Warren Buffet and Geico Insurance

Warren Buffet and Geico Insurance

Warren Buffet and Geico Insurance-Government Employees Insurance Company or commonly known as GEICO are one of the leading insurance companies in the United States. Based on its history, the company was founded in 1936 by a husband-and-wife couple, namely Leo Goodwin Sr. and Lillian Goodwin.

Warren Buffet and Geico Insurance - GEICO

Leo is an accountant and a former employee of the United Services Automobile Association (USAA) which at that time provided insurance services to United States soldiers. Furthermore, he established his own insurance company with his philosophy that is later called GEICO. The GEICO he founded initially operated in San Antonio which he later relocated to Washington DC in 1937 and in 1959, GEICO opened its new head office in Chevy Chase, Maryland until now. The Goodwin’s (Leo and Lilian) funded the creation of GEICO with a joint venture capital between him and Cleaves Rhea. Goodwin invests around $25,000 of cash and $75,000 from Cleaves Rhea who is a banker from Texas. In 1958, after 20 years, Leo Goodwin chose to retire, and his role was replaced by Lorimer Davidson. After the legacy of Goodwin, Davidson, and his successor i.e., Kroeger develops this company to the next level. They make GEICO one of the biggest U.S. auto insurers.

In 1948, Rhea sold his 75% stake in GEICO to a group of investors, led by Benjamin Graham and Jerome Newman’s Graham-Newman Partnership. Historically, from time to time, the company had experienced difficulties after Kroeger‘s departure to the point that it was difficult to pay claims from its customers. Until a consortium of insurance companies helped him, including Warren Buffet himself. Warren Buffet himself ended up buying a proportion of Jerry Newman’s shares, which was previously the largest shareholder in GEIO. After doing nothing over, Warren Buffet then recruited Jack Bryne who is one of the leading executives with experience in several insurance companies such as Lincoln National Life Insurance and Travelers.

Warren Buffet and Geico Insurance - Contract

Warren Buffet known as Oracle of Omaha was born August 30, 1930. He is one of the Greatest Investors in the World and become one of the best-known Benjamin Graham’s Graduate Student at Columbia University. In 1951, Buffet view GEICO as one of his favorites. He ever says that GEICO is “The Security I Like Best“.

With the help of Jack Byrne, some of the problems in the Company were resolved. Until now, GEIO has gone through several phases and in 1996, the company was officially owned by Berkshire Hathaway, an investment company led by Warren Buffet and Charlie Munger.

GEICO Performance From 2015 to 2020

Pre-tax underwriting earnings (loss)
2012680 Million US Dollar
20131.12 Billion US Dollar
20141.15 Billion US Dollar
2015460 Million US Dollar
2016462 Million US Dollar
2017(-310 Million US Dollar)
20182.4 Billion US Dollar
20191.5 Billion US Dollar
20203.4 Billion US Dollar
Source : Berkshire Hathaway Annual Report

From time to time, GEICO still has positive performance in Pre-tax underwriting earnings. Only in the year 2017, this company has lost condition. The growth from time to time indicates that the warren buffet can manage this company well and turn from disaster to glorious era with the growth earning of GEICO gradually.

Now, GEICO companies market private passenger automobile insurance to individuals in all fifty states and the District of Columbia. GEICO also provides insurance for all vehicles, namely motorcycles, all-terrain vehicles, boats, and others, and acts as an agent for other insurers who offer homeowners, renters, life, and identity management insurance to individuals who desire insurance coverages other than those offered by GEICO. According to the most recently published A.M. Best data for 2019, GEICO’s market share is one of the biggest in the United States of America with 13.8%. Along with the development of the company business, GEICO passed seventeen million policies in force (PIF) in 2019 and now insure more than twenty-eight million vehicles. 

Bibliography Warren Buffet and Geico Insurance

GEICO. 2021. GEICO History. Accessed via https://www.geico.com/about/corporate/history/  on October 10, 2021.

Berkshire Hathaway. 2021. Annual Report 2020. Accessed via https://www.berkshirehathaway.com/reports.html on October 10, 2021.

Berkshire Hathaway. 2021. Annual Report 2017. Accessed via https://www.berkshirehathaway.com/reports.html on October 10, 2021.

Berkshire Hathaway. 2021. Annual Report 2014. Accessed via https://www.berkshirehathaway.com/reports.html October 10, 2021.

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