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

Analyst Recommendations

This is a breakdown of current ratings and target prices for American Financial Group and XL Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Financial Group 0 2 1 0 2.33
XL Group 0 6 5 0 2.45

American Financial Group presently has a consensus price target of $93.00, suggesting a potential downside of 11.98%. XL Group has a consensus price target of $45.90, suggesting a potential upside of 16.00%. Given XL Group’s stronger consensus rating and higher possible upside, analysts plainly believe XL Group is more favorable than American Financial Group.

Volatility and Risk

American Financial Group has a beta of 0.84, meaning that its share price is 16% less volatile than the S&P 500. Comparatively, XL Group has a beta of 1, meaning that its share price has a similar volatility profile to the S&P 500.

Dividends

American Financial Group pays an annual dividend of $1.25 per share and has a dividend yield of 1.2%. XL Group pays an annual dividend of $0.88 per share and has a dividend yield of 2.2%. American Financial Group pays out 14.1% of its earnings in the form of a dividend. XL Group pays out 28.6% 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 raised its dividend for 11 consecutive years and XL Group has raised its dividend for 4 consecutive years.

Earnings & Valuation

This table compares American Financial Group and XL Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Financial Group $6.49 billion 1.43 $1.16 billion $8.89 11.89
XL Group $11.02 billion 0.93 $1.47 billion $3.08 12.85

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

Institutional and Insider Ownership

62.3% of American Financial Group shares are owned by institutional investors. Comparatively, 95.3% of XL Group shares are owned by institutional investors. 14.9% of American Financial Group shares are owned by insiders. Comparatively, 3.0% of XL Group shares are owned by 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.

Profitability

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

Net Margins Return on Equity Return on Assets
American Financial Group 11.89% 11.66% 1.07%
XL Group 7.53% 4.88% 1.06%

Summary

American Financial Group beats XL Group on 9 of the 17 factors compared between the two stocks.

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.

About XL Group

XL Group plc is an insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises. The Company operates through two segments: Insurance and Reinsurance. The Company’s Insurance segment is organized into four product divisions: Global Casualty (Casualty); Global Energy Property, & Construction (EPC); Global Professional (Professional), and Global Specialty (Specialty). Its insurance operations provide insurance policies for corporate risks that may require large limits, use of a captive insurance company and the need for a program of locally issued policies. The Reinsurance segment provides casualty, property risk, property catastrophe, specialty, and other reinsurance lines on a global basis with business being written on both a proportional and non-proportional treaty basis, and also on a facultative basis.

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