Reprinted From The COMMERCIAL and FINANCIAL CHRONICLE Thursday, December 6, 1951 The Security I Like Best WARREN E, BUFFETT BulfettFalk 8 Co, Omak Government Employees Insurance Co, Full employment, boom time profits and record dividend pay fronts’ donot get the stage for The company has no agents or branch “offices: As @ result, olleyholdere receive, standard Buto Insurance ‘policies ‘at mitim discounts running as, high a 30% off manual rates. Claims Sie handled promptly” through Spproxtinately 800 representatives Mhroughout the country. ‘The term “growth. company” has been appiled ‘with abandon Gutring the past few years to com= panies whose cales inereases ep Fesented little more than inflation Of prices and "general easing of Business competition. GETCO Qualifies ssa leuitimate. growth gSmpamy Basea upon the foliow= ing Feeor dodaci fer postwar peri, the situation be- Nisn® ine os Hgnt iele S“ou0. fs suoneoe.a1 3.754 {ito “stode casualty” companies "joanoree sist deatn Toei Conte Sou réesssezoo S107 aoieers70 143,04 Of course the investor of today oes not profit irom yesterday's growth. Ik GEICO's cage, there is Feason to believe the mejor por- Hon of growth ties ahead." Prior fo 1850, the company” was only Heensed in'i6 of 80 juriadictions fpeluding p'C- and Hawall, “At the ‘beginning of the year there iyere less than 8,000 policyholders In New York Stata. Yet 25% Saved on an insurance bill of $125, in'New ‘York should. look ‘bigger to ‘the. prospect than the 25% saved on the $50 rate in more sparsely settied regions ‘As cost competition inereases in importance during times of reces~ Sion, GEICO's rate. attraction should become, even more effec five. in ‘diverting business “from he orate n-th incu ance: rates moving ‘higher due. to Inflation, the 28% spreed in rates Decomes wider in terms of dollars and conte. ‘There is no pressure from nts {o accept questionable ap~ leants or renew poor risks. “Tn States where the rate structure 1s inadequate, new promotion may be halted. Probably the biggest attraction of GBICO Is" the profit margin Savantage it enjoys, The ratio of underwriting proitt to bremie Simo. earned ts £000 ‘was "275% for GEICO. ae compared to 8.1% for Ghe 138" stock casualty “and Surely companies summarized’ by Bea “As experience turned for the worse. {n'1990, ‘Best's aggre Sate’ profit’ margin dropped to Underwriting experience the see- Ond. worst sin 3 Years... The Ercan enrminas, rpori ot cag those with the bulk of writings 1 ute have diverted bul Prarket venthusieem. from” thelt Stocks. On’ the basis of normal Wea. "The naiure of the: industry is ‘such as. ease cyclical bumps. ‘Auto Insurance is regarded a2 Aecesity by the maiorty 9 pure scia Contras ua ee sewed yearly at rates Usted upon experience. ‘The 1ag of rates be= ‘Rind’ costs, although triments} {n'a period of sing prices ashes characterized the 1945-1051" pee Hlod, should. prove ‘beneficial it Geflationary trees should be set Other industey advantages, in tude Tack of inventory, collection, {thor and raw material problem Tho. Rasafd” ot produ. bao ‘Sbsslescence ts also absent. Government, Employees. tnsur- 9 ance Corporation "war organized inthe mld-s0s to ‘provide. com= Dlete auto-ingurance’on a nat ‘Wide ‘basis fo. an eligible class Including: (1) Pederal Stato: and ‘muni ni employ esr (2) active and reserve corm {pissoned officers and the “Rest fades of ron-commiss otflcers of the Armed Forees; °(3)_ veterans who were liibte when'on active duty (2) former policyholders (5) faulty rnd echools, (8) governthent coh End schools mihont come irscior employees engaged in ‘Sxchua detense “werk fvaly, “and (7) stockholders, Spr eee rere et eer Sot etn e Seat tery br. 20% and GEICO's dropped to 180%, “GEICO docs not wie all {gual Tins, “however bal injury tnd property damage, bo Important ines for GEICO, were among’ the least profitable lines GEICG ‘leo does 9 large amount St colision writing, wien wae’ profitable line in sb. During the first helt of 1951, practically ait sosurers_ operated frthe ted! om caaalty Tings with Bodily injury and: property, dam Bee among ihe most unprodiable. Whetene GEICO’ prot margin war cut fo. slightly above Oo, Massachusetts Bonding. insu: ance showed. 2.19% “loss, New ‘Amsterdam, Casualty: an 8% os, Seanaard"Aasciaent” Insurance's 52 Toast, ‘Becmse of the rapia growth of GEICO, cam divigends ‘have had forrembit low. Stack dividends anda Bfor split sneteased the Sutstanding shares from 3,000 on Stine 1, 1948; to 250,00) om Nov- 10, 103i. “Valuable rights t0 sub- sxtibe to stock of aifiliated com= Danies have also been issued. ‘Benjamin Graham hae’ been Chairman of the Board since his investment’ trust acquired = and Gistributed 9 large bloc! Stock in 1948, ‘Leo Goodwi hse guided GEICO's growth since Inception, is the able President. ‘Ae the eh of 1950, the 10 mem= Bers "of the Board ‘of Directors owned approximately one third of the outstanding stock ‘gavalngs in 1950 amounted to $8.92 as contrasted to 4.71 on the smaller, amount of business in 1848. “these figures ‘inclode no allowance Zor the ineresse in the neared premium reserve which Was substantial “in both’ years. Earnings. in 1951 will be lower than 1950, but the wave of rate Increases during the pest summer thotld evidence. themselves in 1082 earnings. Tavestment Income quadrupled between 1047. and 1960, reflecting the growth of the company’s assets. ‘At the present price of about ‘ight times the earnings of 1050, fipoor year for the Industry, ‘appears that no price is being paid for the tremendous growth poten- tal of the company. ‘homiry surtctpate tat ice thr Tonsone