Risk has its own reward.

• Author: Scheer, Lisa
• Position: Insurance company stocks

Insurance-company stocks used to be regarded as safe havens for conservative investors. But then soured real-estate and junk-bond investments led to the failures of several major insurers, including California's First Executive Corp. and New Jersey's Mutual Benefit Life Co. The safe haven doesn't look so safe anymore.

However, three Tar Heel insurers represent brighter prospects, despite having taken some hard knocks.

Greensboro-based Jefferson-Pilot Corp. ($4.9 billion in assets) and Fayetteville's Mid-South Insurance Co. ($65 million in assets) are two life and health insurers that have weathered the post-80s storms and represent conservative long-term buys for investors. Property and casualty insurer Integon Corp. ($333 million in assets) of Winston-Salem makes its money in the high-risk auto-insurance business. Its newly minted shares offer a more speculative play to investors.

In February, the property and casualty division of Integon (IN-NYSE) went public. The stock issue, offered at $15.25 a share, raised $113 million, much of which went to repay debt.

Integon has flirted with public ownership before. Ashland Oil Co. bought the insurer in 1981, then sold it to Texas real-estate developer Southmark Corp., now in Chapter 11. In the late 1980s, Southmark took a chunk of Integon public. Then in 1990, Integon went private again in a $236 million leveraged buyout.

Integon is expanding fast in the high-risk auto-insurance business, which accounts for more than 80% of the 70-year-old company's revenues. Risky business has paid off: Last year, the company earned $19.1 million on total revenues of $186 million, a margin of 10%.

High-risk property and casualty insurers typically make money through their investment portfolios, while breaking even on their premium business. But penny-pinching Integon makes money at both ends. Its combined five-year ratio of losses and expenses to premiums is a relatively low 89%.

Strict cost controls are key. During the past four years, Integon trimmed its back-office staff by 14% while computers picked up the slack. Outside the office, the company pares costs with software that processes information about a driver in moments, then spits out a premium price.

The result: Expense ratios are 24%, compared with 30% for the rest of the high-risk auto-insurance industry. Meanwhile, annual revenues more than tripled to $186 million between 1986 and 1991.

"We'll insure most any risk if we get the right price for it,"...