Fairfax Financial (OTCMKTS:FRFHF) vs. Safety Insurance Group (NASDAQ:SAFT) Critical Review

Safety Insurance Group (NASDAQ:SAFT) and Fairfax Financial (OTCMKTS:FRFHF) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, valuation, profitability, institutional ownership, risk, analyst recommendations and earnings.

Risk and Volatility

Safety Insurance Group has a beta of 0.15, meaning that its stock price is 85% less volatile than the S&P 500. Comparatively, Fairfax Financial has a beta of 0.45, meaning that its stock price is 55% less volatile than the S&P 500.

Valuation and Earnings

This table compares Safety Insurance Group and Fairfax Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Safety Insurance Group	$1.26 billion	1.21	$99.25 million	$4.64	22.40
Fairfax Financial	$31.59 billion	1.17	$4.77 billion	$204.10	8.74

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

Dividends

Safety Insurance Group pays an annual dividend of $3.68 per share and has a dividend yield of 3.5%. Fairfax Financial pays an annual dividend of $15.00 per share and has a dividend yield of 0.8%. Safety Insurance Group pays out 79.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fairfax Financial pays out 7.3% of its earnings in the form of a dividend.

Profitability

This table compares Safety Insurance Group and Fairfax Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Safety Insurance Group	5.33%	7.23%	2.58%
Fairfax Financial	13.83%	14.72%	4.16%

Analyst Recommendations

This is a breakdown of current ratings for Safety Insurance Group and Fairfax Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Safety Insurance Group	0	1	1	0	2.50
Fairfax Financial	1	2	1	0	2.00

Insider & Institutional Ownership

81.0% of Safety Insurance Group shares are held by institutional investors. Comparatively, 10.4% of Fairfax Financial shares are held by institutional investors. 2.2% of Safety Insurance Group shares are held 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.

Summary

Fairfax Financial beats Safety Insurance Group on 8 of the 14 factors compared between the two stocks.

About Safety Insurance Group

Safety Insurance Group, Inc. provides private passenger and commercial automobile, and homeowner insurance in the United States. The company’s private passenger automobile policies offer coverage for bodily injury and property damage to others, no-fault personal injury coverage for the insured/insured’s car occupants, and physical damage coverage for an insured’s own vehicle for collision or other perils. It also provides commercial automobile policies that offer insurance for commercial vehicles used for business purposes, including private passenger-type vehicles, trucks, tractors and trailers, insure individual vehicles, and commercial fleets; and homeowners policies, which provide coverage for homes, condominiums, and apartments for losses to a dwelling and its contents from various perils, and coverage for liability to others arising from ownership or occupancy. In addition, the company offers business owners policies that cover apartments and residential condominiums, restaurants, office condominiums, processing and services businesses, special trade contractors, and wholesalers. Further, it provides personal umbrella policies, which provide personal excess liability coverage over and above the limits of individual automobile, watercraft, and homeowner’s insurance policies; and commercial umbrella, which offers an excess liability product to clients, as well as underwrites dwelling fire insurance for non-owner-occupied residences. Additionally, the company offers inland marine coverage for homeowners and business owner policies, and watercraft coverage for small and medium sized pleasure crafts. It distributes its products through independent agents. The company was formerly known as Safety Holdings Inc and changed its name to Safety Insurance Group, Inc. in April 2002. Safety Insurance Group, Inc. was founded in 1979 and is headquartered in Boston, Massachusetts.

About Fairfax Financial

Fairfax Financial Holdings Limited, through its subsidiaries, provides property and casualty insurance and reinsurance, and investment management services in the United States, Canada, Asia, and internationally. The company operates through Property and Casualty Insurance and Reinsurance, Life insurance and Run-off, and Non-Insurance Companies segments. It insures against losses to property from fire, explosion, earthquake, windstorm, flood, terrorism, boiler explosion, machinery breakdown, and construction defects, as well as underwrites automobile, commercial and personal property, and crop insurance. The company also offers workers' compensation, automobile, employer's liability, accident and health, medical malpractice, professional liability, and umbrella coverage insurance products; marine, aerospace, surety risk, and other risks and liabilities insurance products; and reinsurance products. In addition, it franchises, owns, and operates restaurants; retails sports lifestyle products; provides integrated travel and travel-related financial services, as well as advanced digital tools for agriculture; owns and operates holiday resorts; originates, processes, and distributes value-added pulses and staple foods; develops, manages, and invests in hospitality real estate. The company was formerly known as Markel Financial Holdings Limited and changed its name to Fairfax Financial Holdings Limited in 1987. Fairfax Financial Holdings Limited was incorporated in 1951 and is headquartered in Toronto, Canada.