Safety Insurance Group: Reduces Risk with Attractive Probable Returns

Ten months ago I recommended Safety Insurance Group (SAFT). Its share price is down since then, but far from out. While I prefer absolute returns my sense of well being dictates I must look at 2008 through a relative lens. Relatively SAFT was a great performer, beating the pants off the S&P500 by 22%; SAFT is down 20% over the last ten months while the S&P500 has fallen 42%.

In a tough 2008, Safety managed to increase book value by 5.6% to $37.17. With the current share price of $30.84 representing a discount to book value of 21%, P/B is 0.83. As the graph below shows, SAFT has increased book value every quarter.