Financial Analysis: Assured Guaranty (NYSE:AGO) and Universal Insurance (NYSE:UVE)

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

Institutional and Insider Ownership

66.6% of Universal Insurance shares are owned by institutional investors. Comparatively, 92.2% of Assured Guaranty shares are owned by institutional investors. 15.0% of Universal Insurance shares are owned by company insiders. Comparatively, 5.7% of Assured Guaranty shares are owned 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.

Dividends

Universal Insurance pays an annual dividend of $0.64 per share and has a dividend yield of 1.4%. Assured Guaranty pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. Universal Insurance pays out 8.4% of its earnings in the form of a dividend. Assured Guaranty pays out 20.3% 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. 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.

Risk and Volatility

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

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Universal Insurance	$1.60 billion	0.77	$182.95 million	$7.58	5.83
Assured Guaranty	$1.11 billion	2.82	$503.00 million	$7.50	9.48

Assured Guaranty has lower revenue, but higher earnings 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.

Profitability

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

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

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Universal Insurance and Assured Guaranty, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Universal Insurance	0	2	0	1	2.67
Assured Guaranty	0	3	2	0	2.40

Universal Insurance currently has a consensus price target of $45.00, suggesting a potential upside of 1.80%. Assured Guaranty has a consensus price target of $89.33, suggesting a potential upside of 25.71%. Given Assured Guaranty’s higher probable upside, analysts plainly believe Assured Guaranty is more favorable than Universal Insurance.

Summary

Assured Guaranty beats Universal Insurance on 10 of the 18 factors compared between the two stocks.

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.

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.