GEICO’s 2022 results
Berkshire Hathaway released its 2022 annual report, which includes GEICO’s performance.
During 2022, GEICO experienced a reduction of 1.7 million voluntary policies-in-force after flat year-over-year growth from 2020 to 2021. According to the most recently published A.M. Best data for 2021, the five largest automobile insurers had a combined market share in 2021 of approximately 60.5% based on written premiums, with GEICO’s market share being the second largest at approximately 14.4%. GEICO’s management estimates its current market share is approximately 13.9%.
In 2022, GEICO had a pre-tax underwriting loss of $1.88 billion, compared to a ~$1.26 billion profit in 2021. Combined ratio went from 96.7% in 2021 to 104.8% in 2022. Losses in 2022 reflected significant increases in average claims severities, primarily due to significant cost inflation in property and physical damage claims, which began to accelerate in the second half of 2021 and have continued through 2022. Increases in used car prices produced increased claims severities on total losses and shortages of car parts contributed to elevated claims severities on partial losses. In addition, injury claims severities continued to trend higher in 2022.
Premiums written increased $712 million (1.9%) in 2022 compared to 2021, reflecting increases in average premiums per auto policy due to rate increases, which were substantially offset by a decrease in policies-in-force.
Underwriting expenses decreased $881 million (16.2%) in 2022 compared to 2021, primarily due to significant reductions in advertising costs and lower employee-related costs. GEICO’s expense ratio (underwriting expense to premiums earned) was 11.7% in 2022, a decrease of 2.8 percentage points compared to 2021, attributable to both the decrease in expenses as well as the increase in earned premiums.
GEICO has successfully obtained premium rate increase approvals from certain states in response to the significant claims costs increases it has experienced in recent years. As a result, it expects to generate an underwriting profit in 2023.