It is clear that government employees Insurance Co.
The death it seemed, was imminent. But patients combat bankruptcy suspended from week to week. Now, after surgery drastic reduction of aid very important and some of its competitors, it is clear that government employees Insurance Co., which asks me maroden former child of the industry (TIME, July 19), will live. Recent signs of profitability after losing $ 124 million in 1975 and $ 40 million in the first six months of 1976, GEICO turned a small profit in the third quarter, but expects more black ink in the last three months . The company has sold an edition of $ 75 million of preferred shares, mostly to its current shareholders, with surprising lightness, which gives an urgent need for a new injection of capital. And the price of its shares outstanding has more than doubled from $ 2 a share in July to $ 5 now.
To be sure GEICO born of his martyrdom much smaller and poorer than the year 1974, the nation as they fifth auto insurer, the collection of revenue premiums of $ 660 million and, if it sells more than $ 61 an action. The company had received only bumps by removing political agents and selling direct to customers at premium rates as much as 25% lower than those of other insurers. The strategy worked, because for a long time, GEICO limited to its customers, staff federal and provincial administrations, professionals and, later, two people with low risk. But then, in carrying out the other looks for growth, GEICO abandoned bars, in writing, for almost everybody politics, and he failed to land fallow sufficient reserves to cover claims by rocketing excessive costs for car parts and medical care. With last summer, its losses had climbed as high as Maximilian Wallach, Insurance Superintendent for the District of Columbia, where it has its headquarters GEICO, set a deadline for removal to the company insolvent.
Wallach, but at the same time acted to save GEICO. He cajoled 27 other insurers in the purchase of an auto GEICO quarter of existing policies (the insurer itself had an interest in the approval of motivation: If GEICO, bust, it would have had to evaluate help pay its rights ‘insurance). Assuming that the time and money for GEICO’s new president, John J. Byrne, 45, was hired by Travelers Insurance Corp. in May, the beginning of a revision.
Schrumpfende process. Mr. Byrne began a series of reductions, he said, have “very, very sobered my cost of realizing the awesome, we were ready to pay.” He fired more than 1500 employees, reducing staff at less than 6400, and closed 23 sales offices. These displaced persons have reduced by 20% of expenditures; Byrne wishes for more than 10%. Byrne also insured, federal state, permission to increase the average premium rate of 38%. Furthermore, companies must, once operated in 25 countries, has stopped serving unprofitable areas. GEICO extraction of New Jersey, which accounted for 10% of their business, if the state refuses a premium increase, he did not no longer writing new policies in Connecticut, Hawaii, Iowa, New Hampshire, New Mexico and Utah.
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