United Fire Group (NASDAQ:UFCS) vs. Erie Indemnity (ERIE) Critical Survey

Erie Indemnity (NASDAQ: ERIE) and United Fire Group (NASDAQ:UFCS) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, valuation, profitability, institutional ownership and dividends.

Dividends

Erie Indemnity pays an annual dividend of $3.13 per share and has a dividend yield of 2.5%. United Fire Group pays an annual dividend of $1.12 per share and has a dividend yield of 2.3%. Erie Indemnity pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. United Fire Group pays out 177.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. United Fire Group has raised its dividend for 21 consecutive years. Erie Indemnity is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Erie Indemnity has a beta of 0.45, meaning that its stock price is 55% less volatile than the S&P 500. Comparatively, United Fire Group has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Valuation & Earnings

This table compares Erie Indemnity and United Fire Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Erie Indemnity $1.60 billion 3.56 $210.36 million $4.02 30.65
United Fire Group $1.14 billion 1.06 $49.90 million $0.63 76.62

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

Institutional and Insider Ownership

30.8% of Erie Indemnity shares are held by institutional investors. Comparatively, 58.3% of United Fire Group shares are held by institutional investors. 46.8% of Erie Indemnity shares are held by company insiders. Comparatively, 5.8% of United Fire Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Erie Indemnity and United Fire Group’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%
United Fire Group 1.49% 1.32% 0.30%

Analyst Recommendations

This is a summary of current ratings for Erie Indemnity and United Fire Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Erie Indemnity 0 0 0 0 N/A
United Fire Group 0 2 1 0 2.33

United Fire Group has a consensus target price of $46.33, indicating a potential downside of 4.01%. Given United Fire Group’s higher possible upside, analysts clearly believe United Fire Group is more favorable than Erie Indemnity.

Summary

Erie Indemnity beats United Fire Group on 10 of the 16 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.

United Fire Group Company Profile

United Fire Group, Inc., formerly United Fire & Casualty Company, is engaged in the business of writing property and casualty insurance and life insurance and selling annuities. The Company operates in two segments: property and casualty insurance, and life insurance. The Company’s property and casualty insurance segment consists of commercial lines insurance, including surety bonds, personal lines insurance and assumed insurance. Its life insurance segment consists of deferred and immediate annuities, universal life insurance products and traditional life insurance products. Its life insurance segment consists solely of the operations of United Life Insurance Company. On February 1, 2012, the Company completed a holding company reorganization of United Fire Group, Inc., United Fire & Casualty Company and UFC MergeCo, Inc. On March 28, 2011, the Company acquired Mercer Insurance Group, Inc. (Mercer Insurance Group).

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