Safety Insurance: Safety in Numbers

A recent article on Seeking Alpha theorized that Safety Insurance Group (SAFT) would benefit from higher gas prices and global warming. I’m unsure whether that thesis will be proved correct, but I am certain the author is clearly a very lateral thinker. I too like to have a thesis when investing, but require hard numbers to validate it. I thought I’d see if there is any safety in Safety’s numbers.

The first important maxim I learnt about investing in insurance companies was, buy at one sell at two. Buy insurance companies at a price to book value (P/B) of one and sell at P/B of two. It sounds too simplistic to be of use, but often the best ideas are incredibly simple.