Word: premiums
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...sure, GEICO is emerging from its ordeal much smaller and poorer than in 1974, when it was the nation's fifth largest auto insurer, collecting premium income of $660 million-and when its stock sold as high as $61 a share. The company had reached that eminence by doing away with agents and selling policies directly to customers at premium rates as much as 25% below those charged by other insurers. The strategy worked because for a long time GEICO restricted its customers to employees of federal, state and local governments, and later to professional people-two low-risk...
...awesome costs we had to pay." He fired more than 1,500 employees, reducing the staff to fewer than 6,400, and closed 23 sales offices. Those moves have reduced expenses 20%; Byrne vows to cut them further by 10%. Byrne has also secured, state by state, permission for premium-rate increases averaging 38%. Further, the company, which once operated in 25 states, has stopped servicing unprofitable areas. GEICO pulled out of New Jersey, which once accounted for 10% of its business, when the state refused to allow a premium increase; it has also stopped writing new policies in Connecticut...
...preferred stock has rebuilt its depleted reserves, the company is likely to go on shrinking for a while. GEICO is still losing policyholders it wants to keep; some are failing to renew because they distrust the company's finances, others because they will not accept the stiff premium increases. GEICO sells homeowners' insurance as well as auto policies-and some mortgage lenders are demanding that householders switch to richer insurers as their GEICO policies expire. Counting the policies already taken over by other insurers, says Byrne, "well probably lose 1 million" of the 3 million policyholders that GEICO...
ARMS TALKS: "It is a big mistake to tie in the strategic arms limitation talks with summits. Given the fact that our political system is truly democratic, the premium for obtaining an agreement is much higher for the President than for the Soviet General Secretary." Still, he adds, because "the asymmetries between them and us are so favorable to us in every aspect, we can afford to be patient. The scalingdown of the levels [of atomic warheads] is the most urgent business of SALT...
...well afford the tab. The world recession seems to have largely lifted, and crude oil sales are rising as a result. Tanker charters have emerged from the doldrums, as top customers have scrambled to stock up on crude before the price rises again, often paying a 25? or 30? premium on each extra barrel...