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The blue chips may not be the best performers among property/casualty insurance stocks this year.

To find the top performers in the sector, some analysts are looking beyond the traditional top tier-Chubb Corp., American International Group Inc. and General Re Corp.-to smaller and specialized companies.

It's not that they are down on their long-time favorites, just that those stocks are so well-known that they may be fully valued.

"In terms of really standout performance, I think you're going to have to look.....further beyond these kinds of household names," said Ronald Frank, an analyst with Smith Barney Inc. in New York.

As evidence, he cites recent performance. "A whole bunch of small to mid-cap and specialty names were among the top performers in a whole range of subsectors and niches, and there was no strong sector theme tying them together," he said. Lower profiles were all they had in common.

Mr. Frank cites his top pick in 1996-American Re-Insurance Co.-"which we feel gives you a very good play on the sector at a relatively cheap valuation without having to trade down.*.*.in quality."

His other 1996 recommendations and those of other analysts, follow.

Mr. Frank recommends Marsh & McLennan Cos. Inc.-backed startup Risk Capital Holdings Inc. (BI, Sept. 18, 1995) and catastrophe reinsurers Partner Re Ltd. and Mid Ocean Ltd.

He predicts higher valuations for some catastrophe reinsurers because they've "acquired some credibility in the market" yet still "trade at a very sizable discount to the multiples (of traditional reinsurers)."

Jay Cohen of Merrill Lynch & Co. Inc. in New York:

"While the property catastrophe operating environment is becoming more competitive, it still remains quite favorable, allowing RenaissanceRe Holdings Ltd. to produce above-average returns," he said.

EXEL Ltd. is another favorite. "The company has been overcapitalized and has been buying back shares aggressively. Secondly, it is finding new growth opportunities outside of its core market, which is very competitive."

Fremont General Corp. is also on the list. "Essentially the story (is) very good results in the Midwest are offsetting the deterioration in the California workers comp environment."

Michael Lewis, first vp with Dean Witter Reynolds in New York:

AIG is on his list, as is Fremont, which "should benefit from any improvement in the California workers comp market," he said.

Mr. Lewis also recommends Meadowbrook Insurance Group Inc. and Mutual Risk Management Ltd. -both "pure plays on the alternative risk market."

Weston M. Hicks of Sanford Bernstein & Co. in New York:

Chubb as well as TIG Holdings Inc., Executive Risk Inc.-"an undervalued growth company"-are on his list.

In some ways, TIG is "a play on growth in specialty lines and reinsurance" and "really has excellent earnings leverage from getting out of (the middle-market commercial businesses)," said Mr. Hicks.

He also continues to recommend Aetna Life & Casualty Co. and CI

"They are sort of long-term turnaround stories, and I don't think they 're over with yet," he said.

Mr. Hicks also recommends Reliance Group Holdings Inc. and Old Republic International Corp. both of which "have some exposure to the title insruance industry, which we believe will show strong earnings momentum in 1996."

Gloria Vogel, managing director and senior insurance analyst with Ladenburg, Thalmann & Co. Inc. in New York:

"Clearly," she said, Chubb and AIG "are going to continue to grow and do quite well."

However, she added, "I still like some of the specialty companies, companies like Allied Group Inc. or Orion Capital Corp., little niche companies that I think can do well."

Donald E. Franz Jr., vp and senior analyst at Advest Inc. in New York:

The small-capacity stock specialist recommends Acceptance Insurance Co. After extraordinary reserving last year, the writer of specialty coverages "should have a very good year," he said.

He also recommends two surplus lines companies:

Penn-America Group Inc. has a improving combined ratio and redundant reserves. While it has an official objective of a 20% increase in revenues and profits each year, it has "done a lot better than that the past two years," he said.

And over the past 10 years, GAINSCO Inc. has had about the highest return on equity among companies its size, said Mr. Franz.

Blair E. Sanford of Hoefer & Arnett in San Francisco.

Gryphon Holdings Inc. Group, Navigators Group Inc., Philadelphia Consolidated Holding and Capsure Holdings Corp. are the recommendations of this small-cap specialist.

Gryphon stands to benefit from hardening rates in the California commercial earthquake property market, while Navigators had "very impressive" earnings for the past few quarters, said Mr. Sanford.

Philadelphia Consolidated Holding-which writes casualty-related products targeted to rental car consumers, non-profit organizations, health and fitness organizations, and specialty and training schools-is very well run, has "shorter-than-average liability tails, solid reserving and good growth prospects," said Mr. Sanford.

And Capsure, primarily a surety company, shows promise in light of its plan to integrate a recent acquisition, he said.

David Seifer, vp with Donaldson, Lufkin & Jenrette Securities Inc. in New York:

His list includes AIG, Gen Re and Chubb as well as Executive Risk, Vesta Insurance Group Inc., Reliance, SAFECO Corp., Progressive Corp., Transatlantic Holdings Inc., National Re Corp. and American Re.

Carol Manning, vp at Prudential Securities Inc. in New York:

She recommends AIG, Chubb, Gen Re, American Re, The Travelers Inc., ITT/Hartford Group Inc. and Prudential Reinsurance Co.

Harry Fong, director of C.J. Lawrence/Deutsche Securites in New York:

He recommends The St. Paul Cos. Inc. and Chubb, both of which have sold "at above average growth over the years, and sell at below-average industry multiples."