Berkshire Hathaway on Saturday said GEICO’s collision claim frequencies came by an amount within the “twenty-three to twenty-four percent range,” with property damage claims down much more.
GEICO’s plummeting frequency during the COVID-19 pandemic year helped the insurer end the year at more than double its 2021 profitability, even with cut customers a break on premium costs. Pre-tax underwriting earnings in the nation’s No. 2 auto insurer rose to almost $3.43 billion this past year, compared to nearly $1.51 billion in 2021.
An exact tally for GEICO property damage auto claims was unavailable in parent company Berkshire Hathaway’s Feb. 27 annual report. Berkshire Hathaway simply described GEICO’s “property damage, bodily injury and personal injury protection” frequency as having dropped by a “twenty-eight to thirty percent range.”
For a little broader context, CCC estimated that repairable vehicle claims fell 21.3 percent in 2021. Totals fell 15.2 percent, and claims overall were down 20.1 percent, the data provider said Tuesday.
GEICO said its average damage to property and collision severity rose by an proportion within the “eight to ten percent range.”
Overall, GEICO’s claim costs and loss adjustment expenses fell $2.9 billion, a ten.1 percent decline from 2021.
The company’s earned premiums also fell $479 million in 2021, however it ended the year with a larger customer base — also it spent a lesser number of those premiums covering policyholder and third-party claims compared to 2021.
“The GEICO Giveback program deliver to a 15% premium credit to all voluntary auto and motorcycle policies renewing between April 8, 2021 and October 7, 2021, in addition to any new policies written throughout the same period,” GEICO wrote. “The GEICO Giveback program reduced premiums written in 2021 by approximately $2.9 billion. Premiums earned decreased 1.3% in 2021 when compared with 2021, which included reductions of approximately $2.5 billion attributable to the GEICO Giveback program.”
GEICO earned more than $35.09 billion in premiums and paid just shy of $26.02 billion in claims and loss adjustment expenses in 2021, a 7.2 percentage-point decrease in the company’s loss ratio when compared with 2021. Essentially, GEICO paid out 74.1 cents of every premium dollar covering claims and loss adjustment expenses in 2021.
The insurer spent another $5.647 billion of premium revenue on underwriting expenses, up more than $500 million from 2021.
“Underwriting expenses in 2021 increased $518 million compared to 2021, reflecting higher employee-related, advertising and technology costs partly offset by lower premium taxes,” Berkshire Hathaway wrote. “GEICO's expense ratio in 2021 was 16.1%, an increase of 1.6 percentage points compared to 2021. The expense ratio increase was primarily due to the decline in earned premiums in the GEICO Giveback program.”
Ultimately, GEICO could keep 9.8 cents of each and every premium dollar using its overall 90.2 combined ratio.
