Geico still trails Progressive despite Berkshire's turnaround push

what happened

Berkshire Hathaway's Geico auto unit remains a work in progress, with underwriting results weaker than rivals after almost seven years of turnaround efforts. Its direct model once gave it a low-cost edge that let it outgrow the market, but Geico fell behind on technology for customer segmentation, pricing and claims handling. Barron's reports that Geico's underlying combined ratio excluding reserve releases was 95.5% in the third quarter, according to UBS analyst Brian Meredith, about three points above his estimate.

Progressive posted a combined ratio below 90% in the same quarter, and its nine-month auto revenue of $56 billion far exceeds Geico's $34 billion. Premiums are declining in many regions while repair costs keep rising, adding pressure across the sector.

why it matters

For Berkshire investors, Geico is a relatively small piece of a diversified group, so weakness at the insurer has limited impact on the overall picture. The Class A shares have nonetheless gained about 12% over the past month as investors favor a defensive stance.

market impact

Berkshire Hathaway: weak Geico results weigh on the insurance unit, though the group impact is limited

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