UPDATE: Compass Point Initiates Coverage on Safety Insurance Group with Buy Rating, $63 PT on Positive Outlook Despite Challenges

In a report published Thursday, Compass Point analyst Ken Billingsley initiated coverage on

with a Buy rating and $63.00 price target. In the report, Compass Point noted, “Safety Insurance is primarily a mono-state writer of personal lines in Massachusetts. Their low use of leverage (underwriting and debt) coupled with a strong reserve history makes the company appear inexpensive. They have taken a conservative approach to growing their business, which some may call boring, but produces a stable platform on which to pay an industry leading dividend yield to investors and is likely the reason for the high insider ownership of 16.7%. We do not expect the company to leverage its operations higher, and thus ROATE expectations will likely remain below the peer group. However, their focus on serving the independent agents in their state should continue to build loyalty and attract and retain profitable business. The company does not employ a direct to consumer channel, which would be unconscionable if the company was looking for growth. But they are focused on writing profitable business, not growing the top line for the sake of growth. Now that Massachusetts is six years removed from deregulation, the demise of the independent agent distribution platform is likely overstated as well known direct writers are now putting up storefronts. We rate SAFT a Buy with a $63 price target.” Safety Insurance Group closed on Wednesday at $55.63.