1) The avg cost of auto insurance is now >$2K/year. Median earnings of full time workers is $1,100/week. It's a big expense.
GEICO and Progressive have been fierce competitors for decades and are now tied in the #2 position behind State Farm.
$BRKA $BRKB $PGR #Berkshire2023
GEICO and Progressive have been fierce competitors for decades and are now tied in the #2 position behind State Farm.
$BRKA $BRKB $PGR #Berkshire2023
2) Progressive has recently picked up market share and was 2nd in terms of written premiums while GEICO was 2nd in earned premiums in 2022 according to the National Association of Insurance Commissioners.
3) Both Progressive and GEICO have posted excellent long term financial results, with GEICO only posting two years of underwriting losses since 2001 and Progressive never posting an annual loss over 22 years. Impressive to say the least.
4) GEICO consistently runs at a lower expense ratio and a higher loss ratio than Progressive.
In 2020, loss ratios plummeted industrywide as the pandemic reduced miles driven. However, expense ratios were boosted by rebates to drivers.
In 2020, loss ratios plummeted industrywide as the pandemic reduced miles driven. However, expense ratios were boosted by rebates to drivers.
5) In 2021 and 2022, inflation became a major issue. The cost of repairs increased and used car prices skyrocketed. This chart is from an article I wrote in August 2022. rationalwalk.substack.com/p/the-automobi…
6) Starting in Q3 2021, GEICO began posting underwriting losses as the loss ratio skyrocketed, partly offset by a declining expense ratio. This is from an article on Berkshire's Q3 results. rationalwalk.substack.com/p/a-closer-loo…
7) Progressive has performed better over the past year. They report monthly results and the table below shows the past year.
8) Conventional wisdom is that Progressive's use of telematics (most notably in-car technology that measures risk) has allowed management to do a better job of matching rate to risk.
Ajit Jain agreed about PGR's lead in telematics at last year's Berkshire Annual Meeting.
Ajit Jain agreed about PGR's lead in telematics at last year's Berkshire Annual Meeting.
9) However, Progressive's recent results indicate some trouble on rates. The company posted adverse prior year development of $621.2 million in Q1 boosting combined ratio to 99%. The CEO cited inflation as a primary factor in the Q3 earnings call.
10) Progressive significantly boosted policies in force during Q1 along with advertising spending.
But they might have overshot on customer acquisition while letting rates fall behind inflation.
Progressive plans to curtail ad spend in the coming months.
But they might have overshot on customer acquisition while letting rates fall behind inflation.
Progressive plans to curtail ad spend in the coming months.
11) Progressive's CEO CEO went on to say that they would take aggressive action on rate increases.
12) Ajit Jain and Warren Buffett will no doubt get questions about GEICO at the Berkshire Hathaway annual meeting today.
For more thoughts on the GEICO/Progressive rivalry, please read my article posted yesterday:
rationalwalk.substack.com/p/progressive-…
For more thoughts on the GEICO/Progressive rivalry, please read my article posted yesterday:
rationalwalk.substack.com/p/progressive-…
13) If you are particularly interested in Progressive, I wrote a lengthy report (PDF/Excel downloads) in December 2022 which is free to read.
rationalwalk.substack.com/p/the-progress…
/end
rationalwalk.substack.com/p/the-progress…
/end
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