The Hanover Insurance Group (THG) & RLI (RLI) Critical Contrast

The Hanover Insurance Group (NYSE: THG) and RLI (NYSE:RLI) are both mid-cap property & casualty insurance – nec companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitability, institutional ownership, valuation, earnings and dividends.

Valuation & Earnings

This table compares The Hanover Insurance Group and RLI’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 $4.95 billion 0.92 $155.10 million $2.89 37.23
RLI $816.33 million 3.22 $114.92 million $1.80 33.18

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

Volatility and Risk

The Hanover Insurance Group has a beta of 1.11, meaning that its stock price is 11% more volatile than the S&P 500. Comparatively, RLI has a beta of 1.29, meaning that its stock price is 29% more volatile than the S&P 500.

Dividends

The Hanover Insurance Group pays an annual dividend of $2.00 per share and has a dividend yield of 1.9%. RLI pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. The Hanover Insurance Group pays out 69.2% of its earnings in the form of a dividend. RLI pays out 46.7% 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 40 consecutive years and RLI has raised its dividend for 5 consecutive years. The Hanover Insurance Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

83.9% of The Hanover Insurance Group shares are owned by institutional investors. Comparatively, 83.7% of RLI shares are owned by institutional investors. 1.1% of The Hanover Insurance Group shares are owned by insiders. Comparatively, 6.1% of RLI shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
The Hanover Insurance Group 2.37% 3.35% 0.67%
RLI 9.97% 8.53% 2.57%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for The Hanover Insurance Group and RLI, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Hanover Insurance Group 0 1 0 0 2.00
RLI 1 4 0 0 1.80

The Hanover Insurance Group presently has a consensus target price of $91.00, indicating a potential downside of 15.43%. RLI has a consensus target price of $41.67, indicating a potential downside of 30.24%. Given The Hanover Insurance Group’s stronger consensus rating and higher possible upside, research analysts clearly believe The Hanover Insurance Group is more favorable than RLI.

Summary

The Hanover Insurance Group beats RLI on 9 of the 16 factors compared between the two stocks.

The Hanover Insurance Group Company Profile

The Hanover Insurance Group, Inc. is a holding company. The Company is engaged in providing property and casualty insurance products and services. The Company has four segments: Commercial Lines, Personal Lines, Chaucer and Other. It markets its domestic products and services through independent agents and brokers in the United States, and conducts business internationally through a subsidiary, Chaucer Holdings Limited, which operates through the Society and Corporation of Lloyd’s (Lloyd’s). Its Commercial Lines product suite provides agents and customers with products designed for small, middle and specialized markets. Its Personal Lines coverages include other personal lines, which consist of umbrella and fire, among others. The Chaucer segment consists of international business written through Lloyd’s, including marine and aviation, and property. The Other segment consists of Opus Investment Management, Inc. (Opus), which provides investment advisory services to affiliates.

RLI Company Profile

RLI Corp. is a specialty insurance company. The Company underwrites selected property and casualty insurance through subsidiaries, as well as offers insurance coverages in both the specialty admitted, and excess and surplus markets. It operates through Casualty, Property and Surety segments. Its Casualty segment consists of commercial and personal umbrella, general liability, commercial transportation, professional services, small commercial, executive products, medical professional liability and other casualty businesses. Its property segment consists of commercial property, marine, specialty personal, property reinsurance and crop reinsurance businesses. Its surety segment consists of miscellaneous, commercial, contract and energy businesses. The Company conducts its operations principally through three insurance companies: RLI Insurance Company (RLI Ins.), Mt. Hawley Insurance Company (Mt. Hawley) and Contractors Bonding and Insurance Company (CBIC).

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