Erie Indemnity (NASDAQ: ERIE) and RLI (NYSE:RLI) are both mid-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, profitability, risk, valuation, earnings and analyst recommendations.
Institutional and Insider Ownership
31.1% of Erie Indemnity shares are held by institutional investors. Comparatively, 85.1% of RLI shares are held by institutional investors. 46.8% of Erie Indemnity shares are held by company insiders. Comparatively, 6.1% of RLI shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This is a summary of recent ratings for Erie Indemnity and RLI, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
RLI has a consensus price target of $53.00, indicating a potential downside of 13.86%. Given RLI’s higher possible upside, analysts clearly believe RLI is more favorable than Erie Indemnity.
This table compares Erie Indemnity and RLI’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Earnings & Valuation
This table compares Erie Indemnity and RLI’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Erie Indemnity||$1.60 billion||3.27||$210.36 million||$4.02||28.14|
|RLI||$797.22 million||3.40||$105.02 million||$1.62||37.98|
Erie Indemnity has higher revenue and earnings than RLI. Erie Indemnity is trading at a lower price-to-earnings ratio than RLI, indicating that it is currently the more affordable of the two stocks.
Erie Indemnity pays an annual dividend of $3.36 per share and has a dividend yield of 3.0%. RLI pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. Erie Indemnity pays out 83.6% 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 pays out 51.9% of its earnings in the form of a dividend. Erie Indemnity has raised its dividend for 22 consecutive years and RLI has raised its dividend for 41 consecutive years.
Risk & Volatility
Erie Indemnity has a beta of 0.42, suggesting that its stock price is 58% less volatile than the S&P 500. Comparatively, RLI has a beta of 1.28, suggesting that its stock price is 28% more volatile than the S&P 500.
RLI beats Erie Indemnity on 8 of the 15 factors compared between the two stocks.
About Erie Indemnity
Erie Indemnity Company is a management company. The Company serves as the attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange (Exchange). The Exchange is a reciprocal insurer that writes property and casualty insurance. The Company’s function is to perform certain services for the Exchange relating to the sales, underwriting and issuance of policies on behalf of the Exchange. The sales related services the Company provides include agent compensation, and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written, as well as additional commissions and bonuses to agents. The underwriting services the Company provides include underwriting and policy processing expenses. It provides information technology services that supports various functions. The remaining services the Company provides include customer service and administrative costs.
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).
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