Berkshire’s Geico back in black Q2 on reduced claims; book still shrinking
Berkshire Hathaway's retail auto carrier Geico continued its press back into the black, hauling in $514 million in pre-tax underwriting profits for its second straight quarter of gains after a 2022 head-on collision with inflation.
The combined ratio for the unit fell to 94.7% in the second quarter, down from a technical loss-making 105.0% in the year prior period.
Revenues slipped again as Geico continued to push higher insurance rates onto a dwindling client base.
Net earned premiums of $9.7 billion in Q2 were down 09.9% year on year and left the H1 tally 0.1% of its prior year mark.
Geico increased average premiums per policy by 16.3%, but saw its policy count decline by 14.4% or 2.7 million policies, Berkshire Hathaway said of the larger H1 tallies.
Losses and loss adjustment expenses declined 10% or $913 million in Q2 to take 8.5 points off the Q2 loss ratio, an acceleration in improvement versus what had been seen in the first quarter of profit in Q1.
“These decreases reflected the impact of higher average premiums per auto policy, additional reductions in prior accident years’ claims estimates, the reduction in policies-in-force and lower claims frequencies, partially offset by increases in average claims severities,” management said.
Severity rose across coverage components. Geico listed average H1 claims severities up 21-23% in property damage and 7-9% in collision and bodily injury.
Frequency for property damage and collision was down high single digits, offset by a low single digit gain in frequency of bodily injury, Geico said.
Favourable prior year reserve development increased from 1.1 combined ratio points in H1 2022 to 4.6 points in the current year first half.
Continued cuts to advertising expenses pulled several points out of combined ratio calculations.
Geico had suffered in 2022 as inflation poured fuel on claims severities. The unit suffered underwriting losses in each quarter of 2022 for a grand total of $1.9 billion.
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