Critical Contrast: United Fire Group (NASDAQ:UFCS) versus Arthur J. Gallagher & Co. (NYSE:AJG)

United Fire Group (NASDAQ:UFCS) and Arthur J. Gallagher & Co. (NYSE:AJG) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Dividends

United Fire Group pays an annual dividend of $0.80 per share and has a dividend yield of 1.5%. Arthur J. Gallagher & Co. pays an annual dividend of $2.80 per share and has a dividend yield of 1.2%. United Fire Group pays out 14.9% of its earnings in the form of a dividend. Arthur J. Gallagher & Co. pays out 46.4% 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. Arthur J. Gallagher & Co. has increased its dividend for 15 consecutive years. United Fire Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

62.7% of United Fire Group shares are held by institutional investors. Comparatively, 85.5% of Arthur J. Gallagher & Co. shares are held by institutional investors. 6.1% of United Fire Group shares are held by company insiders. Comparatively, 1.4% of Arthur J. Gallagher & Co. shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares United Fire Group and Arthur J. Gallagher & Co.’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Fire Group	9.57%	15.19%	3.69%
Arthur J. Gallagher & Co.	9.96%	13.28%	4.03%

Risk & Volatility

United Fire Group has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500. Comparatively, Arthur J. Gallagher & Co. has a beta of 0.55, indicating that its stock price is 45% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for United Fire Group and Arthur J. Gallagher & Co., as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Fire Group	0	0	2	2	3.50
Arthur J. Gallagher & Co.	0	6	14	0	2.70

United Fire Group presently has a consensus price target of $52.50, suggesting a potential downside of 4.79%. Arthur J. Gallagher & Co. has a consensus price target of $284.50, suggesting a potential upside of 22.38%. Given Arthur J. Gallagher & Co.’s higher probable upside, analysts plainly believe Arthur J. Gallagher & Co. is more favorable than United Fire Group.

Earnings and Valuation

This table compares United Fire Group and Arthur J. Gallagher & Co.”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Fire Group	$1.47 billion	0.96	$118.19 million	$5.38	10.25
Arthur J. Gallagher & Co.	$15.75 billion	3.78	$1.49 billion	$6.03	38.55

Arthur J. Gallagher & Co. has higher revenue and earnings than United Fire Group. United Fire Group is trading at a lower price-to-earnings ratio than Arthur J. Gallagher & Co., indicating that it is currently the more affordable of the two stocks.

Summary

Arthur J. Gallagher & Co. beats United Fire Group on 12 of the 18 factors compared between the two stocks.

About United Fire Group

United Fire Group, Inc., together with its subsidiaries, provides property and casualty insurance for individuals and businesses in the United States. The company offers commercial and personal lines of property and casualty insurance; and reinsurance coverage for property and casualty insurance. Its commercial lines include fire and allied lines, other liability, automobile, workers’ compensation, fidelity and surety coverage, and other insurance products; and personal lines comprise automobile, and fire and allied lines coverage, including homeowners, as well as provides assumed reinsurance products. The company sells its products through a network of independent agencies. United Fire Group, Inc. was incorporated in 1946 and is headquartered in Cedar Rapids, Iowa.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co. engages in the provision of insurance brokerage, reinsurance brokerage, consulting, and third-party claims settlement and administration services. It operates through the following segments: Brokerage, Risk Management, and Corporate. The Brokerage segment consists of retail and wholesale insurance brokerage operations. The Risk Management segment provides contract claim settlement and administration services. The Corporate segment manages clean energy and other investments. The company was founded by Arthur J. Gallagher in 1927 and is headquartered in Rolling Meadows, IL.