Analyzing Assured Guaranty (NYSE:AGO) and Marsh & McLennan Companies (NYSE:MRSH)

Marsh & McLennan Companies (NYSE:MRSH) and Assured Guaranty (NYSE:AGO) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, risk, earnings, dividends, institutional ownership, profitability and analyst recommendations.

Valuation and Earnings

This table compares Marsh & McLennan Companies and Assured Guaranty”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Marsh & McLennan Companies	$28.46 billion	3.22	$3.98 billion	$8.36	23.06
Assured Guaranty	$887.00 million	3.46	$329.84 million	$7.50	9.31

Marsh & McLennan Companies has higher revenue and earnings than Assured Guaranty. Assured Guaranty is trading at a lower price-to-earnings ratio than Marsh & McLennan Companies, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Marsh & McLennan Companies and Assured Guaranty’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Marsh & McLennan Companies	N/A	N/A	N/A
Assured Guaranty	N/A	N/A	N/A

Volatility and Risk

Marsh & McLennan Companies has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Assured Guaranty has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Marsh & McLennan Companies and Assured Guaranty, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Marsh & McLennan Companies	2	11	6	2	2.38
Assured Guaranty	0	1	3	0	2.75

Marsh & McLennan Companies presently has a consensus price target of $204.42, indicating a potential upside of 6.03%. Assured Guaranty has a consensus price target of $91.00, indicating a potential upside of 30.37%. Given Assured Guaranty’s stronger consensus rating and higher probable upside, analysts clearly believe Assured Guaranty is more favorable than Marsh & McLennan Companies.

Institutional & Insider Ownership

88.0% of Marsh & McLennan Companies shares are owned by institutional investors. Comparatively, 92.2% of Assured Guaranty shares are owned by institutional investors. 0.4% of Marsh & McLennan Companies shares are owned by company insiders. Comparatively, 5.7% of Assured Guaranty shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Marsh & McLennan Companies pays an annual dividend of $3.96 per share and has a dividend yield of 2.1%. Assured Guaranty pays an annual dividend of $1.52 per share and has a dividend yield of 2.2%. Marsh & McLennan Companies pays out 47.4% of its earnings in the form of a dividend. Assured Guaranty pays out 20.3% 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. Marsh & McLennan Companies has raised its dividend for 15 consecutive years and Assured Guaranty has raised its dividend for 7 consecutive years. Assured Guaranty is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Assured Guaranty beats Marsh & McLennan Companies on 8 of the 15 factors compared between the two stocks.

About Marsh & McLennan Companies

Marsh & McLennan Cos., Inc. is a professional services firm, which engages in offering clients advice and solutions in risk, strategy, and people. It operates through the Risk and Insurance Services, and Consulting segments. The Risk and Insurance Services segment is involved in risk management activities, as well as insurance and reinsurance broking and services. The Consulting segment offers health, wealth, and career solutions and products, and specialized management, strategic, economic, and brand consulting services. The company was founded by Henry W. Marsh and Donald R. McLennan in 1871 and is headquartered in New York, NY.

About Assured Guaranty

Assured Guaranty Ltd., together with its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It operates through two segments: Insurance and Asset Management. The company offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It insures and reinsures various debt obligations, including bonds issued by the United States state governmental authorities; and notes issued to finance infrastructure projects. In addition, the company insures and reinsures various the U.S. public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, infrastructure, housing revenue, investor-owned utility, renewable energy, and other public finance bonds. Further, the company involved in insuring and reinsuring of non-U.S. public finance obligations comprising regulated utilities, infrastructure finance, sovereign and sub-sovereign, renewable energy bonds, pooled infrastructure, and other public finance obligations; and the U.S. and non-U.S. Structured finance obligations, including residential mortgage-backed securities, life insurance transactions, consumer receivables securities, subscription finance facilities, pooled corporate obligations, and financial products. Additionally, it offers specialty business, such as real estate properties, insurance securitizations, and aircraft residual value insurance (RVI) transactions; and asset management services comprising investment advisory services. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. Assured Guaranty Ltd. was incorporated in 2003 and is headquartered in Hamilton, Bermuda.