Under-the-Radar Insurance Stocks for Today

Universal Insurance and American Physicians Service Group have sidestepped losses that have devastated the insurance industry.
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"Under-the-Radar Stocks" is a daily feature that uncovers little-known companies worthy of investors' consideration. Check in at 5 every morning to find out about stocks that tend to beat their bigger brethren.

The U.S.

insurance industry

has lost tens of billions of dollars since the beginning of 2008 because of reduced underwriting, investment losses and higher claims. Titans such as

The Hartford

(HIG) - Get Report

,

MetLife

(MET) - Get Report

and

Genworth

(GNW) - Get Report

have been battered. And I'm not even going to mention

American International Group

(AIG) - Get Report

.

But a few regional companies are growing, in part, because they have a superior understanding of their markets. The following two micro-cap insurers demonstrate sound fundamentals, yet offer strong growth potential, and are trading at discounts. Few investors have heard of them, as most analysts focus on

bigger companies

.

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Fort Lauderdale-based

Universal Insurance Holdings

(UVE) - Get Report

is a Florida-focused homeowners' insurance company. Even though earnings per share fell 11% in the first quarter, its operating margin widened to 42% from 36% for all of 2008, and revenue rose 6%. Florida's insurance market is tightly regulated and, after a denial by the state to increase rates to compensate for weather risks, large players such as

Allstate

(ALL) - Get Report

and

State Farm

have scaled back their operations, which will benefit Universal Insurance.

The insurer's stock price has more than doubled since the beginning of 2009. But the stock remains affordable. With a price-to-earnings ratio of just 5.37, Universal Insurance is 86% cheaper than its average peer in the property and casualty industry. The shares pay a mammoth 9.36% dividend, significantly higher than the 3.43% average of companies in the

S&P 500 Index

. As more investors hear about this micro-cap gem, the share price probably will extend gains, so consider looking at this company before the herd piles in.

American Physicians Service Group

(AMPH) - Get Report

provides medical-liability insurance for doctors and health-care providers in Texas. First-quarter revenue declined 2% to $19 million, but earnings per share surged 46% to $0.67. Despite strong quarterly performance, the stock has languished, falling 1% this year.

Shares of American Physicians Service Group are attractive compared with peers in the property and casualty insurance industry. They are currently trading at a price-to-earnings ratio of 7.53, 80% cheaper than rivals'. Considering the first-quarter profit boost, the discount seems illogical, but is nonetheless attractive to prudent bargain hunters. The stock even pays a modest 1.41% dividend yield, which isn't much but sweetens the pot.

TheStreet.com Ratings gives both insurers a "buy" recommendation.

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.