American International Group Inc (AIG), Hartford Financial Services Group Inc (HIG): This Insurer Has Improved Tremendously, But Is it a Buy Yet?

Hartford Financial Services Group Inc (NYSE:HIG) is one of the largest multi-line insurers, and is focused on property-casualty, group benefits, and mutual funds. In order to sharpen its focus, the company sold off its retirement services, life insurance, and annuity business units over the past year. Hartford Financial Services Group Inc (NYSE:HIG) still has a long way to go in its restructuring, but the company trades for a very low P/E of just 9.6 times 2013’s earnings. While Hartford Financial Services Group Inc (NYSE:HIG) is far from being “low-risk”, it has a risk/reward that certainly looks attractive, especially if the company is successful in its new direction.

Loews Corporation (NYSE:L) is perhaps the least risky of the three, with interests in property/casualty insurance as well as other assets such as hotels, offshore oil and gas drilling, natural gas liquids, and interstate gas pipelines. Loews Corporation (NYSE:L) is a way to get insurance exposure while adding some diversity so that earnings are not completely dependent on one line of revenue. While insurance still makes up about two-thirds of Loews’ revenue, I find the diversified holdings of the company to be very appealing. The lower risk level is also priced into the shares, as Loews is the most “expensive” company here at 14.5 times this year’s expected earnings.

Final thoughts

I am still a bit hesitant to get involved in American International Group Inc (NYSE:AIG), despite all of the positive developments of the past few years. When the company reports, I’m paying attention to the progress of winding down their riskier assets, as well as how the company plans to continually improve its financial position. As far as the earnings numbers go, a poor number could result in a dip in share price, at which point an investment in AIG may make more sense from a risk/reward perspective.

The article This Insurer Has Improved Tremendously, But Is it a Buy Yet? originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends American International Group and Loews. The Motley Fool owns shares of American International Group and Loews and has the following options: long January 2014 $25 calls on American International Group. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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