Analyzing Universal Insurance (NYSE:UVE) & Assured Guaranty (NYSE:AGO)

Assured Guaranty (NYSE:AGO) and Universal Insurance (NYSE:UVE) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, valuation, earnings, risk and dividends.

Institutional & Insider Ownership

92.2% of Assured Guaranty shares are owned by institutional investors. Comparatively, 66.6% of Universal Insurance shares are owned by institutional investors. 5.7% of Assured Guaranty shares are owned by company insiders. Comparatively, 15.0% of Universal Insurance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Assured Guaranty and Universal Insurance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Assured Guaranty	37.34%	7.11%	3.25%
Universal Insurance	13.49%	37.67%	7.12%

Earnings & Valuation

This table compares Assured Guaranty and Universal Insurance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Assured Guaranty	$1.11 billion	2.89	$503.00 million	$7.50	9.73
Universal Insurance	$1.60 billion	0.77	$182.95 million	$7.58	5.83

Assured Guaranty has higher earnings, but lower revenue than Universal Insurance. Universal Insurance is trading at a lower price-to-earnings ratio than Assured Guaranty, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for Assured Guaranty and Universal Insurance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Assured Guaranty	0	3	2	0	2.40
Universal Insurance	0	2	1	0	2.33

Assured Guaranty currently has a consensus price target of $90.33, indicating a potential upside of 23.78%. Universal Insurance has a consensus price target of $45.00, indicating a potential upside of 1.78%. Given Assured Guaranty’s stronger consensus rating and higher possible upside, analysts clearly believe Assured Guaranty is more favorable than Universal Insurance.

Risk and Volatility

Assured Guaranty has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, Universal Insurance has a beta of 0.72, indicating that its share price is 28% less volatile than the S&P 500.

Dividends

Assured Guaranty pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. Universal Insurance pays an annual dividend of $0.64 per share and has a dividend yield of 1.4%. Assured Guaranty pays out 20.3% of its earnings in the form of a dividend. Universal Insurance pays out 8.4% 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. Assured Guaranty has increased its dividend for 7 consecutive years. Assured Guaranty is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Assured Guaranty beats Universal Insurance on 11 of the 17 factors compared between the two stocks.

About Assured Guaranty

Assured Guaranty Ltd., together with its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It operates through two segments: Insurance and Asset Management. The company offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It insures and reinsures various debt obligations, including bonds issued by the United States state governmental authorities; and notes issued to finance infrastructure projects. In addition, the company insures and reinsures various the U.S. public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, infrastructure, housing revenue, investor-owned utility, renewable energy, and other public finance bonds. Further, the company involved in insuring and reinsuring of non-U.S. public finance obligations comprising regulated utilities, infrastructure finance, sovereign and sub-sovereign, renewable energy bonds, pooled infrastructure, and other public finance obligations; and the U.S. and non-U.S. Structured finance obligations, including residential mortgage-backed securities, life insurance transactions, consumer receivables securities, subscription finance facilities, pooled corporate obligations, and financial products. Additionally, it offers specialty business, such as real estate properties, insurance securitizations, and aircraft residual value insurance (RVI) transactions; and asset management services comprising investment advisory services. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. Assured Guaranty Ltd. was incorporated in 2003 and is headquartered in Hamilton, Bermuda.

About Universal Insurance

Universal Insurance Holdings, Inc., together with its subsidiaries, operates as an integrated insurance holding company in the United States. It develops, markets, and underwrites insurance products for personal residential insurance, such as homeowners, renters/tenants, condo unit owners, and dwelling/fire; and offers allied lines, coverage for other structures, and personal property, liability, and personal articles coverages. The company also advises on actuarial issues, oversees distribution, administers claims payments, performs policy administration and underwriting, and assists with reinsurance negotiations; places and manages reinsurance programs for the insurance entities; and operates Clovered.com, a digital agency for various carrier partners and utilization of digital applications for adjusting claims. It offers its products through a network of independent agents, as well as direct-to-consumer online solutions, including digital insurance agency. The company was formerly known as Universal Heights, Inc. and changed its name to Universal Insurance Holdings, Inc. in January 2001. Universal Insurance Holdings, Inc. was incorporated in 1990 and is headquartered in Fort Lauderdale, Florida.