Compass Point Research & Trading analyst Ken Billingsley has downgraded Safety Insurance Group Inc. to "sell" from "neutral," saying that its shares are trading at a "record" price-to-tangible-book-value multiple of 1.8x, leaving little upside potential for the company.
Though the insurer will avoid third-quarter catastrophe losses that many of its personal lines peers will experience, there is "little margin for error," Billingsley said. He said the company would keep trading at an "elevated, but unsustainable," price-to-tangible-book-value multiple as long as interest rates are low.
The company does have low leverage as compared to its peers and a "strong" excess reserve position, the analyst said, adding that it also has nearly $6 per share in redundant reserves.
Billingsley maintained his price target for the company at $66 and also held his 2017 and 2018 EPS estimates at $4.00 and $4.15, respectively.