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The short sellers of insurance stocks are back.

Taking the most heat is Citizens ( CIA), with a short interest ratio of 17.6, up 3.8 in a week. Citizens, however, has outperformed its peers, and analysts' consensus price target for 2009 is $9. Someone has got it wrong.

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The largest increase in short interest, up 5.7 to 12.9, was in Ambac Financial Group ( ABK), recently declared solvent by Wisconsin's insurance regulator after it abandoned its attempts to create a separate corporate bond insurance company. It's struggling to reach an agreement over its guarantee for swaps between UBS ( UBS) and the Massachusetts Turnpike Authority following Moody's downgrade.

Primus Guarantee ( PRS), a volatile stock with a beta of 1.7, has a short interest ratio of 15.4, an increase of 4. The shares have fallen 30% during the past year. Maybe some believe the credit swap insurance market is exposed. Certainly, Primus was displeased and asked that its ratings be withdrawn last month when Standard & Poor's downgraded the company.

Auto insurer Mercury General ( MCY) received a negative outlook from Moody's last month after it received approval for a 3% rate cut in its California market. It holds third place behind State Farm and Zurich Financial Services' Farmers Group, which completed the purchase of American International Group's ( AIG) car insurance subsidiary, 21st Century, on July 1. That competitive situation appears to have some nervous, as rate reductions keep receiving approvals. With a short interest ratio of 12.6, up 3.7 in the week, even this company with a low-volatility beta of 0.83 faces an examination.

Other shorted insurers include MBIA ( MBI), which is under pressure as it tries to resolve problems caused by the splitting off of its bond insurance business. It has a short interest ratio of 11.8, up 3.2.

Molina Healthcare ( MOH) has a short interest ratio of 13.5, up 2.3. The company's stock has already surpassed analysts' consensus price of $22.8 and may be attracting those who see health insurers as a viable target as the health care debate warms up.

Most Shorted Insurance Stocks
Source: Lind-Waldock

Gavin Magor joined TheStreet.com Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.