Critical Comparison: Hiscox (OTCMKTS:HCXLF) versus Donegal Group (NASDAQ:DGICA)

Donegal Group (NASDAQ:DGICA) and Hiscox (OTCMKTS:HCXLF) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, institutional ownership, risk, valuation and dividends.

Dividends

Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.1%. Hiscox pays an annual dividend of $0.08 per share and has a dividend yield of 0.3%. Donegal Group pays out 39.9% of its earnings in the form of a dividend. Hiscox pays out 12.3% 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 raised its dividend for 5 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Donegal Group and Hiscox, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	2	2	0	2.50
Hiscox	0	0	2	0	3.00

Donegal Group presently has a consensus price target of $20.00, indicating a potential upside of 5.37%. Given Donegal Group’s higher possible upside, analysts plainly believe Donegal Group is more favorable than Hiscox.

Earnings and Valuation

This table compares Donegal Group and Hiscox”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$963.18 million	1.30	$79.34 million	$1.93	9.83
Hiscox	N/A	N/A	N/A	$0.64	38.16

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

Profitability

This table compares Donegal Group and Hiscox’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%
Hiscox	N/A	N/A	N/A

Insider and Institutional Ownership

28.0% of Donegal Group shares are held by institutional investors. Comparatively, 59.1% of Hiscox shares are held by institutional investors. 2.8% of Donegal Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Donegal Group beats Hiscox on 9 of the 13 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 Hiscox

Hiscox Ltd, through its subsidiaries, provides insurance and reinsurance services in the United Kingdom, Europe, the United States, and internationally. The company operates through four segments: Hiscox Retail, Hiscox London Market, Hiscox Re & ILS, and Corporate Centre. It offers commercial insurance for small-and medium-sized businesses; and personal lines cover, including high-value household, fine art, and luxury motor, as well as artwork, antiques, classic cars, jewelry, collectables, and other assets through brokers, partners, and direct-to-consumers. The company also provides property insurance; marine, specialty, and energy insurance; space and aviation insurance; casualty insurance; specialty insurance; terrorism, kidnap, and ransom insurance; and other specialty insurance products. In addition, it offers healthcare and casualty reinsurance services, as well as investment services. Hiscox Ltd was founded in 1901 and is headquartered in Pembroke, Bermuda.