Critical Analysis: Universal Insurance (UVE) and Hallmark Financial Services (HALL)

Universal Insurance (NYSE: UVE) and Hallmark Financial Services (NASDAQ:HALL) are both small-cap financials companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, valuation, risk, dividends, analyst recommendations and institutional ownership.

Insider & Institutional Ownership

78.0% of Universal Insurance shares are held by institutional investors. Comparatively, 65.0% of Hallmark Financial Services shares are held by institutional investors. 10.5% of Universal Insurance shares are held by company insiders. Comparatively, 28.7% of Hallmark Financial Services shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations for Universal Insurance and Hallmark Financial Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Universal Insurance 0 0 1 0 3.00
Hallmark Financial Services 0 0 0 0 N/A

Universal Insurance presently has a consensus target price of $29.00, suggesting a potential upside of 6.42%. Given Universal Insurance’s higher probable upside, equities analysts plainly believe Universal Insurance is more favorable than Hallmark Financial Services.

Profitability

This table compares Universal Insurance and Hallmark Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Universal Insurance 11.55% 20.90% 6.30%
Hallmark Financial Services -1.19% -0.42% -0.09%

Risk & Volatility

Universal Insurance has a beta of 1.88, suggesting that its share price is 88% more volatile than the S&P 500. Comparatively, Hallmark Financial Services has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500.

Dividends

Universal Insurance pays an annual dividend of $0.56 per share and has a dividend yield of 2.1%. Hallmark Financial Services does not pay a dividend. Universal Insurance pays out 23.9% of its earnings in the form of a dividend. Hallmark Financial Services has raised its dividend for 3 consecutive years.

Valuation & Earnings

This table compares Universal Insurance and Hallmark Financial Services’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Universal Insurance $685.29 million 1.37 $99.41 million $2.34 11.65
Hallmark Financial Services $375.95 million 0.52 $6.52 million ($0.26) -41.27

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

Summary

Universal Insurance beats Hallmark Financial Services on 13 of the 16 factors compared between the two stocks.

Universal Insurance Company Profile

Universal Insurance Holdings, Inc. (UVE) is a private personal residential homeowners insurance company in Florida. The Company performs substantially all aspects of insurance underwriting, policy issuance, general administration, and claims processing and settlement internally. The Company’s subsidiaries include Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC). UPCIC writes homeowners insurance policies in states, including Alabama, Delaware, Florida, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, South Carolina and Virginia. APPCIC writes homeowners and commercial residential insurance policies in Florida. The Company has developed a suite of applications that provide underwriting, policy and claim administration services, including billing, policy maintenance, inspections, refunds, commissions and data analysis.

Hallmark Financial Services Company Profile

Hallmark Financial Services, Inc. is an insurance holding company. The Company markets, distributes, underwrites and services its property/casualty insurance products to businesses and individuals. Its business involves marketing, distributing, underwriting and servicing insurance products, as well as providing other insurance related services. Its segments include Standard Commercial Segment, Specialty Commercial Segment and Personal Segment. The Company’s Standard Commercial P&C operating unit primarily underwrites low-severity, short-tailed commercial property/casualty insurance products in the standard market. The Company reinsures a portion of the risk it underwrites in order to control the exposure to losses and to protect capital resources. Its Workers Compensation operating unit specializes in small and middle market workers compensation business. Its Specialty Commercial operating unit offers general aviation and satellite launch insurance products and services.

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