Critical Analysis: Universal Insurance (UVE) vs. Erie Indemnity (ERIE)

Universal Insurance (NYSE: UVE) and Erie Indemnity (NASDAQ:ERIE) are both financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, risk, profitability and dividends.

Valuation and Earnings

This table compares Universal Insurance and Erie Indemnity’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Universal Insurance $685.29 million 1.33 $99.41 million $2.34 11.28
Erie Indemnity $1.60 billion 3.53 $210.36 million $4.02 30.37

Erie Indemnity has higher revenue and earnings than Universal Insurance. Universal Insurance 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

Universal Insurance has a beta of 1.88, meaning that its stock price is 88% more volatile than the S&P 500. Comparatively, Erie Indemnity has a beta of 0.47, meaning that its stock price is 53% less volatile than the S&P 500.

Dividends

Universal Insurance pays an annual dividend of $0.56 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%. Universal Insurance pays out 23.9% 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. Universal Insurance has raised its dividend for 21 consecutive years and Erie Indemnity has raised its dividend for 3 consecutive years.

Analyst Recommendations

This is a summary of current recommendations and price targets for Universal Insurance and Erie Indemnity, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Universal Insurance 0 0 1 0 3.00
Erie Indemnity 0 0 0 0 N/A

Universal Insurance presently has a consensus target price of $29.00, suggesting a potential upside of 9.85%. Given Universal Insurance’s higher possible upside, analysts clearly believe Universal Insurance is more favorable than Erie Indemnity.

Insider and Institutional Ownership

78.0% of Universal Insurance shares are held by institutional investors. Comparatively, 30.9% of Erie Indemnity shares are held by institutional investors. 10.5% of Universal Insurance shares are held by insiders. Comparatively, 46.8% of Erie Indemnity shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Universal Insurance and Erie Indemnity’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Universal Insurance 11.55% 20.90% 6.30%
Erie Indemnity 12.62% 24.98% 13.51%

Summary

Erie Indemnity beats Universal Insurance on 10 of the 16 factors compared between the two stocks.

Universal Insurance Company Profile

Universal Insurance Holdings, Inc. (UVE) is a private personal residential homeowners insurance company in Florida. The Company performs substantially all aspects of insurance underwriting, policy issuance, general administration, and claims processing and settlement internally. The Company’s subsidiaries include Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC). UPCIC writes homeowners insurance policies in states, including Alabama, Delaware, Florida, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, South Carolina and Virginia. APPCIC writes homeowners and commercial residential insurance policies in Florida. The Company has developed a suite of applications that provide underwriting, policy and claim administration services, including billing, policy maintenance, inspections, refunds, commissions and data analysis.

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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