SRB Corp, a major holder of Safety Insurance Group (SAFT), recently bought 39,000 shares across two transactions. The buy increased the company’s holdings by 3 percent, and came to a total price of about $2.8 million.
This marks the first insider buying activity in the company in over two years. Company directors and executives have been regular and steady sellers of shares over the past two years, with no sale larger than $268,000.
Overall, company insiders own about 4.2 percent of shares, and institutions such as SRB own 82 percent.
The property and casualty insurance provider has seen shares lose a quarter of their price over the past year. While earnings were flat, revenues rose by nearly 10 percent. Insurance companies tend to hold a fixed-income portfolio, which will have dropped in value as interest rates have risen in the past year.
Action to take: Shares are a bit expensive at 22 times their most recent earnings. But shares also trade at 1.3 times their book value, their cheapest valuation in nearly two years. Plus, buyers at today’s prices can get a 5 percent starting dividend yield.
For traders, shares have been trending down, but appear to be flattening out, and may be capable of moving higher. The August $75 calls, which last carried a bid/ask spread of about $4.25, offer mid-double-digit returns on a move higher in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.