National Western Life Group (NASDAQ: NWLI) and American Equity Investment Life Holding (NYSE:AEL) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, dividends, risk, profitability, analyst recommendations and institutional ownership.

Insider and Institutional Ownership

79.0% of National Western Life Group shares are held by institutional investors. Comparatively, 93.3% of American Equity Investment Life Holding shares are held by institutional investors. 1.0% of National Western Life Group shares are held by company insiders. Comparatively, 4.1% of American Equity Investment Life Holding shares are held by company 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.

Dividends

National Western Life Group pays an annual dividend of $0.36 per share and has a dividend yield of 0.1%. American Equity Investment Life Holding pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. National Western Life Group pays out 1.2% of its earnings in the form of a dividend. American Equity Investment Life Holding pays out 11.1% 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. National Western Life Group has increased its dividend for 4 consecutive years.

Risk and Volatility

National Western Life Group has a beta of 1.47, indicating that its stock price is 47% more volatile than the S&P 500. Comparatively, American Equity Investment Life Holding has a beta of 2.52, indicating that its stock price is 152% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for National Western Life Group and American Equity Investment Life Holding, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
National Western Life Group 0 0 0 0 N/A
American Equity Investment Life Holding 0 5 2 0 2.29

American Equity Investment Life Holding has a consensus target price of $24.43, indicating a potential downside of 15.79%. Given American Equity Investment Life Holding’s higher probable upside, analysts plainly believe American Equity Investment Life Holding is more favorable than National Western Life Group.

Profitability

This table compares National Western Life Group and American Equity Investment Life Holding’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
National Western Life Group 13.10% 5.33% 0.78%
American Equity Investment Life Holding 6.48% 6.84% 0.30%

Valuation & Earnings

This table compares National Western Life Group and American Equity Investment Life Holding’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
National Western Life Group $788.97 million 1.54 $171.25 million $30.07 11.77
American Equity Investment Life Holding $3.00 billion 0.86 $343.94 million $2.16 13.43

American Equity Investment Life Holding has higher revenue and earnings than National Western Life Group. National Western Life Group is trading at a lower price-to-earnings ratio than American Equity Investment Life Holding, indicating that it is currently the more affordable of the two stocks.

Summary

American Equity Investment Life Holding beats National Western Life Group on 10 of the 16 factors compared between the two stocks.

National Western Life Group Company Profile

National Western Life Insurance Company (National Western) is a stock life insurance company. The Company operates in two segments: Domestic Insurance Operations and International Insurance Operations. The products marketed under domestic insurance operations are annuities, universal life insurance and traditional life insurance, which include both term and whole life products. National Western’s international operations focus on foreign nationals in upper socioeconomic classes. The Company provides life insurance products for the savings and protection needs of approximately 126,700 policyholders and for the asset accumulation and retirement needs of 139,100 annuity contract holders. National Western offers a portfolio of individual whole life, universal life and term insurance plans, and annuities, including supplementary riders.

American Equity Investment Life Holding Company Profile

American Equity Investment Life Holding Company is engaged in the development and sale of fixed index and fixed rate annuity products. The Company issues fixed annuity and life insurance products through its life insurance subsidiaries, American Equity Investment Life Insurance Company, American Equity Investment Life Insurance Company of New York and Eagle Life Insurance Company. Its target market includes the group of individuals aged 45 to 75 seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The Company distributes through a range of distribution channels, including independent agents, broker/dealers, banks and registered investment advisors. Its product types include fixed index annuities, annual reset fixed rate annuities, multi-year fixed rate annuities and single premium immediate annuities. Its life insurance products include traditional ordinary and term, universal life and other interest-sensitive life insurance products.

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