ProAssurance (NYSE:PRA) versus State Auto Financial (NYSE:STFC) Critical Comparison

ProAssurance (NYSE:PRA) and State Auto Financial (NASDAQ:STFC) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, earnings, profitability, institutional ownership, dividends and risk.

Dividends

ProAssurance pays an annual dividend of $1.24 per share and has a dividend yield of 3.3%. State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.1%. ProAssurance pays out 83.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. State Auto Financial pays out 33.3% of its earnings in the form of a dividend.

Institutional and Insider Ownership

81.6% of ProAssurance shares are held by institutional investors. Comparatively, 33.5% of State Auto Financial shares are held by institutional investors. 1.7% of ProAssurance shares are held by insiders. Comparatively, 1.8% of State Auto Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

ProAssurance has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500. Comparatively, State Auto Financial has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500.

Profitability

This table compares ProAssurance and State Auto Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ProAssurance 7.01% 3.98% 1.34%
State Auto Financial 4.87% 6.86% 2.01%

Valuation & Earnings

This table compares ProAssurance and State Auto Financial’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ProAssurance $886.03 million 2.26 $47.06 million $1.48 25.21
State Auto Financial $1.28 billion 1.20 $12.80 million $1.20 29.38

ProAssurance has higher earnings, but lower revenue than State Auto Financial. ProAssurance is trading at a lower price-to-earnings ratio than State Auto Financial, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for ProAssurance and State Auto Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ProAssurance 1 3 1 0 2.00
State Auto Financial 0 1 0 0 2.00

ProAssurance presently has a consensus price target of $41.75, indicating a potential upside of 11.90%. State Auto Financial has a consensus price target of $30.00, indicating a potential downside of 14.89%. Given ProAssurance’s higher probable upside, analysts clearly believe ProAssurance is more favorable than State Auto Financial.

Summary

ProAssurance beats State Auto Financial on 9 of the 15 factors compared between the two stocks.

ProAssurance Company Profile

ProAssurance Corporation, through its subsidiaries, provides property and casualty insurance, and reinsurance products in the United States. The company operates through Specialty Property and Casualty, Workers' Compensation Insurance, Segregated Portfolio Cell Reinsurance, and Lloyd's Syndicate segments. It offers professional liability insurance for healthcare professionals and facilities; professional liability insurance for attorneys; liability insurance for medical technology and life sciences risks; and workers' compensation insurance for employers, groups, and associations. The company also participates in Lloyd's of London Syndicate 1729, which underwrites property and casualty insurance, and reinsurance; and Syndicate 6131 that underwrites contingency and specialty property insurance. ProAssurance Corporation markets its products through independent agencies and brokers, as well as an internal sales force. The company was founded in 1976 and is headquartered in Birmingham, Alabama.

State Auto Financial Company Profile

State Auto Financial Corporation, through its subsidiaries, engages in writing personal and business insurance products. It operates through four segments: Personal Insurance, Commercial Insurance, Specialty Insurance, and Investment Operations. The Personal Insurance segment primarily provides personal automobile, homeowners insurance, and other personal insurance products. The commercial insurance segment primarily provides commercial automobile, commercial multi-peril, fire and allied, general liability, and workers' compensation insurance covering small-to-medium sized commercial insurance market, as well as farm and ranch insurance. The Specialty Insurance segment provides commercial coverages that require specialized product underwriting, claims handling, or risk management services. The Investment Operations segment provides investment management services to affiliated insurance companies. The company markets its products primarily through independent agencies, including retail agencies and wholesale brokers. The company was founded in 1950 and is headquartered in Columbus, Ohio. State Auto Financial Corporation is a subsidiary of State Automobile Mutual Insurance Company.

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