Shareholders attending Berkshire Hathaway’s annual meeting this year will likely seek updates on Geico, the auto insurer once dubbed Warren Buffet’s “favorite child.” The event, dubbed “Woodstock for Capitalists,” is set to take place in Omaha, Nebraska, on Saturday and will be the second in-person gathering since 2019.
Geico, viewed as a prized asset in Berkshire’s insurance portfolio, has faced recent challenges due to losing market share to its main competitor, Progressive, resulting in a widening gap in underwriting margins and growth. Geico reported a $1.9 billion pretax underwriting loss in 2022 and experienced a 1.7 million decrease in active policies.
Berkshire shareholders are expected to seek updates on Geico’s use of telematics to collect clients’ driving data, including mileage and speed, which has been cited as a major factor in the company’s underperformance. Berkshire’s vice chairman of insurance operations, Ajit Jain, has noted that Geico has only recently made a serious effort to incorporate telematics for segmentation and rate-risk matching.
Berkshire Hathaway has been performing well in the market, with Class A shares hitting a 52-week high and rising almost 5% over the past month while the S&P 500 has fallen approximately 1% amid the banking crisis. The conglomerate is known for its diverse businesses and unmatched balance sheet strength, making it a popular choice for downside protection in a down market.
Although Geico only makes up a relatively small percentage of Berkshire’s vast empire, it holds a special place in Warren Buffett’s heart. Geico was one of Buffett’s first investments, and he has a strong emotional and sentimental attachment to the insurer. Despite Geico’s recent struggles, including losing market share to its competitor, Progressive, and a pretax underwriting loss of $1.9 billion in 2022, investors are interested in hearing how the company plans to close the gap in usage-based technology and offset claims cost inflation.
Buffett expects Geico to return to an underwriting profit in 2023 after obtaining premium rate increase approvals from a few states.