BOSTON (TheStreet) -- Insurance stocks are some of the cheapest in the equity market. Aside from AIG (AIG), which recently attracted capital from value guru Bruce Berkowitz of Fairholme Capital (FAIRX), insurance stocks get little attention from the media. Warren Buffett earned a fortune buying insurance companies. His Berkshire Hathaway (BRK.A) has been involved in the insurance business since it bought National Indemnity in 1967.

Here are the 10 cheapest U.S. insurance stocks. Most trade below book value and are predicted by analysts to make huge gains in the next year. Although the insurance business is inherently risky, the value of these stocks provides investors with a margin of safety. Below, they are ordered by forward earnings multiple, from cheap to cheapest.

10. Protective Life ( PL) sells insurance and investment products. Second-quarter profit tumbled 54% to $41 million, or 47 cents a share, as revenue decreased 9.3% to $712 million. The operating margin narrowed from 21% to 14%. Protective Life's stock trades at a trailing earnings multiple of 7.2, a forward earnings multiple of 7.6 and a cash flow multiple of 1.7 -- 58%, 31%, and 82% discounts to insurance industry averages. One analyst rates it "buy," nine rate it "hold" and two rank it "sell." A median target of $25.43 suggests a 12-month return of 15%.

Bullish Scenario: UBS ( UBS) predicts that Protective Life's stock will rise 40% to $31.

9. Tower Group ( TWGP) sells commercial, personal and specialty property and casualty insurance. Second-quarter net income declined 8% to $28 million and earnings per share dropped 16% to 63 cents. Revenue grew 23%. The operating margin contracted from 20% to 15%. Tower Group's stock sells for a trailing earnings multiple of 9.7, a forward earnings multiple of 6.9 and a cash flow multiple of 5.9, 44%, 37% and 38% discounts to peer averages. Four analysts rate it "buy" and three rate it "hold." A median target of $31 suggests 31% of upside.

Bullish Scenario: Piper Jaffray ( PJC) forecasts that Tower Group's stock will soar 81% to $43.

8. Reinsurance Group of America ( RGA) sells life, annuity, asset-intensive, critical illness and financial reinsurance. Second-quarter profit decreased 17% to $127 million, or $1.70 a share, as revenue extended 8.9%. The operating margin rose from 11% to 12%. Reinsurance Group's stock trades at a trailing earnings multiple of 7.5, a forward earnings multiple of 6.8 and a cash flow multiple of 1.9, 56%, 38% and 80% discounts to industry averages. Nine analysts rate it "buy" and two rank it "hold." A median target of $64.29 suggests a 33% return.

Bullish Scenario: UBS ( UBS) offers a target of $75, projecting the stock will gain 55%.

7. Lincoln National ( LNC) engages in insurance and retirement businesses. Lincoln swung to a second-quarter profit of $256 million, or 32 cents a share, from a year-earlier loss. Revenue jumped 38%. The operating margin stretched from 2.1% to 15%. In addition to selling for less than book value per share, Lincoln's stock commands a forward earnings multiple of 6.8 and a cash flow multiple of 5.8 -- 39% and 40% discounts to peer averages. Half of the analysts covering the stock rate it "buy." A median target of $32.92 implies 32% of upside.

Bullish Scenario: UBS ( UBS) values the stock at $41, suggesting a 12-month return of 65%.

6. Hartford Financial Services ( HIG) is a multi-line insurer with a market value of $11 billion. Hartford swung to a second-quarter profit of $76 million, or 14 cents a share, from a loss of $15 million, or 6 cents, a year earlier. Revenue tumbled 58% to $3.3 billion. The operating margin widened from 4% to 6.5%. Hartford's stock trades at a book value multiple of just 0.6. Its forward earnings multiple of 6.7 and cash flow multiple of 5.6 reflect discounts of 40% and 41% to industry averages. Eight analysts rate the stock "buy," 10 rate it "hold" and one ranks it "sell."

Bullish Scenario: UBS ( UBS) forecasts that Hartford's stock will advance 77% to $42.

5. National Financial Partners ( NFP) is an independent insurance broker. Second-quarter profit expanded 20% to $12 million, or 27 cents a share, as revenue ascended 4.8% to $235 million. The operating margin tightened from 7% to 6.4%. The company's stock sells for a forward earnings multiple of 6.3 and a cash flow multiple of 4.4 -- 43% and 54% discounts to peer averages. Of researchers following National Financial Partners, one advises purchasing its shares and six recommend holding them. A median target of $15 suggests the stock will gain 7%.

Bullish Scenario: Barclays ( BCS) offers a price target of $16, implying the stock will gain 14%.

4. AmTrust Financial Services ( AFSI) is a multi-national specialty property and casualty insurer. Second-quarter profit increased 15% to $31 million, or 51 cents a share, as revenue grew 35% to $246 million. The operating margin fell from 20% to 15%. AmTrust's stock trades at a trailing earnings multiple of 7.7 and a forward earnings multiple of 6.3 -- 55% and 43% discounts to insurance industry averages. Of analysts covering AmTrust, six advocate buying its stock and one suggests holding it. A median target of $20.80 suggests a one-year return of 34%.

Bullish Scenario: FBR Capital Markets ( FBCM) predicts that AmTrust's stock will rise 62% to $25.

3. First Mercury Financial ( FMR) sells specialty insurance in commercial markets. Second-quarter profit plummeted 64% to $4.2 million, or 23 cents a share, as revenue dropped 15% to $66 million. The operating margin contracted from 24% to 12%. First Mercury's stock sells for a trailing earnings multiple of 5.5, a forward earnings multiple of 6.1 and a cash flow multiple of 2.2 -- 68%, 44% and 77% discounts to peer averages. Of analysts covering the stock, four rate it "buy" and one ranks it "hold." A median target of $15 implies 44% of upside in 12 months.

Bullish Scenario: KBW ( KBW) forecasts that First Mercury's stock will appreciate 54% to $16.

2. American Equity Investment Life ( AEL) sells annuities and life insurance products. The company swung to a second-quarter loss of $1.5 million, or 3 cents a share, from a profit of $9 million, or 16 cents, a year earlier. Revenue tumbled 75%. The operating margin rose from 6.7% to 8.8%. American Equity's stock trades at a forward earnings multiple of 5.7 and a cash flow multiple of 1.4 -- 49% and 85% discounts to insurance industry averages. Five analysts rate it "buy" and one ranks it "sell." A median target of $14.25 suggests a 12-month return of 30%.

Bullish Scenario: SunTrust ( STI) values the stock at $15, implying that it will rise 37%.

1. Phoenix Companies ( PNX) sells life insurance and annuity products. Phoenix swung to a second-quarter profit of $10 million, but a per share loss of 4 cents, from a year-earlier loss of $111 million, or 73 cents. Revenue climbed 29%. The operating margin turned positive. Phoenix's stock sells for a book value multiple of 0.2, a sales multiple of 0.1 and a forward earnings multiple of 5.4 -- massive discounts to peer averages. One analyst rates the stock "buy", two rate it "hold" and four rank it "sell." A median target of $4 implies a one-year gain of 74%.

Bullish Scenario: UBS ( UBS) predicts that Phoenix's stock will surge 161% to $6.

-- Written by Jake Lynch in Boston.

>To see these stocks in action, visit the 10 Insurance Stocks portfolio on Stockpickr.

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