OK, it's time to whip out the NoDoz and caffeine because we're about to talk about the ultra-exciting subject of insurance stocks. Yes, hold me back! But seriously, insurance is big business-whether it comes in the form of health, life, homeowners, property, disability, business interruption, hurricane or earthquake insurance-it's a vital need for everyone. 

Insurance stocks typically thrive during tough times. Therefore, threats of a recession may play well in the hands of insurance company stock investors. But remember, investing in risk management stocks involves just that -- risk. So, buy what you know, and never be afraid to take the first 20% in gains off the table.

The Chubb Corporation (CB)

Snapshot: Born in 1882, Chubb keeps churning along, as it provides property and casualty insurance to businesses and individuals through three segments: commercial insurance, specialty insurance and personal insurance.

PRICE: $52.79

Pros:

*          Stock trading on the cheap alert! Chubb shares are selling at a mere seven times earnings. In addition, the price is hovering around 52-week lows.  That's a clean bill of health that any insurer wouldn't give you a denial on, right? Yeah, right.

*          Chubb's earnings are rather, er, chubby to say the least, to the tune of $6.88 per share. Couple that with a dividend payment of $1.16 per share and everything sounds rather nice until you realize the yield is just 2.4%.

*          Chubb is one of 40 stocks named to Standard & Poor's PowerPicks for 2008. This list is based on S&P's formula for determining attractive valuation. The average gain of companies comprising the S&P list has outperformed its well-respected cousin, the S&P 500, for five years running.

Cons:

*          Buy and hold investors over the last two years have barely earned a dime on Chubb's volatile stock.

*          While earnings were expected to grow 12% for 2007, this year has pundits making projections of a rollback in growth and a 6.5% decline in Chubb's bottom line.

*          Revenues are in the same boat, with a forecast of flat to a decline of 0.5% in sales. Still, experts are predicting revenues a shade below $12 billion for 2008.  That's a heckuva lot of float for Chubb to get their mitts on and invest.


AFLAC Inc. (AFL)

Snapshot: AFLAC markets and sells supplemental health and life insurance plans in the United States and Japan. It also sells cancer plans, care plans, general medical indemnity plans, medical/sickness riders, living benefit life plans, life insurance plans and annuities.

PRICE: $60.70

Pros:

*          Wall Street must love the pride and joy of Madison Avenue - the AFLAC duck, as shares of the company that makes sure it doesn't hurt if you miss work soared as much as 48% over the past year.

*          AFLAC has a nice shield against the likelihood of a recession in the United States thanks to the fact that more than half its profits originate in Japan.

*          Earnings were expected to be 15% higher for 2007 and jump another 16% in 2008. That's some pretty sweet duck soup. 

Cons:

*          OK, you make money hand-over-webbed feet yet you can only afford to give investors a dividend yield of 1.3%?  That's a bit quacky to me!

*          Growth in Japan has been relatively flat in recent years. However, that is expected to turnaround this year with the start of cancer product sales by Japan Post Network to postal employees in 24,000 post offices. However, if the Japanese postal workers are slow to embrace the product, investors may find themselves with some sushi on their bill.

*          It's truly hard to find much in the way of negatives other than to caution that if shareholders suddenly get their feathers ruffled by AFLAC, institutional investors may leave in flock -- and the shares could become ugly ducklings.

Allstate Corp. (ALL)

Snapshot: Allstate engages in personal property and casualty insurance, as well as life insurance, retirement and investment products in the United States and Canada.

PRICE:

Pros:

*          While its shares plummeted as much as 28% over the past year, Allstate's stock price appears to be holding firm at a base around $50 a share.  If the charts hold steady, value investors may be licking their chops.

*          In fact, they likely are undervalued, as shares are trading at a miniscule 6 times earnings.  Plus, Allstate has earned $8.33 per share over the trailing 12 month period. Now, that's the kind of "good hands people" I like to know.

*          Finally! A dividend yield to be proud of - Allstate pays out a nice 3% yield to its shareholders, or $1.52 per share.  That's a 3% start off the bat, which you can piggyback on any gains or offset against any unforeseen losses. 

Cons:

*          Allstate suffered a $5.7 billion blow from Hurricane Katrina in 2005.  Should 2008 shape up to be another monster storm season, heaven forbid, Allstate still has significant risk exposure to Mother Nature, even after a large purge of policies in hurricane-prone states.

*          Allstate is in a knockdown, drag out fight with the state of Florida over a law passed last year that required insurers to cut homeowner premiums in exchange for bargain basement rates on reinsurance.  Allstate recently won a stay in court that allows their agents to write policies in Florida while the legal battle plays out. Oh, you've got to love election-year politics, eh?

*          The company has the public relations savvy of a sinkhole.  For example, Allstate created subsidiary Allstate Floridian to enable it to claim widespread losses and increase premiums.  Granted, hurricanes undoubtedly caused losses in states that suffered, such as Florida.  But when the company cries poverty over losses in a single state while it reports billions in profits companywide, the sympathy factor gets to the level of a fender bender.

Michael Abramowitz is a freelance writer based in Florida. To avoid a conflict of interest, he does not currently own any of the stocks mentioned above.

Price quotes are from February 1, 2008.