GEICO Corp.'s expansion this year has more than fulfilled Berkshire Hathaway Inc. Chairman Warren Buffett's pledge that the auto insurer would "make hay while the sun sets, knowing that it will surely rise again," even as it continues to retreat from one particularly challenging state.
With growth in direct premiums written at Government Employees Insurance Co. and seven affiliates that focus on private-passenger auto insurance hitting 16.5% for the third quarter and 16.1% for the first nine months of 2017, the group is on pace to deliver its highest level of expansion in at least 14 years. The group's direct premiums written grew by double-digit percentages in 40 of the 50 states on a year-over-year basis in both the third quarter and the year-to-date period. Only in Michigan, a state whose no-fault system has proven costly over time in the absence of legislative reforms, did the group's premium writings decline.
The GEICO group's growth rates in the third quarter ranged from less than 3.3% in Alaska to 31.4% in Georgia. For the first nine months of the year, the pace of expansion ranged from 0.8% in Alaska to 30% in Georgia. But in Michigan, the GEICO group's direct premiums written fell by 12.3% in the third quarter and by nearly 13.7% for the first nine months of the year.
The third quarter marked the 12th consecutive period in which GEICO's Michigan business declined on a year-over-year basis. The rates of decline were in the double digits for all but one of those reporting periods.
Though there are signs that the group's retreat has slowed and perhaps bottomed out earlier in 2017, the $33.9 million in Michigan direct premiums written that GEICO wrote during the third quarter represented a decline of 46.4% from its volume in the state during the same period in 2014.
GEICO's share of the Michigan private auto market totaled just 1.8% in 2016, down from a peak of nearly 3.1% in 2014. The groups led by State Farm Mutual Automobile Insurance Co. and Dearborn, Mich.-based Auto Club Insurance Association have ranked No. 1 and No. 2 in the Michigan private auto market in each of the past five years, with Progressive Corp. ascending to the No. 3 spot in 2015 and maintaining that position in 2016. GEICO was No. 12 in 2016, down from No. 9 in 2014.
Near- and intermediate-term Michigan results for the private auto-focused Progressive Direct subgroup as consolidated by S&P Global Market Intelligence come in stark contrast to those of the GEICO companies: Direct premiums written in the state of $205.1 million for the third quarter of 2017 represented an increase of 25.3% from the year-earlier period. It was the third time in the last four quarters in which Progressive Direct's Michigan growth rate topped 20%. The third quarter of 2013 was the last time that the group's Michigan direct premiums written did not grow at a double-digit percentage rate.
The Progressive Agency Pool companies generated growth in Michigan direct premiums written of 20.2% in the third quarter, marking its fastest rate of expansion in the state since the fourth quarter of 2014.
Recent rate filing activity in Michigan shows Progressive and GEICO going in different directions from a pricing perspective, as well.
Progressive Direct subgroup member Progressive Marathon Insurance Co. and Progressive Agency Pool member Progressive Michigan Insurance Co. lowered their Michigan private auto rates for new and renewal business during the third quarter by 0.8% and 1.4%, respectively. GEICO Indemnity Co., which accounted for all $152 million of the GEICO group's 2016 Michigan private auto business, implemented a 5.2% rate increase on its private auto business in the state, effective in November for renewals.
The amounts of policies in force associated with the Progressive Marathon and Progressive Michigan programs in the respective filings, which the companies originally submitted in the summer of 2017, were 12.9% and 11.6% higher than the counts they reported in similar filings in the summer of 2016.
Progressive's unit growth is not limited to Michigan. Data in the company's recent November earnings release put policies-in-force growth in the agency auto business at 11.6% for the month, the highest for that channel since April 2004. It totaled 11.6% in the direct auto business for a second consecutive month.
Berkshire Hathaway in its third-quarter Form 10-Q filing credited year-over-year expansion in voluntary auto policies-in-force of 9.9% and in premiums per auto policy of 6.0% for GEICO's overall top-line growth.