Critical Analysis: Cincinnati Financial (NASDAQ:CINF) vs. Safety Insurance Group (NASDAQ:SAFT)

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

Profitability

This table compares Safety Insurance Group and Cincinnati 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%
Cincinnati Financial	23.84%	9.63%	3.70%

Risk & Volatility

Safety Insurance Group has a beta of 0.16, suggesting that its stock price is 84% less volatile than the S&P 500. Comparatively, Cincinnati Financial has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Safety Insurance Group and Cincinnati 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
Cincinnati Financial	0	3	1	1	2.60

Cincinnati Financial has a consensus target price of $195.40, suggesting a potential upside of 20.22%. Given Cincinnati Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Cincinnati Financial is more favorable than Safety Insurance Group.

Dividends

Safety Insurance Group pays an annual dividend of $3.68 per share and has a dividend yield of 3.6%. Cincinnati Financial pays an annual dividend of $3.76 per share and has a dividend yield of 2.3%. 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. Cincinnati Financial pays out 17.7% of its earnings in the form of a dividend. Cincinnati Financial has increased its dividend for 65 consecutive years.

Institutional and Insider Ownership

81.0% of Safety Insurance Group shares are held by institutional investors. Comparatively, 65.2% of Cincinnati Financial shares are held by institutional investors. 2.2% of Safety Insurance Group shares are held by insiders. Comparatively, 2.9% of Cincinnati Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Safety Insurance Group and Cincinnati Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Safety Insurance Group	$1.27 billion	1.19	$99.25 million	$4.64	22.31
Cincinnati Financial	$13.95 billion	1.79	$2.39 billion	$21.20	7.67

Cincinnati Financial has higher revenue and earnings than Safety Insurance Group. Cincinnati 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.

Summary

Cincinnati Financial beats Safety Insurance Group on 14 of the 17 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 Cincinnati Financial

Cincinnati Financial Corporation, together with its subsidiaries, provides property casualty insurance products in the United States. It operates through five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The Commercial Lines Insurance segment offers coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. It also provides contract and commercial surety bonds, and fidelity bonds; and machinery and equipment. The Personal Lines Insurance segment offers personal auto insurance; homeowner insurance; and dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Excess and Surplus Lines Insurance segment offers commercial casualty insurance that covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products, as well as other coverages, including miscellaneous errors and omissions, professional liability, and excess liability; and commercial property insurance, which insures buildings, inventory, equipment, and business income from loss or damage due to various causes, such as fire, wind, hail, water, theft, and vandalism. The Life Insurance segment provides term life insurance products; universal life insurance products; worksite products, such as term life; and whole life insurance products, as well as annuities. The Investments segment invests in fixed-maturity investments, including taxable and tax-exempt bonds, redeemable preferred stocks, and mortgage-backed securities; and equity investments comprising common and nonredeemable preferred stocks. It also offers commercial leasing and financing services; and insurance brokerage services. Cincinnati Financial Corporation was founded in 1950 and is headquartered in Fairfield, Ohio.