NEW YORK ( TheStreet) -- Insurance shares this year have been to investors what kryptonite is to Superman.

That's why conservative investors looking for attractive insurance stocks favor the likes of Progressive ( PGR) or Loews ( L). But there are better alternatives.

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.)

ACE

ACE ( 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 Group

American 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.

With the recent announcement that the insurance regulator plans to introduce a new risk calculation for RMBS portfolios, American Financial Group is in a strong position to receive a boost to its capital and surplus of $900 million, and, thus, its risk-based capital position.

The stock price has fallen about 6% in the past three months, bringing the 12-month gain to 7.6%. With a P/E ratio of 5.4, price to book of 74.6%, low interest in the stock and a short-interest ratio of only 2, American Financial Group is alluring. It's the proverbial market follower, with a beta of 1.01 (almost a perfect correlation), and trades at 24% below analysts' mean target price. The insurer offers a dividend yield of 2.21% to sweeten the pot.

Aspen Insurance Holdings

Aspen Insurance Holdings ( AHL) is one of many Bermuda-based insurance groups that wants to expand into U.S. property and casualty markets. The company, according to SNL, is in discussions with a number of U.S. managing general agents to enable Aspen to acquire business in small to mid-market risks, areas that have been successful in the London market.

Aspen's stock is up nearly 19% over the past 12 months, though has moved little in three months. The P/E ratio is only 4, and price to book is 76%, with trading at 84% of regular levels. There is limited short interest, and a beta of 0.85 shows the company's independence from other insurance shares. Aspen's shares trade at 14% below analysts' mean target price. Analysts are forecasting a small drop in net income for next year, though a 2.28% dividend yield might help investors overlook that.

OneBeacon Insurance Group

OneBeacon Insurance Group ( OB) has a small challenge. Recently revised by S&P to "stable," Moody's last week put the company under review for a possible downgrade following the disclosure that it had sold renewal rights to Hanover Insurance Group ( THG) for $490 million in business. Hanover said this week its board had approved an increase of $100 million to the company's existing share-repurchase program, providing for aggregate repurchases of up to $300 million of the company's common stock.

So why buy OneBeacon's stock? First, it has risen 44% over the past year, proving it has been able to escape the pain of the insurance market. With a beta of only 0.92, OneBeacon doesn't correlate with the broader stock market.

A P/E ratio of 2.9 and a book value of 92% are attractive. Trading is at normal levels and short interest is dropping, down from more than 4 to 2.6 in the past week. Price might not be the main attraction, as the stock is just over the top of analysts' mean projection, but the dividend yield of 6.31% is exceptional.

-- 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.

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