Contrasting Allied World Assurance (AWHHF) and American Financial Group (AFG)

Allied World Assurance (OTCMKTS: AWHHF) and American Financial Group (NYSE:AFG) are both mid-cap companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Institutional and Insider Ownership

86.5% of Allied World Assurance shares are held by institutional investors. Comparatively, 61.4% of American Financial Group shares are held by institutional investors. 3.2% of Allied World Assurance shares are held by company insiders. Comparatively, 13.7% of American Financial Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Allied World Assurance has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500.

Dividends

Allied World Assurance pays an annual dividend of $0.52 per share and has a dividend yield of 1.0%. American Financial Group pays an annual dividend of $1.40 per share and has a dividend yield of 1.3%. Allied World Assurance pays out 17.5% 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. Allied World Assurance has raised its dividend for 12 consecutive years.

Profitability

This table compares Allied World Assurance and American Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Allied World Assurance 12.56% 8.96% 2.42%
American Financial Group 10.22% 10.90% 0.98%

Analyst Ratings

This is a breakdown of current ratings and price targets for Allied World Assurance and American Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Allied World Assurance 0 1 0 0 2.00
American Financial Group 0 1 1 0 2.50

Allied World Assurance currently has a consensus target price of $24.50, indicating a potential downside of 52.47%. American Financial Group has a consensus target price of $111.00, indicating a potential downside of 0.55%. Given American Financial Group’s stronger consensus rating and higher probable upside, analysts plainly believe American Financial Group is more favorable than Allied World Assurance.

Valuation and Earnings

This table compares Allied World Assurance and American Financial Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Allied World Assurance N/A N/A N/A $2.97 17.36
American Financial Group $6.50 billion 1.51 $649.00 million $7.79 14.33

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

Summary

American Financial Group beats Allied World Assurance on 9 of the 15 factors compared between the two stocks.

Allied World Assurance Company Profile

Allied World Assurance Company Holdings Ltd is a Germany-based holding company. It provides property, casualty and specialty insurance and reinsurance solutions to clients around the world. The Company operates in three segments: North American Insurance, Global Markets Insurance and Reinsurance. The North American Insurance segment consists of the Company’s direct insurance operations in the United States, Bermuda and Canada. The Global Markets Insurance segment includes all of the Company’s direct insurance operations outside of North America. The Company’s reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverage’s written by other reinsurance companies. The Company leases space in Australia, Bermuda, Canada, Hong Kong, Ireland, Labuan, Singapore, the United Kingdom and the United States for the operation of its North American Insurance, Global Markets Insurance and Reinsurance segments.

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.

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