Berkshire Hathaway acquired GEICO in 1996
A.M. Best has reaffirmed the financial strength rating (FSR) of the members of Government Employees Group of Chevy Chase, MD or better known as GEICO. In addition, to retaining its A++ (Superior) rating as well as its issuer credit ratings (ICR) of “aaa” , the rating agency’s outlook for the insurer also remains stable.
The rating affirmations reflect GEICO’s solid risk-adjusted capitalization, continued strong operating performance, brand name recognition and preeminent national market position in the personal automobile segment. GEICO’s strong operating results reflect a considerable underwriting expense advantage, driven by its direct distribution business model. In addition, the group continues to produce favorable loss experience while benefiting from a solid stream of investment income. As a result, GEICO has generated substantial capital over the previous five-year period, which has supported steady growth in premiums and enabled it to pay significant dividends to GEICO Corporation.
While Best emphasized the strength of the company’s strong name brand recognition and its adeptness to respond to changing market conditions, interestingly the ratings agency did note that one of the company’s negative rating factors includes the fact that “…its top five states account for slightly more than half of its direct premiums written.”
GEICO’s negative rating factors include high investment leverage derived from its significant allocation of invested assets to unaffiliated equities, which could lead to fluctuations in its risk-adjusted capitalization due to market swings, as evidenced by the stock market downturn in 2008. In addition, GEICO maintains a modest geographic concentration that exposes it to legislative changes and judicial decisions, as its top five states account for slightly more than half of its direct premiums written. However, this risk is largely mitigated by GEICO’s geographic spread throughout the United States and management’s proven ability to quickly adapt to changing market conditions.
A.M. Best’s ratings include the following members of the Government Employees Group:
- Government Employees Insurance Company
- GEICO Indemnity Company
- GEICO Casualty Company
- GEICO General Insurance Company
- GEICO Advantage Insurance Company
- GEICO Choice Insurance Company
- GEICO Secure Insurance Company
- GEICO County Mutual Insurance Company
