Critical Analysis: Donegal Group (NASDAQ:DGICA) & Assurant (NYSE:AIZ)

Donegal Group (NASDAQ:DGICA) and Assurant (NYSE:AIZ) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, earnings, valuation, institutional ownership, risk, profitability and analyst recommendations.

Profitability

This table compares Donegal Group and Assurant’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Donegal Group	7.38%	10.65%	2.83%
Assurant	7.90%	20.40%	3.34%

Dividends

Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.1%. Assurant pays an annual dividend of $3.52 per share and has a dividend yield of 1.3%. Donegal Group pays out 39.9% of its earnings in the form of a dividend. Assurant pays out 16.8% 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. Donegal Group has increased its dividend for 5 consecutive years and Assurant has increased its dividend for 21 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Donegal Group and Assurant, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	2	1	0	2.33
Assurant	0	1	6	1	3.00

Donegal Group presently has a consensus price target of $20.00, suggesting a potential upside of 5.32%. Assurant has a consensus price target of $327.14, suggesting a potential upside of 16.64%. Given Assurant’s stronger consensus rating and higher possible upside, analysts clearly believe Assurant is more favorable than Donegal Group.

Insider and Institutional Ownership

28.0% of Donegal Group shares are held by institutional investors. Comparatively, 92.7% of Assurant shares are held by institutional investors. 2.8% of Donegal Group shares are held by company insiders. Comparatively, 0.5% of Assurant shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Donegal Group has a beta of -0.01, indicating that its share price is 101% less volatile than the S&P 500. Comparatively, Assurant has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500.

Earnings & Valuation

This table compares Donegal Group and Assurant”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$978.01 million	1.28	$79.34 million	$1.93	9.84
Assurant	$13.46 billion	1.03	$872.70 million	$20.94	13.39

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

Summary

Assurant beats Donegal Group on 15 of the 18 factors compared between the two stocks.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals. It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles; and homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as liability of the insured arising from injury to other persons or their property. It also offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against combining liability and physical damage coverages; and workers’ compensation policies, which provide benefits to employees for injuries sustained during employment. The company markets its insurance products primarily to Mid-Atlantic, Midwestern, New England, Southern, and Southwestern regions through independent insurance agencies. Donegal Group Inc. was incorporated in 1986 and is based in Marietta, Pennsylvania. Donegal Group Inc. operates as a subsidiary of Donegal Mutual Insurance Company.

About Assurant

Assurant, Inc., together with its subsidiaries, provides business services that supports, protects, and connects consumer purchases in North America, Latin America, Europe, and the Asia Pacific. The company operates through two segments: Global Lifestyle and Global Housing. The Global Lifestyle segment offers mobile device solutions, and extended service contracts and related services for consumer electronics and appliances, and credit and other insurance products; and vehicle protection, commercial equipment, and other related services. The Global Housing segment provides lender-placed homeowners, manufactured housing, and flood insurance; renters insurance and related products; and voluntary manufactured housing, and condominium and homeowners insurance products. The company was formerly known as Fortis, Inc. and changed its name to Assurant, Inc. in February 2004. Assurant, Inc. was founded in 1892 and is headquartered in Atlanta, Georgia.