Financial Comparison: RLI (RLI) and Donegal Group (DGICA)

RLI (NYSE: RLI) and Donegal Group (NASDAQ:DGICA) are both financials companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, institutional ownership, profitability and earnings.

Institutional & Insider Ownership

83.6% of RLI shares are held by institutional investors. Comparatively, 29.3% of Donegal Group shares are held by institutional investors. 6.1% of RLI shares are held by company insiders. Comparatively, 11.9% of Donegal Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations and price targets for RLI and Donegal Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RLI 1 4 0 0 1.80
Donegal Group 0 0 2 0 3.00

RLI presently has a consensus price target of $43.00, indicating a potential downside of 26.76%. Donegal Group has a consensus price target of $19.50, indicating a potential upside of 12.52%. Given Donegal Group’s stronger consensus rating and higher possible upside, analysts plainly believe Donegal Group is more favorable than RLI.

Earnings and Valuation

This table compares RLI and Donegal Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RLI $816.33 million 3.17 $114.92 million $1.80 32.62
Donegal Group $688.42 million 0.69 $30.80 million $0.55 31.51

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

Volatility and Risk

RLI has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, Donegal Group has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500.

Profitability

This table compares RLI and Donegal Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
RLI 9.97% 8.53% 2.57%
Donegal Group 2.13% 2.81% 0.75%

Dividends

RLI pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.2%. RLI pays out 46.7% of its earnings in the form of a dividend. Donegal Group pays out 101.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RLI has raised its dividend for 40 consecutive years.

Summary

RLI beats Donegal Group on 12 of the 17 factors compared between the two stocks.

About RLI

RLI Corp. is a specialty insurance company. The Company underwrites selected property and casualty insurance through subsidiaries, as well as offers insurance coverages in both the specialty admitted, and excess and surplus markets. It operates through Casualty, Property and Surety segments. Its Casualty segment consists of commercial and personal umbrella, general liability, commercial transportation, professional services, small commercial, executive products, medical professional liability and other casualty businesses. Its property segment consists of commercial property, marine, specialty personal, property reinsurance and crop reinsurance businesses. Its surety segment consists of miscellaneous, commercial, contract and energy businesses. The Company conducts its operations principally through three insurance companies: RLI Insurance Company (RLI Ins.), Mt. Hawley Insurance Company (Mt. Hawley) and Contractors Bonding and Insurance Company (CBIC).

About Donegal Group

Donegal Group Inc. (DGI) is an insurance holding company whose insurance subsidiaries offer personal and commercial lines of property and casualty insurance. The Company offered its insurance business to various businesses and individuals in 21 Mid-Atlantic, Midwestern, New England and Southern states, as of December 31, 2016. It has four segments: investment function, personal lines of insurance, commercial lines of insurance and investment in Donegal Financial Services Corporation (DFSC). Its insurance operations include two segments: personal lines of insurance and commercial lines of insurance. The personal lines of insurance, which its insurance subsidiaries write consists of private passenger automobile and homeowners insurance. The commercial lines of insurance, which its insurance subsidiaries write consists of commercial automobile, commercial multi-peril and workers’ compensation insurance. It holds interests in DFSC, which is a unitary savings and loan holding company.

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