Erie Indemnity (NASDAQ: ERIE) and Allied World Assurance (OTCMKTS:AWHHF) are both mid-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, profitability, dividends and risk.
Insider & Institutional Ownership
31.2% of Erie Indemnity shares are held by institutional investors. Comparatively, 86.5% of Allied World Assurance shares are held by institutional investors. 46.8% of Erie Indemnity shares are held by insiders. Comparatively, 3.2% of Allied World Assurance shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
This is a breakdown of recent recommendations for Erie Indemnity and Allied World Assurance, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Allied World Assurance||0||1||0||0||2.00|
Allied World Assurance has a consensus price target of $24.50, suggesting a potential downside of 52.47%. Given Allied World Assurance’s higher probable upside, analysts clearly believe Allied World Assurance is more favorable than Erie Indemnity.
Erie Indemnity pays an annual dividend of $3.36 per share and has a dividend yield of 2.9%. Allied World Assurance pays an annual dividend of $0.52 per share and has a dividend yield of 1.0%. 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. Allied World Assurance pays out 17.5% of its earnings in the form of a dividend. Erie Indemnity has increased its dividend for 22 consecutive years. Erie Indemnity is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk and Volatility
Erie Indemnity has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500. Comparatively, Allied World Assurance has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500.
Valuation & Earnings
This table compares Erie Indemnity and Allied World Assurance’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Erie Indemnity||$1.60 billion||3.38||$210.36 million||$4.02||29.06|
|Allied World Assurance||N/A||N/A||N/A||$2.97||17.36|
Erie Indemnity has higher revenue and earnings than Allied World Assurance. Allied World Assurance is trading at a lower price-to-earnings ratio than Erie Indemnity, indicating that it is currently the more affordable of the two stocks.
This table compares Erie Indemnity and Allied World Assurance’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Allied World Assurance||12.56%||8.96%||2.42%|
Erie Indemnity beats Allied World Assurance on 9 of the 13 factors compared between the two stocks.
Erie Indemnity Company Profile
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.
Allied World Assurance Company Profile
Allied World Assurance Company Holdings Ltd is a Germany-based holding company. It provides property, casualty and specialty insurance and reinsurance solutions to clients around the world. The Company operates in three segments: North American Insurance, Global Markets Insurance and Reinsurance. The North American Insurance segment consists of the Company’s direct insurance operations in the United States, Bermuda and Canada. The Global Markets Insurance segment includes all of the Company’s direct insurance operations outside of North America. The Company’s reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverage’s written by other reinsurance companies. The Company leases space in Australia, Bermuda, Canada, Hong Kong, Ireland, Labuan, Singapore, the United Kingdom and the United States for the operation of its North American Insurance, Global Markets Insurance and Reinsurance segments.
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