Reviewing The Hanover Insurance Group (NYSE:THG) and Principal Financial Group (NASDAQ:PFG)

The Hanover Insurance Group (NYSE:THG) and Principal Financial Group (NASDAQ:PFG) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Insider and Institutional Ownership

86.6% of The Hanover Insurance Group shares are held by institutional investors. Comparatively, 75.1% of Principal Financial Group shares are held by institutional investors. 2.8% of The Hanover Insurance Group shares are held by company insiders. Comparatively, 1.1% of Principal Financial Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and recommmendations for The Hanover Insurance Group and Principal Financial Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
The Hanover Insurance Group	0	5	3	2	2.70
Principal Financial Group	3	7	3	0	2.00

The Hanover Insurance Group presently has a consensus price target of $225.71, indicating a potential downside of 0.07%. Principal Financial Group has a consensus price target of $108.83, indicating a potential downside of 6.32%. Given The Hanover Insurance Group’s stronger consensus rating and higher possible upside, research analysts plainly believe The Hanover Insurance Group is more favorable than Principal Financial Group.

Profitability

This table compares The Hanover Insurance Group and Principal Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
The Hanover Insurance Group	11.17%	21.72%	4.61%
Principal Financial Group	9.93%	16.49%	0.58%

Earnings and Valuation

This table compares The Hanover Insurance Group and Principal Financial Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
The Hanover Insurance Group	$6.59 billion	1.19	$662.50 million	$20.95	10.78
Principal Financial Group	$15.63 billion	1.59	$1.19 billion	$7.04	16.50

Principal Financial Group has higher revenue and earnings than The Hanover Insurance Group. The Hanover Insurance Group is trading at a lower price-to-earnings ratio than Principal Financial Group, indicating that it is currently the more affordable of the two stocks.

Dividends

The Hanover Insurance Group pays an annual dividend of $3.80 per share and has a dividend yield of 1.7%. Principal Financial Group pays an annual dividend of $3.36 per share and has a dividend yield of 2.9%. The Hanover Insurance Group pays out 18.1% of its earnings in the form of a dividend. Principal Financial Group pays out 47.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. The Hanover Insurance Group has raised its dividend for 20 consecutive years and Principal Financial Group has raised its dividend for 2 consecutive years.

Volatility and Risk

The Hanover Insurance Group has a beta of 0.26, meaning that its share price is 74% less volatile than the S&P 500. Comparatively, Principal Financial Group has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Summary

The Hanover Insurance Group beats Principal Financial Group on 11 of the 17 factors compared between the two stocks.

About The Hanover Insurance Group

The Hanover Insurance Group, Inc., through its subsidiaries, provides various property and casualty insurance products and services in the United States. The company operates through four segments: Core Commercial, Specialty, Personal Lines, and Other. The Commercial Lines segment offers commercial multiple peril, commercial automobile, workers' compensation, and other commercial lines coverage. The Specialty segment provides professional and executive Lines, marine, and surety and other, as well as specialty property and casualty, such as program business, specialty industrial business, excess and surplus business, and specialty general liability coverage. The Personal Lines segment offers personal automobile and homeowner's coverages, as well as other personal coverages, such as personal umbrella, inland marine, fire, personal watercraft, personal cyber, and other miscellaneous coverages. The Other segment markets investment advisory services to institutions, insurance companies, pension funds, and other organizations. The Hanover Insurance Group, Inc. markets its products and services through independent agents and brokers. The company was formerly known as Allmerica Financial Corp. and changed its name to The Hanover Insurance Group, Inc. in December 2005. The Hanover Insurance Group, Inc. was founded in 1852 and is headquartered in Worcester, Massachusetts.

About Principal Financial Group

Principal Financial Group, Inc. provides retirement, asset management, and insurance products and services to businesses, individuals, and institutional clients worldwide. The company operates through Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions segments. The Retirement and Income Solutions segment provides a portfolio of asset accumulation products and services for retirement savings and income. It offers products and services for defined contribution plans, including 401(k) and 403(b) plans, defined benefit pension plans, nonqualified executive benefit plans, employee stock ownership plans, equity compensation, and pension risk transfer services; individual retirement accounts; investment only products; and mutual funds, individual variable annuities, and bank products. The Principal Global Investors segment provides equity, fixed income, real estate, and other alternative investments, as well as asset allocation, stable value management, and other structured investment strategies. The Principal International segment offers pension accumulation products and services, mutual funds, asset management, income annuities, and life insurance accumulation products, as well as voluntary savings plans in Brazil, Chile, Mexico, China, Hong Kong Special Administrative Region, India, and Southeast Asia. The U.S. Insurance Solutions segment provides specialty benefits, such as group dental and vision insurance, group life insurance, and group and individual disability insurance, as well as administers group dental, disability, and vision benefits; and individual life insurance products comprising universal, variable universal, indexed universal, and term life insurance products in the United States. It also offers insurance solutions for small and medium-sized businesses and their owners, as well as executives. Principal Financial Group, Inc. was founded in 1879 and is based in Des Moines, Iowa.