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This week, Allied World Assurance Company Holdings (NYSE:AWH) announced that it is buying Transatlantic Holdings (NYSE:TRH). This deal is the only recent multi-billion dollar insurance M&A activity and may be the start of what many have predicted will be a wave of consolidation amongst insurers and possibly other financials.

Here, I have screened the market for American large-cap property and casualty insurers. Amongst them, I looked for those with trailing earnings (however dubious) that are trading below book value while having a current price to free cash flow (FCF) under 10. In the chart below, I also included TRH as a comparison.

Ticker
Name
Market Cap
P/E
P/B
P/FCF
American International Group, Inc.
$54.07 B
2.7
0.6
5.98
The Allstate Corporation
$15.80 B
12.28
0.82
5.57
Hartford Financial Services Group Inc.
$11.13 B
7.19
0.53
3.5
Transatlantic Holdings Inc.
$3.09 B
16.78
0.77
3.18
The Travelers Companies, Inc.
$24.56 B
7.99
0.98
9.84

Book value and free cash flow are two popular metrics amongst value investors, and also important metrics to insurers. These metrics can sometimes look deceptively undervalued when a company is under significant risk, but also where a company’s underlying assets are overvalued.

Looking at these names, it is notable that Transatlantic was purchased at a price to free cash flow that is below these larger insurers, and about the average price to book. Amongst the large cap names, Hartford has the lowest price to book and price to FCF. Hartford is also the smallest of these large-caps.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.

Source: Large-Cap Insurers Priced Below Book With Strong FCF