Three Fantastic Insurers for Investors

While life as a bond insurer may not be all its cracked up to be these days, life as a property and casualty insurance company is a different story--especially for three property and casualty stocks that are more likely than the average stock to be higher in a year's time.

The Property and Casualty Insurance industry is one of a number of 10-rated industry groups that investors should be focusing on when it comes to buying stocks right now. 10-rated industries, based on our research into industry group behavior since 1995, have dramatically outperformed the average industry. We found that industries with PowerRatings of 10 were able to achieve average annualized returns of more than 35% between 1995 and 2006. The average industry, by comparison, had average annualized returns of approximately 14.61%.

And while there are a number of stocks in the group that are likely to perform as well as the average stock over the next year--and a few that are likely to perform worse than the average stock--there are also at least three stocks that will not only outperform their peers in the Property and Casualty Insurance industry, but also many of the stocks in the broad market, as well.

PartnerRe Ltd. (PRE@PRE | Quote | Chart | News | PowerRating) has a PowerRating of 9. Stocks with PowerRatings of 9 have been higher one year later more than 79% of the time based on our research. 9-rated stocks have also tended to gain, on average, more than 18% after one year. PartnerRe Ltd. has a P/E of 6.10 and is trading in the middle of its 52-week price range from a high of $84.75 to a low of $66.83. The company provides reinsurance services for insurance companies, including property and casualty, catastrophe, life and alternative risk transfer. The Bermuda-based reinsurer recently raised its dividend by 7%.

Mercury General Corporation (MCY@MCY | Quote | Chart | News | PowerRating) trades at just under 11 times earnings. The stock is trading in the lower half of its 52-week price range from a high of $59.06 to a low of $42.57. The company's main business is in providing automobile insurance, especially in the state of California. With a PowerRating of 8, Mercury General Corporation belongs to that group of stocks which, according to our research, have been higher one year later more than 74% of the time. Stocks with PowerRatings of 8 also have tended to gain, on average, more than 17% after one year.

White Mountains Insurance Group (WTM@WTM | Quote | Chart | News | PowerRating) is another stock in the Property and Casualty Insurance industry with a PowerRating of 8. White Mounttains Insurance Group is a holding company with business interests in property and casualty insurance, as well as reinsurance. The company recently acquired a 42% stake in Answer Financial, one of the largest online personal insurance companies in the United States.

White Mountains Insurance Group trades at a P/E of 8.8. The stock is trading in the lower half of its 52-week price range of $611.02 and $449.36

I left out the biggest name in the industry, Berkshire Hathaway (BRKB@BRKB | Quote | Chart | News | PowerRating), with its PowerRating of 10. I certainly did not do so because the company run by the world's most famous investor is not worth of investment. Rather, I wanted to focus on a few other stocks at the top of the industry group that could provide no less excellent opportunities for investors after a year.

David Penn is Senior Editor at PowerRatings.net

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