Berkshire Hathaway auto unit Geico slips to ever-deeper Q3 loss

Berkshire Hathaway's retail auto insurer Geico sunk to a still-larger loss in the third quarter, as runaway claims inflation drove loss cost while premiums were supressed by client outflow.

Losses deepen quarter by quarter, now to a pre-tax underwriting loss of $759 million in the third quarter after $178 million in Q1 and $487 million in Q2.

Management blamed “increased claims severities, primarily due to significant cost inflation."

Q3 loss and loss-adjustment expense rose 12.1% or $1.0 billion y/y, the slowest annual pace to date in 2022, but well in excess of stagnant premiums.

Frequency was also said to have contributed above and beyond claims inflation, including 1-2% on property damage, 4-5% in injury and 6-7% in collision.

With a slowdown in favourable prior period adjustments, the loss ratio shot up to 97.0% in Q3 and 93.1% for the first nine months.

Written premium growth slowed to a 0.4% annual pace after having fallen to 2.0% in Q2 and 2.6% in Q1, all well below the nearly 10% growth enjoyed for FY2021.

Management called the written premium tally "relatively unchanged" for both Q3 and the first nine months, reflecting a 5.4% average rate increase for 9M "substantially offset" by a 4.6% decline in voluntary policies in force.

After 25% in cuts to underwriting expense, the combined ratio is still up on both prior periods to 107.7%.