Arch Capital Group (NASDAQ:ACGL) versus American Financial Group (NASDAQ:AFG) Head-To-Head Analysis

Arch Capital Group (NASDAQ:ACGL) and American Financial Group (NYSE:AFG) are both large-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, risk, analyst recommendations, valuation, institutional ownership, profitability and earnings.

Volatility and Risk

Arch Capital Group has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.83, meaning that its stock price is 17% less volatile than the S&P 500.

Profitability

This table compares Arch Capital Group and American Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arch Capital Group 21.97% 10.31% 3.15%
American Financial Group 10.89% 13.00% 1.16%

Analyst Recommendations

This is a breakdown of recent ratings for Arch Capital Group and American Financial Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arch Capital Group 0 4 6 0 2.60
American Financial Group 0 0 1 0 3.00

Arch Capital Group presently has a consensus price target of $44.15, suggesting a potential downside of 7.69%. American Financial Group has a consensus price target of $120.00, suggesting a potential upside of 6.37%. Given American Financial Group’s stronger consensus rating and higher probable upside, analysts clearly believe American Financial Group is more favorable than Arch Capital Group.

Institutional & Insider Ownership

79.3% of Arch Capital Group shares are owned by institutional investors. Comparatively, 63.9% of American Financial Group shares are owned by institutional investors. 5.2% of Arch Capital Group shares are owned by insiders. Comparatively, 11.9% of American Financial Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Arch Capital Group and American Financial Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Arch Capital Group $5.45 billion 3.56 $757.97 million $2.20 21.74
American Financial Group $8.24 billion 1.24 $897.00 million $8.62 13.09

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

Summary

American Financial Group beats Arch Capital Group on 8 of the 14 factors compared between the two stocks.

About Arch Capital Group

Arch Capital Group Ltd., together with its subsidiaries, provides property, casualty, and mortgage insurance and reinsurance products worldwide. The company's Insurance segment offers primary and excess casualty coverages; loss sensitive primary casualty insurance programs; collateral protection, debt cancellation, and service contract reimbursement products; directors' and officers' liability, errors and omissions liability, employment practices and fiduciary liability, crime, professional indemnity, and other financial related coverages; medical professional and general liability insurance coverages; and workers' compensation and umbrella liability, as well as commercial automobile and inland marine products. It also provides property, energy, marine, and aviation insurance; travel insurance; accident, disability, and medical plan insurance coverages; captive insurance programs; employers' liability insurance coverages; and contract and commercial surety coverages. This segment markets its products through a group of licensed independent retail and wholesale brokers. Its Reinsurance segment provides reinsurance for third party liability and workers' compensation exposures; marine and aviation reinsurance; surety, accident and health, workers' compensation catastrophe, agriculture, trade credit, and political risk products; reinsurance protection for catastrophic losses and commercial property risks; life reinsurance; casualty clash; and risk management solutions. This segment markets its reinsurance products through brokers, and directly to ceding companies. The company's Mortgage segment offers private mortgage insurance covering one-to-four family residential mortgages; mortgage insurance to cover previously originated residential loans; quota share reinsurance; and risk-sharing products. This segment sells its products through direct basis and through brokers to mortgage originators. The company was founded in 1995 and is based in Pembroke, Bermuda.

About American Financial Group

American Financial Group, Inc., an insurance holding company, provides property and casualty insurance products in the United States. The company operates through three segments: Property and Casualty Insurance, Annuity, and Other. It offers property and transportation insurance products, such as physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products, and other property; specialty casualty insurance, including primarily excess and surplus, general liability, executive liability, professional liability, umbrella and excess liability, and specialty coverage in targeted markets, as well as customized programs for small to mid-sized businesses and workers' compensation insurance; and specialty financial insurance products comprising risk management insurance programs for leasing and financing institutions, surety and fidelity products, and trade credit insurance. The company sells its property and casualty insurance products through independent insurance agents and brokers, as well as through employee agents. It also provides traditional fixed, fixed-indexed, and variable-indexed annuities to the retail, financial institutions, registered investment advisor, and education markets; and engages in the commercial real estate operations in Cincinnati, Whitefield, New Hampshire, Chesapeake Bay, Charleston, and Palm Beach. American Financial Group, Inc. was founded in 1872 and is headquartered in Cincinnati, Ohio.

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