Selective Insurance Group (NASDAQ: SIGI) and American Financial Group (NYSE:AFG) are both mid-cap financials companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.
This table compares Selective Insurance Group and American Financial Group’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Selective Insurance Group||7.36%||11.00%||2.37%|
|American Financial Group||10.22%||10.90%||0.98%|
Selective Insurance Group pays an annual dividend of $0.72 per share and has a dividend yield of 1.3%. American Financial Group pays an annual dividend of $1.40 per share and has a dividend yield of 1.3%. Selective Insurance Group pays out 23.9% of its earnings in the form of a dividend. American Financial Group pays out 18.0% 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. American Financial Group has increased its dividend for 11 consecutive years. American Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of recent recommendations and price targets for Selective Insurance Group and American Financial Group, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Selective Insurance Group||0||4||0||0||2.00|
|American Financial Group||0||1||0||0||2.00|
Selective Insurance Group currently has a consensus price target of $50.91, indicating a potential downside of 11.46%. American Financial Group has a consensus price target of $103.00, indicating a potential downside of 3.69%. Given American Financial Group’s higher probable upside, analysts plainly believe American Financial Group is more favorable than Selective Insurance Group.
Earnings and Valuation
This table compares Selective Insurance Group and American Financial Group’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Selective Insurance Group||$2.28 billion||1.47||$158.49 million||$3.01||19.10|
|American Financial Group||$6.50 billion||1.45||$649.00 million||$7.79||13.73|
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.
Insider and Institutional Ownership
77.8% of Selective Insurance Group shares are owned by institutional investors. Comparatively, 61.4% of American Financial Group shares are owned by institutional investors. 3.0% of Selective Insurance Group shares are owned by company insiders. Comparatively, 14.9% of American Financial Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Risk & Volatility
Selective Insurance Group has a beta of 1.45, meaning that its stock price is 45% more volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.
American Financial Group beats Selective Insurance Group on 9 of the 15 factors compared between the two stocks.
About Selective Insurance Group
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.
About American Financial Group
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.
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