If your Geico renewal came in lower this year, you’re not imagining it.
The car insurer Warren Buffett made famous is cutting prices to win back drivers. The trouble, according to a new UBS research report, is that crash costs keep climbing faster than Geico’s rates.
That gap showed up in Berkshire Hathaway’s third-quarter results. Geico’s underwriting profit fell to $982 million from $1.77 billion a year earlier, the Associated Press reported.
UBS analyst Brian Meredith laid out what’s happening underneath in a Nov. 9 note seen by TheStreet.
One disclosure: UBS holds a long position of at least 0.5% of Berkshire’s shares and has provided it with non-investment-banking services in the past year, the note’s disclosures show.
Why GEICO’s prices and claims are moving in opposite directions
Geico’s underwriting income beat UBS’s forecast. But Meredith said that beat came from releasing money set aside for old claims, and it “masked deterioration in underlying profitability.”
Strip out those releases, and Geico’s underlying combined ratio rose 8.1 points from a year earlier to 95.5%. UBS had expected 92.5%.
A combined ratio is what an insurer spends on claims and expenses for every dollar of premiums it collects. Anything under 100% is a profit.
By my math, Geico’s underlying profit on each $100 of premiums fell to about $4.50 from about $12.60 a year ago.
Meredith blamed “elevated claims frequency/severity” that “continued to outpace pricing.” He expects margins to keep shrinking, “as Geico pushed for growth with pricing running below loss trend.”
What’s driving up the cost of your claim
Berkshire’s own quarterly filing shows where the pressure comes from.
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Bodily injury claims were more frequent in the first nine months of 2026, rising in the 4% to 6% range. The average cost of those claims rose in the 9% to 11% range.
By my math, those two together push Geico’s bodily injury costs per policy up roughly 14% to 17%. Meanwhile, its premiums earned grew just 1.3% in the third quarter.
Related: The Car Insurance Gap That Could Cost College Parents Thousands
The filing cites “continued growth in policies-in-force, offset by lower average premiums per policy.” Geico is signing up more drivers while charging each one less.
Geico’s loss ratio, the share of premiums paid out in claims, rose to 76.6% from 71.5% a year earlier, the filing shows. Underwriting expenses jumped 17%, driven mainly by advertising and commissions.
Is this good news for your car insurance bill?
For now, yes. Price competition is working in drivers’ favor.
Geico has cut Florida auto rates three times in the past year and filed two more decreases covering over 1.3 million drivers, it said in an August release.
Those cuts have lowered annual Florida premiums by more than $500 million over two years, the company said.
“Florida’s insurance market continues to show sustained improvement,” Geico Chief Insurance Product Officer Yang Yu said, CBS12 reported.
But insurers can’t let prices trail claim costs forever. UBS now expects Geico’s combined ratio to worsen to 96.3% in 2028, from an estimated 94.8% in 2027.
The usual fix for that squeeze is to raise rates. So this may be a good window to lock in a lower price.
A few moves worth making now:
- Get quotes from at least three insurers before your next renewal
- Ask your current insurer to re-rate your policy if a rival offers less
- Review your bodily injury limits, since that’s the coverage where claim costs are rising fastest
What the buyback says about Berkshire’s stock
Investors got a different surprise. Berkshire bought back $9.65 billion of its own stock in the third quarter, about 2.5 times UBS’s $3.84 billion estimate.
UBS estimates another $2 billion followed in October, bringing this year’s total to $16.4 billion.
The bigger change is the price. UBS estimates Berkshire bought at roughly a 5% discount to its intrinsic value, after historically waiting for discounts of 15% to 20%.
That’s a looser standard under CEO Greg Abel, who took over in January, the AP reported. Meredith sees it as good news for capital return.
There’s a catch for anyone buying today. UBS estimates the shares now trade about 7% above intrinsic value, so it expects buybacks to slow this quarter.
UBS’s intrinsic value works out to about $532 per Class B share, according to my calculations. The stock closed at about $571 on Nov. 6, so buyers are paying roughly $39 above that estimate.
UBS’s 12-month target is $628 for Class B shares and $942,405 for Class A. Both imply about 10% upside.
Cash also kept piling up, reaching $377.4 billion at the end of September.
The bottom line for drivers and investors
Operating earnings fell nearly 6% to $12.7 billion, missing UBS’s $13.8 billion estimate. Weaker energy and manufacturing results did most of the damage.
“It should be looking better,” Chris Ballard of Check Capital told the AP, adding that GEICO is spending to win customers again.
Drivers get the near-term win. Shop now, while the price war lasts.
Berkshire shareholders have a $377 billion cushion. But UBS says Geico’s profits won’t recover until its prices catch up to its claims.
Related: State Farm is sending $5B back to customers for one reason
