Critical Comparison: Erie Indemnity (NASDAQ:ERIE) vs. The Travelers Companies (TRV)

The Travelers Companies (NYSE: TRV) and Erie Indemnity (NASDAQ:ERIE) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, earnings, risk, analyst recommendations, valuation, institutional ownership and profitability.

Institutional & Insider Ownership

77.6% of The Travelers Companies shares are owned by institutional investors. Comparatively, 30.8% of Erie Indemnity shares are owned by institutional investors. 0.8% of The Travelers Companies shares are owned by insiders. Comparatively, 46.8% of Erie Indemnity shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

The Travelers Companies pays an annual dividend of $2.88 per share and has a dividend yield of 2.1%. Erie Indemnity pays an annual dividend of $3.13 per share and has a dividend yield of 2.6%. The Travelers Companies pays out 33.4% of its earnings in the form of a dividend. 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. The Travelers Companies has increased its dividend for 21 consecutive years and Erie Indemnity has increased its dividend for 8 consecutive years.

Valuation and Earnings

This table compares The Travelers Companies and Erie Indemnity’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
The Travelers Companies $27.63 billion 1.34 $3.01 billion $8.61 15.74
Erie Indemnity $1.60 billion 3.55 $210.36 million $4.02 30.52

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

Risk & Volatility

The Travelers Companies has a beta of 1.26, meaning that its share price is 26% more volatile than the S&P 500. Comparatively, Erie Indemnity has a beta of 0.45, meaning that its share price is 55% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for The Travelers Companies and Erie Indemnity, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Travelers Companies 4 7 7 0 2.17
Erie Indemnity 0 0 0 0 N/A

The Travelers Companies currently has a consensus target price of $127.56, indicating a potential downside of 5.89%. Given The Travelers Companies’ higher probable upside, equities analysts clearly believe The Travelers Companies is more favorable than Erie Indemnity.

Profitability

This table compares The Travelers Companies and Erie Indemnity’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Travelers Companies 8.56% 9.87% 2.28%
Erie Indemnity 12.62% 24.98% 13.51%

Summary

The Travelers Companies beats Erie Indemnity on 9 of the 16 factors compared between the two stocks.

The Travelers Companies Company Profile

The Travelers Companies, Inc. is a holding company. The Company’s segments include Business and International Insurance; Bond & Specialty Insurance, and Personal Insurance. Through its subsidiaries, it provides commercial and personal property and casualty insurance products and services. The Business and International Insurance segment offers property and casualty insurance and insurance related services to its clients, in the United States and in Canada, as well as in the United Kingdom, the Republic of Ireland, Brazil and throughout other parts of the world. The Bond & Specialty Insurance segment provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to a range of primarily domestic customers, utilizing various degrees of financially-based underwriting approaches. The Personal Insurance segment writes a range of property and casualty insurance covering individuals’ personal risks.

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.

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