesting 24% of upside in the next 12 months. Its price target was derived by combining a price to book value and residual income model, a new type of valuation for Barclays.

Even more bullish is

UBS

, which has positive ratings and lofty targets on a variety of insurance stocks. UBS forecasts that The Hartford's stock will advance 63% to $42 in the next year.

Deutsche Bank

echoes Barclays target of $32.

Goldman Sachs

is less optimistic, with a $29 target. Institutional investors are bullish. Of the stock's 68 largest owners, 40, or 59%, increased their stakes during the latest quarter as three held steady and 25 decreased their positions.

-- Written by Jake Lynch in Boston.

RELATED STORIES:

10 Unloved Stocks to Rise Up to 120%

Become a fan of TheStreet on Facebook.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.