Head to Head Analysis: American Financial Group (AFG) vs. Selective Insurance Group (SIGI)

American Financial Group (NYSE: AFG) and Selective Insurance Group (NASDAQ:SIGI) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, earnings, profitability, valuation, analyst recommendations, institutional ownership and risk.

Dividends

American Financial Group pays an annual dividend of $1.40 per share and has a dividend yield of 1.2%. Selective Insurance Group pays an annual dividend of $0.72 per share and has a dividend yield of 1.2%. American Financial Group pays out 18.0% of its earnings in the form of a dividend. Selective Insurance Group pays out 23.9% 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. Selective Insurance Group has increased its dividend for 12 consecutive years. American Financial Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares American Financial Group and Selective Insurance Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Financial Group 10.22% 10.90% 0.98%
Selective Insurance Group 7.36% 11.00% 2.37%

Institutional and Insider Ownership

61.4% of American Financial Group shares are owned by institutional investors. Comparatively, 77.8% of Selective Insurance Group shares are owned by institutional investors. 13.7% of American Financial Group shares are owned by company insiders. Comparatively, 3.0% of Selective Insurance Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares American Financial Group and Selective Insurance Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Financial Group $6.50 billion 1.53 $649.00 million $7.79 14.46
Selective Insurance Group $2.28 billion 1.55 $158.49 million $3.01 20.10

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

Risk and Volatility

American Financial Group has a beta of 0.85, suggesting that its share price is 15% less volatile than the S&P 500. Comparatively, Selective Insurance Group has a beta of 1.45, suggesting that its share price is 45% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for American Financial Group and Selective Insurance Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Financial Group 0 1 1 0 2.50
Selective Insurance Group 0 3 0 0 2.00

American Financial Group currently has a consensus target price of $111.00, suggesting a potential downside of 1.48%. Selective Insurance Group has a consensus target price of $53.22, suggesting a potential downside of 12.04%. Given American Financial Group’s stronger consensus rating and higher possible upside, equities research analysts plainly believe American Financial Group is more favorable than Selective Insurance Group.

Summary

American Financial Group beats Selective Insurance Group on 10 of the 17 factors compared between the two stocks.

American Financial Group Company Profile

American Financial Group, Inc. (AFG) is a holding company engaged primarily in property and casualty insurance businesses. The Company, through Great American Insurance Group, focuses on commercial products for businesses, and is engaged in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets. It has four segments: Property and casualty insurance, Annuity, Run-off long-term care and life, and Other. It reports its property and casualty insurance business in specialty sub-segments, including Property and transportation, Specialty casualty and Specialty financial. AFG sells traditional fixed and fixed-indexed annuities in the retail, financial institutions and education markets through independent producers and through direct relationships with certain financial institutions. AFG also sells single premium annuities in financial institutions through direct relationships with certain banks and through independent agents and brokers.

Selective Insurance Group Company Profile

Selective Insurance Group, Inc. is a holding company. As of December 31, 2016, the Company had 10 insurance subsidiaries, nine of which were licensed by various state departments of insurance to write specific lines of property and casualty insurance business. The remaining subsidiary is authorized by various state insurance departments to write property and casualty insurance in the excess and surplus lines (E&S) market. Its segments include Standard Commercial Lines, which consists of insurance products and services provided in the standard marketplace; Standard Personal Lines, which consists of insurance products and services, including flood insurance coverage that it writes through the National Flood Insurance Program (NFIP); E&S Lines, which consists of insurance products and services provided to customers not obtaining coverage in the standard marketplace, and investment segment invests insurance premiums, as well as amounts generated through its capital management strategies.

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