Analyzing RLI (RLI) and Erie Indemnity (ERIE)

Erie Indemnity (NASDAQ: ERIE) and RLI (NYSE:RLI) are both mid-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, risk, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Earnings and Valuation

This table compares Erie Indemnity and RLI’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Erie Indemnity $1.60 billion 3.21 $210.36 million $4.02 27.58
RLI $797.22 million 3.35 $105.02 million $2.37 25.55

Erie Indemnity has higher revenue and earnings than RLI. RLI is trading at a lower price-to-earnings ratio than Erie Indemnity, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Erie Indemnity has a beta of 0.42, indicating that its stock price is 58% less volatile than the S&P 500. Comparatively, RLI has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.

Dividends

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 35.4% 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.

Profitability

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
Erie Indemnity 12.62% 24.98% 13.51%
RLI 13.17% 8.21% 2.46%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Erie Indemnity and RLI, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Erie Indemnity 0 0 0 0 N/A
RLI 1 3 0 0 1.75

RLI has a consensus target price of $53.00, suggesting a potential downside of 12.47%. Given RLI’s higher possible upside, analysts clearly believe RLI is more favorable than Erie Indemnity.

Institutional & Insider Ownership

31.2% of Erie Indemnity shares are owned by institutional investors. Comparatively, 84.0% of RLI shares are owned by institutional investors. 46.8% of Erie Indemnity shares are owned by company insiders. Comparatively, 6.1% of RLI shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

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.

About RLI

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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