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Progressive outgrew GEICO in most states in 2018

Progressive Corp.'s private-passenger auto business expanded at a faster pace than that of Berkshire Hathaway Inc.'s GEICO Corp. in 38 states and the District of Columbia in 2018 as the company surged forward in both the independent agency and direct channels.

While 2017 marked the first time in 13 years that Progressive saw its U.S. private auto direct premiums written grow faster than Government Employees Insurance Co. and its eight affiliates, that result occurred because of a dramatic divergence in business trends in Michigan. In 2018, the outcome was considerably more decisive and widespread.

Based on the aggregation of disclosures on the state pages of annual statutory statements, S&P Global Market Intelligence calculates that Progressive's U.S. private auto direct premiums written increased by 18.8% in 2018 as compared with 16.1% in 2017. The expansion was Progressive's fastest since 2004, a year in which the company's private auto growth rate of 25.5% exceeded GEICO's by 9.6 percentage points. GEICO's private auto business expanded at greater rates than Progressive in every year from 2005 through 2016.

GEICO companies generated growth of 11.8% in private auto direct premiums written in 2018. That marked a fifth consecutive year of double-digit expansion but was down from 15.9% in 2017 and 12.3% in 2016.

Progressive expanded at faster rates in all five of GEICO's largest markets: Florida, California, Texas, New York and Georgia. Among those states, the margin between the two companies' growth rates ranged from less than 3.1 percentage points in California to 13.4 points in Florida, where Progressive's growth rate of 23.7% was more than double GEICO's. Progressive grew more quickly in all but two of GEICO's top 24 states.

GEICO, meanwhile, expanded at faster rates than Progressive in some of the nation's smallest private auto markets, including South Dakota, Wyoming, Alaska, Montana, Hawaii and New Hampshire. It also grew more quickly in New Jersey, Massachusetts, Utah, Indiana and Minnesota.

GEICO's private auto writings expanded by more than 20% in two states — Nevada and Kansas — but its 23.9% growth rate in the former market fell short of Progressive's 28.5% surge. In Kansas, GEICO achieved its widest margin over Progressive by growing at 23.2% in a state in which its rival increased its private auto writings by less than 13.1%.

Progressive, meanwhile, achieved growth rates that exceeded GEICO's by more than 10 percentage points in a total of eight states: Colorado, Florida, Illinois, Kentucky, Michigan, New Mexico, South Carolina and Texas. The divergence between Progressive and GEICO continued to be most striking in Michigan, where the former company's private auto direct premiums written rose by 18.9% while the latter's declined by 11.9%.

GEICO's Michigan business volume has declined by double-digit percentages in each of the last four years. Progressive's Michigan private auto business, conversely, has grown in each of the last five years at a pace in excess of its nationwide writings, including by more than 20% on three occasions during that stretch. Michigan is a unique market as its no-fault auto insurance law provides unlimited lifetime medical benefits for injured motorists, subject to carrier per-occurrence retentions of $555,000.

GEICO Indemnity Co. writes all of the group's Michigan private auto business. A review of its historical rate filings finds that the company's Michigan auto policies in force peaked at 111,626 in a filing submitted in October 2014. In its most recent submission, a filing originally submitted in April 2018, policy count had plunged by 54.2% from October 2014 to 51,153. Premiums associated with the Michigan business dropped by 32.4% between the two filings.

Excluding Michigan from the analysis, however, had little overall impact on the two companies' private auto growth rates in 2018. Progressive's was unchanged at 18.8% while GEICO's increased by 0.1 percentage point to 11.9%.

A review of disclosures in the annual reports on Form 10-K for Progressive and Berkshire finds that the companies each achieved mid-single-digit expansions in average premiums per private auto policy, but Progressive's growth in personal auto policies in force of 14.2% easily exceeded GEICO's result of just 3.1%. The Progressive agency and direct channels achieved policies-in-force growth rates of 12.1% and 16.2%, respectively.

With the combination of rapid growth and a private auto combined ratio well within management's 96% target, it should come as no surprise that Progressive President and CEO Tricia Griffith labeled 2018 as "an incredible year" for her company. But with year-over-year growth rates in Progressive's personal auto business appearing to have peaked in June 2018 and September 2018 based on policy count and trailing-12-month written premiums, that expansion will be difficult to replicate in 2019.