Critical Review: Alleghany (NYSE:Y) & National General (NYSE:NGHC)

National General (NASDAQ:NGHC) and Alleghany (NYSE:Y) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, dividends and analyst recommendations.

Institutional & Insider Ownership

50.7% of National General shares are held by institutional investors. Comparatively, 80.0% of Alleghany shares are held by institutional investors. 3.4% of National General shares are held by company insiders. Comparatively, 3.4% of Alleghany shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations for National General and Alleghany, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
National General 0 3 2 0 2.40
Alleghany 0 2 2 0 2.50

National General currently has a consensus target price of $32.40, indicating a potential upside of 38.11%. Alleghany has a consensus target price of $700.00, indicating a potential downside of 5.23%. Given National General’s higher probable upside, analysts plainly believe National General is more favorable than Alleghany.

Profitability

This table compares National General and Alleghany’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
National General 5.44% 16.90% 3.22%
Alleghany 3.86% 2.88% 0.93%

Valuation and Earnings

This table compares National General and Alleghany’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
National General $4.61 billion 0.58 $207.35 million $2.09 11.22
Alleghany $6.89 billion 1.55 $39.53 million $16.13 45.79

National General has higher earnings, but lower revenue than Alleghany. National General is trading at a lower price-to-earnings ratio than Alleghany, indicating that it is currently the more affordable of the two stocks.

Dividends

National General pays an annual dividend of $0.16 per share and has a dividend yield of 0.7%. Alleghany does not pay a dividend. National General pays out 7.7% of its earnings in the form of a dividend.

Risk and Volatility

National General has a beta of 0.68, suggesting that its share price is 32% less volatile than the S&P 500. Comparatively, Alleghany has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500.

Summary

Alleghany beats National General on 8 of the 15 factors compared between the two stocks.

National General Company Profile

National General Holdings Corp., a specialty personal lines insurance holding company, provides various insurance products and services in the United States, Bermuda, Luxembourg, and Sweden. The company's Property and Casualty segment offers standard, preferred, and nonstandard automobile insurance products; and recreational vehicle (RV) insurance products that carry RV-specific endorsements comprising automatic personal effects coverage, optional replacement cost coverage, RV storage coverage, and full-time liability coverage. It also provides homeowners policies consisting of property and liability coverages for one-and two-family, and owner-occupied residences; and additional personal umbrella coverage to the homeowners. In addition, this segment offers small business automobile insurance products, which covers liability and physical damage caused by light-to-medium duty commercial vehicles; motorcycle insurance products for various types of motorcycles, golf carts, and all-terrain vehicles; and lender-placed insurance products, including fire, home, and flood products, as well as collateral protection insurance and guaranteed asset protection products for automobiles. It sells its products through retail store fronts, Web/mobile, phone contact centers, and kiosks; and agents and affinity partners. The company's Accident and Health segment provides accident and non-major medical health insurance products, such as accident/AD&D coverage in the event of bodily injury or death due to accidental means; hospital indemnity; short-term medical plans; cancer/critical illness policies; basic dental coverage; and life insurance products for individuals, as well as stop loss programs for employers. It sells its products through agents, managing general underwriters, employers, Internet; and directly. The company was formerly known as American Capital Acquisition Corporation. National General Holdings Corp. was founded in 1939 and is headquartered in New York, New York.

Alleghany Company Profile

Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company operates in three segments: Reinsurance, Insurance, and Alleghany Capital. The Reinsurance segment offers fire, allied lines, auto physical damage, and homeowners multiple peril reinsurance products; and casualty and other reinsurance products, such as medical malpractice, ocean marine and aviation, accident and health, mortgage, surety, and credit reinsurance products, as well as directors' and officers', errors and omissions, general, and auto liability reinsurance. It distributes its products and services through brokers, as well as directly to insurance and reinsurance companies. The Insurance segment underwrites specialty insurance coverages in the property, as well as umbrella/excess, general, management, and professional liability lines; surety products comprising commercial and contract surety bonds; and workers' compensation insurance products. It distributes its products through independent wholesale insurance brokers, and retail and general insurance agents. The Alleghany Capital segment manufacturer/remanufacturer of specialty machine tools, as well as custom trailers and truck bodies for the moving and storage industry, and other markets; and operates as a toy, and entertainment and musical instrument company. It also provides technical engineering services for pharmaceutical and biotechnology industries; products and services for the funeral and cemetery industries, and precast concrete markets; and hotel management and development services, as well as operates as a structural steel fabricator and erector. The company also explores for and produces oil; and owns and manages improved and unimproved commercial land, and residential lots. As of December 31, 2018, it owned approximately 125 acres of property. Alleghany Corporation was founded in 1929 and is based in New York, New York.

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