NEW YORK (

TheStreet

) -- Let's call them "stocking-stuffer stocks."

Insurance companies fared among the worst this year --

American International Group

(AIG) - Get Report

has a much worse reputation than the banking industry's biggest loser,

Citigroup

(C) - Get Report

. So they're somewhere between a lump of coal and a re-gifted item from

Wal-Mart

(WMT) - Get Report

.

The following insurers cost less than $5 a share and carry a price-to-book value of less than 30%. By this time next year, the companies' shares may be worth a lot more if the economy continues to improve, spurring insurance-policy income and investment-portfolio returns.

Ambac Financial Group

(ABK)

is special. It's the only insurance company on the New York Stock Exchange that trades for less than $1 a share. That has earned the company a notification of non-compliance. It also stars in the game known as "bankruptcy watch."

Increasing the stock price could easily be achieved through a reverse stock split, if necessary. The attractive 26% price-to-book value shouldn't be the reason to scoop it up. Neither the growing short interest, at 6.8, nor the 2.1 beta (1 is a perfect correlation with the stock market). The one reason to buy: If you believe the company will survive.

If Ambac can arrange for commutations of credit default swaps at rates similar to the deal completed earlier in the quarter, the company will be buying time for the stock market to recover. As a result, the likelihood of bankruptcy will diminish as time moves on. The gamble that the group can survive long enough for improvements to take place is the basis for buying this stock.

MBIA

(MBI) - Get Report

was dropped from the

S&P 500 Index

on Friday for

Mead Johnson Nutrition

(MJN)

, which makes baby formula. This is the bad news bears of stocks. The share price is barely above the March low of $2.17.

As with Ambac, there's no fundamental reason to buy MBIA. If the insurer can resolve the municipal bond insurance lawsuit brought by, among others,

JP Morgan Chase

(JPM) - Get Report

and

Bank of America

(BAC) - Get Report

subsidiary Merrill Lynch, the stock likely will leap in value.

Consider

PMI Group

(PMI)

. The mortgage insurer finds it difficult to summon investors' belief. It staged a spectacular rally mid-year, but now the stock price has descended, putting it on par with the average insurer. Analysts who follow delinquency and cure rates for mortgage defaults saw a decline in October and have projected more slack through the remainder of the year.

Chief Business Officer David Katlov, according to SNL Financial, told Bloomberg News last Thursday that the company will need support from regulators to shore up its capital because it can't raise money by selling shares. Capital restraints in some states have made it hard to sell mortgage-insurance policies, and that could act as a restraining factor on any uptick in housing sales.

PMI's 19% price-to-book value is the lowest of any insurer. Short interest in this stock is limited at 3.7, and it has a 2.1 beta. On the basis that the stock is likely trading at the bottom of its range, this present could be the one that keeps on giving. Of course, the risk is that it could get worse, but, as a stocking filler, would you mind if it did?

Reported by Gavin Magor in Jupiter, Fla.

Gavin Magor is the senior analyst responsible for assigning financial-strength ratings to insurance companies. He conducts industry analysis and supports consumer products. Magor has more than 22 years of international experience in operations and credit-risk management, commercial lending and analysis. His experience includes international assignments in Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.