Comparing The Hanover Insurance Group (NYSE:THG) & Octave Specialty Group (NYSE:OSG)

The Hanover Insurance Group (NYSE:THG) and Octave Specialty Group (NYSE:OSG) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, risk, dividends, analyst recommendations, earnings and valuation.

Dividends

The Hanover Insurance Group pays an annual dividend of $3.80 per share and has a dividend yield of 2.2%. Octave Specialty Group pays an annual dividend of $0.24 per share and has a dividend yield of 5.1%. The Hanover Insurance Group pays out 20.9% of its earnings in the form of a dividend. Octave Specialty Group pays out -4.0% 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. The Hanover Insurance Group has raised its dividend for 20 consecutive years. Octave Specialty Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares The Hanover Insurance Group and Octave Specialty Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
The Hanover Insurance Group	10.05%	21.00%	4.29%
Octave Specialty Group	-104.17%	-2.87%	-0.52%

Valuation & Earnings

This table compares The Hanover Insurance Group and Octave Specialty Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
The Hanover Insurance Group	$6.59 billion	0.92	$662.50 million	$18.17	9.47
Octave Specialty Group	$455.58 million	0.46	-$261.69 million	($5.95)	-0.79

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

Insider & Institutional Ownership

86.6% of The Hanover Insurance Group shares are owned by institutional investors. Comparatively, 80.9% of Octave Specialty Group shares are owned by institutional investors. 2.5% of The Hanover Insurance Group shares are owned by insiders. Comparatively, 9.3% of Octave Specialty Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility and Risk

The Hanover Insurance Group has a beta of 0.31, indicating that its share price is 69% less volatile than the S&P 500. Comparatively, Octave Specialty Group has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for The Hanover Insurance Group and Octave Specialty Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
The Hanover Insurance Group	0	2	5	0	2.71
Octave Specialty Group	1	1	1	0	2.00

The Hanover Insurance Group currently has a consensus target price of $200.60, indicating a potential upside of 16.53%. Octave Specialty Group has a consensus target price of $15.00, indicating a potential upside of 218.81%. Given Octave Specialty Group’s higher possible upside, analysts plainly believe Octave Specialty Group is more favorable than The Hanover Insurance Group.

Summary

The Hanover Insurance Group beats Octave Specialty Group on 12 of the 17 factors compared between the two stocks.

About The Hanover Insurance Group

The Hanover Insurance Group, Inc., through its subsidiaries, provides various property and casualty insurance products and services in the United States. The company operates through four segments: Core Commercial, Specialty, Personal Lines, and Other. The Commercial Lines segment offers commercial multiple peril, commercial automobile, workers' compensation, and other commercial lines coverage. The Specialty segment provides professional and executive Lines, marine, and surety and other, as well as specialty property and casualty, such as program business, specialty industrial business, excess and surplus business, and specialty general liability coverage. The Personal Lines segment offers personal automobile and homeowner's coverages, as well as other personal coverages, such as personal umbrella, inland marine, fire, personal watercraft, personal cyber, and other miscellaneous coverages. The Other segment markets investment advisory services to institutions, insurance companies, pension funds, and other organizations. The Hanover Insurance Group, Inc. markets its products and services through independent agents and brokers. The company was formerly known as Allmerica Financial Corp. and changed its name to The Hanover Insurance Group, Inc. in December 2005. The Hanover Insurance Group, Inc. was founded in 1852 and is headquartered in Worcester, Massachusetts.

About Octave Specialty Group

Ambac Financial Group, Inc. operates as a financial services holding company. It operates three businesses: Specialty Property and Casualty Insurance, Insurance Distribution, and Legacy Financial Guarantee (LFG) Insurance. The Specialty Property and Casualty Insurance business provides specialty property and casualty program insurance with a focus commercial and personal liability risks. The Insurance Distribution business includes the specialty property and casualty insurance distribution business, which includes managing general agents and underwriters, insurance wholesalers, brokers, and other distribution businesses. The LFG Insurance business offers financial guarantee insurance policies that provide an unconditional and irrevocable guarantee, which protects the holder of a debt obligation against non-payment when due of the principal and interest on the obligations guaranteed. Ambac Financial Group, Inc. was incorporated in 1991 and is headquartered in New York, New York.