Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (44329)	9/14/2011 6:12:46 PM
From: Shane M	1 Recommendation Read Replies (2) \| Respond to of 78600

Clownbuck, my perception is Geico attracts a more valuable type of customer. retains better - not as likely to shop. I can't recall where, but when retention levels between the companies is compared Geico's retentions have tended to be considerably higher than Progressive as I recall. by "more fragile" - PGR seems to have to pedal harder (replace the churn) in their book to keep up. Based on AM Best data that I've seen Geico seems to be gaining share at a better pace right now also. All of the direct companies appeal to shoppers which tend to remain shoppers - so retention will always be a big concern there I think. As it's been explained to me, Property business is undesirable for reserve requirement reasons at present. States require you to keep large reserves in place to cover property exposure written. At present it's very difficult to achieve decent rate of return on those reserves. Having property on the book often just pulls down overall returns. It seems to me PGR and Geico have been able to grow because they don't have property. Most multiline carriers can't achieve adequate rates on property so have to subsidize property with auto. This creates ability for auto only carriers like PGR and Geico to cherry pick the books of multiline carriers without having to carry the property reserves. (PGR and Geico will hook you up with a 3rd party brokered property carrier in many places though). If I recall Geico tried a test writing property in a (western state?) market and quickly shut it down after bad results. It's just tough to make property make sense right now. I'd guess it's even tougher for a company like Geico who'd be trying to do property online. I'd say they'd want to be extremely tight on risk mgmt and approach it very slowly/carefully with low volume. I think money can be made, but be very careful about selection. all imho