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.

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