Financial Contrast: Safety Insurance Group (NASDAQ:SAFT) and First American Financial (NYSE:FAF)

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

Dividends

First American Financial pays an annual dividend of $2.20 per share and has a dividend yield of 3.5%. Safety Insurance Group pays an annual dividend of $3.68 per share and has a dividend yield of 4.7%. First American Financial pays out 47.3% of its earnings in the form of a dividend. Safety Insurance Group pays out 62.5% 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. First American Financial has raised its dividend for 15 consecutive years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First American Financial	6.80%	11.01%	3.50%
Safety Insurance Group	7.09%	8.85%	3.26%

Insider & Institutional Ownership

89.1% of First American Financial shares are owned by institutional investors. Comparatively, 81.0% of Safety Insurance Group shares are owned by institutional investors. 3.7% of First American Financial shares are owned by company insiders. Comparatively, 2.0% of Safety Insurance Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

First American Financial has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500. Comparatively, Safety Insurance Group has a beta of 0.23, suggesting that its stock price is 77% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for First American Financial and Safety Insurance Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First American Financial	0	2	3	0	2.60
Safety Insurance Group	0	1	0	0	2.00

First American Financial presently has a consensus price target of $75.75, suggesting a potential upside of 19.84%. Given First American Financial’s stronger consensus rating and higher probable upside, research analysts plainly believe First American Financial is more favorable than Safety Insurance Group.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First American Financial	$6.13 billion	1.05	$131.10 million	$4.65	13.59
Safety Insurance Group	$1.22 billion	0.96	$70.73 million	$5.89	13.36

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

Summary

First American Financial beats Safety Insurance Group on 14 of the 17 factors compared between the two stocks.

About First American Financial

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Home Warranty segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services internationally. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, document generation services, mortgage loans subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in various states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, New Zealand, South Korea, and internationally. The Home Warranty segment provides home warranty products, including residential service contracts that cover residential systems, such as heating and air conditioning systems, and various appliances against failures that occur as the result of normal usage during the coverage period. This segment operates in various states and the District of Columbia. The company was founded in 1889 and is headquartered in Santa Ana, California.

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.